Simple scam targets homeownersBroadcast: October 8, 2002
Imagine sitting in your kitchen and getting a call from a police officer to tell you your home now belongs to a thief, who through a clever con and a legal loophole, is entitled to call your house his home.
It happened to Ravi Raina. He invested the family's savings to buy a $650,000 home north of Toronto, early in 1999.
But as the Rainas were settling in to their dream home, someone else had other plans.
Emanuele Tesoro, a 47 year old with a history in the illegal gambling business, was onto a scam so simple, it would later amaze lawyers.
Tesoro was driving through an upscale neighbourhood, noting addresses. He would later run one through Ontario's Land Title Registry. It tells him who owns the house and details of their mortgage.
Next stop: a stationery store. Tesoro picks up a couple of legal forms. The first, he fills in as if he had just bought the Rainas' home. Where the form asks for a lawyer's signature, he forges one - a name he randomly picks out of the phone book. He also forges the Rainas' signatures.
Later, Tesoro takes the document to a land title registry office, pays the land transfer tax (a little over $9,500) and the registration fee. That's all it took for a stranger to assume legal title over the Rainas' home.
It's that simple in nearly every province.
Meanwhile, the Rainas – out of the country - haven’t a clue. No one calls them to verify they’ve sold their house. After all, their supposed signatures are on the transfer.
Getting rid of the Rainas' mortgage is just as easy. Tesoro simply fills out another form saying the Rainas have paid it off. He invents two bank officials and signs for them. After Tesoro paid another fee and registered the document, the Rainas' house is free and clear of any mortgage - as far as the government is concerned.
Easy money
Tesoro is now ready to go for the money - in the form of a new mortgage on what used to be the Rainas' house. He avoids the major banks and goes to a specialty, or equity, lender.
Tesoro says he needs the cash in a hurry. Because he's asking for a mortgage worth only half the home's value, the lender agrees to a "drive-by appraisal." That means the appraiser doesn't need to contact the homeowner for an appointment to see the house. The appraiser drives by to evaluate the house.
Seven days later, the lender hands Tesoro $350,000. The Rainas are still making payments on the first, legitimate mortgage.
The scheme works so well, Tesoro does it to four more homes. He even takes out a second mortgage on the Rainas' home. In just six months, he's bilked lenders out of $1.5 million.
Doors slam on scam
But Tesoro's luck runs out on house number six, after a lawyer gets suspicious. Tesoro has gone to Equitable Trust four times with the same story.
Tesoro goes into hiding. Police issue a Canada-wide warrant for his arrest.
Meanwhile, the Rainas receive an urgent call from their bank.
"Its shocking if somebody tells you that you don’t own a thing for which you have worked hard and which is yours," Ravi Raina said.
Compensation fund no help
The Rainas go to the province after they hear there's a fund to reimburse victims of frauds like this. There's one problem: they have to prove there's been a crime, to find Tesoro and get their money back.
Even the police are surprised.
"I don’t think it would be wise for a victim to chase down any criminal," Detective Constable Phil Shrewsbury-Gee said.
Meanwhile, two years have passed and the Rainas still don’t legally own their own house. They can’t sell it or use it as collateral to borrow money. They have no cash flow and their software exporting business falls apart.
Ravi Raina’s legal bills come in at $33,000. His wife is hospitalized for depression. But there's more: the lenders, who gave Tesoro the two new mortgages on the Rainas' house, threaten to seize the house to get their money back. The house, they say, is legal collateral for a legal mortgage, which just happened to be fraudulently obtained.
Appeal Lawyer Bernard Gasee says it took a dozen lawyers to work it out.
"It caused financial stress, business stress, marital difficulties, psychiatric difficulty, tremendous anxiety, insecurity. Usually in most cases it’s the families biggest asset."
Money back — for the lenders
In the end, the lenders stopped trying to get money from the Rainas. That provincial fund set up to compensate victims of real estate fraud reimbursed the lenders. The lenders got back everything they loaned Tesoro, plus interest. And their legal fees were also fully covered.
The Rainas and the other victims of Tesoro's fraud were offered $10,000 each. For Raina, that was nowhere near enough to cover his legal fees, let alone to make up for his lost business.
After three years, the Rainas still haven't got their title back. They blame Tesoro - but they also blame the system.
Ravi Raina says the government could do a few more checks before rubber-stamping a change in ownership - like making sure the signatures match a previous document.
The Ontario government says it's a question of balance. Kate Murray is with the Ontario Land Title Registry Office.
"We constantly look at our procedures, the process documents and what we do with them. We are also in the process of automating what we do and introducing an electronic system."
Murray also suggested the mortgage lenders should be more rigorous. Marketplace asked all four companies that gave mortgages to Emanuele Tesoro for an interview, but none of them would talk to us on camera.
'There is a problem in this industry'
Michael Beckette did. He runs the Canadian Institute of Mortgage Brokers and Lenders.
"I think we recognize the fact there is a problem in this industry."
Beckette's association has proposed a few voluntary changes:
More documents to be checked
Ensure signatures are checked for forgeries
No drive-by appraisals
Beckette concedes the changes haven't been made yet. But he says the CIMBL is working hard to make sure it happens.
Police eventually tracked down Tesoro in Italy. He returned to Canada to face 33 fraud-related charges. He was sentenced to 38 months in prison. He served eight months. None of the money has been recovered.
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