Theft of Wallet Plunges Victim Into Black Hole of Mortgage Fraud

Meghan Ross took all the obvious steps when her wallet was snatched in a crowded bar three years ago.

Grabbing a cellphone, she canceled her credit cards, filed a police report and awakened her mother for advice.

Ross, 22, a student improv performer at Chicago’s Second City theater, made follow-up inquiries over the next few days. Then she figured the ordeal was over and had cost her the $40 in cash she had in the wallet.

Sixteen months later, in April 2004, a private detective tracked down Ross’ parents and handed them a sheaf of court papers. Ross was being sued by lending companies based in New Jersey, California and Pennsylvania.

Her wallet had been filched by a sophisticated mortgage fraud crew who used her identity to take out loans.

Ross’ story shows how something as simple as a stolen wallet -- which used to mean somebody might run up a tab of a few hundred dollars at a nearby store -- can plunge a victim into a world of high-stakes fraud involving people and places never heard of and sums never imagined.

Her ordeal, told in land records, interviews and internal loan company files, also shows how the booming crime of mortgage fraud can play out beyond the reach of law enforcement and lender safeguards.

In an audacious series of face-to-face scams, con artists used Ross’ identity to secure loans worth $412,300 on three buildings that they didn’t own on Chicago’s West Side.

Three lending companies that had purchased the mortgages sued Ross, seeking full repayment. Her family spent about $10,000 in legal fees fending off those claims.

Her once good credit has been shredded: She can’t rent an apartment or lease a car without her parents’ co-signing.

Ross met with several law-enforcement agencies but got little help. At one meeting, she recalls, a Chicago police detective advised her to dye her hair and move out of town. “He told me, ‘These people are dangerous.’ ”

Chicago police spokeswoman Monique Bond said Ross’ case was closed, and it was not clear whom the detectives were. But Bond said she could not imagine an officer saying that to a victim.

Following a paper trail from Ross’ credit report through land records to title company documents to a title company, a reporter was able to trace who stole Ross’ identity in less than two weeks.

Her identity was assumed by a 37-year-old convicted check forger, Freddie “Knucklehead” Johnson, who was already on the lam when he began using her name in real estate transactions, the Tribune found.

On June 4, 2003, Johnson was scheduled to report to federal prison to begin a 15-month sentence for taking part in a conspiracy that used counterfeit checks to buy race car engines, jewelry and pit bulls. Johnson failed to show up, federal court records show, and a judge issued a warrant for his arrest.

Bank records indicate that he was still in Chicago.

A week later, on June 11, 2003, Johnson endorsed and deposited a $75,818 mortgage check from the first “Ross” sale in an account at a West Side bank, records show.

Two more deals followed within the next month. Johnson remains a fugitive.

Like Ross, the actual owners of the homes were plunged into legal and financial chaos.

The family of 75-year-old Ruth Williams spent personal funds -- she declined to say how much -- to clear the title to her two-story brick home.

“I got mine straightened out,” Williams said. “I don’t know about the others.”

Two doors away, Corey Latimer managed to forestall the court sale of his property. But he can’t sell his building or borrow against it because a lending company hasn’t released the phony mortgage. “The house is just sitting there with a cloud on the title,” said Latimer’s attorney, Dennis Kral.

About a mile southeast stands a once-sturdy three-story building. That owner never stepped forward to assert his claim amid the tangle of litigation that followed the third phony “Ross” mortgage. That property is headed for a court-ordered sale to repay the bank holding the fraudulent loan.

Although traditional theft and forgery laws should protect all these victims, mortgage fraud’s complexity leaves law enforcement struggling to keep up.

In addition to the police, Ross took her case to the FBI, the U.S. Secret Service, the Federal Trade Commission, the U.S. Customs Service and the Cook County state’s attorney’s office. None has contacted her for more than a year, she said. *

It was just below freezing but dry and nearly windless on the December night in 2002 when Ross and her troupe stepped across the street to the Old Town Ale House, piling their coats on a chair. Minutes later, she and another woman reached for their wallets and came up empty.

Ross agreed to talk about what happened despite concerns that she might provoke further retribution from the swindlers, who apparently are still at large.

Ross’ mother, Eileen, is vice president and general manager of a real estate firm that specializes in industrial property. But even her expertise and industry connections were of little help.

Because the real Meghan Ross did not take part in the land deals, once she was dismissed as a defendant her lawyers had no standing to obtain confidential closing files that would have shown where the $412,300 in mortgage funds went.

“I can’t find out who the broker was, who did the closing. But the lending companies sue Meghan,” Eileen Ross said.

There are clues in Ross’ credit report. Under a listing of employers was a West Side company called RM Developers LLC.

Ross had never heard of the place. But her credit report said she started working there in May 2003, about six months after her wallet was stolen.

State records show that Freddie Johnson created RM in 2002, shortly after his fourth forgery conviction. The three buildings were sold to “Ross” in June and July of 2003.

Lending firms ignored obvious signs of fraud as they hurried to sign loans they could quickly resell to investors or banks. About $55,000 of the $412,300 went for closing costs, including lender fees.

Two closing packages included a photocopy of a driver’s license with Ross’ name on it. But the picture on the license is of a black woman with brown eyes -- Ross is white with green eyes -- and the license has no number assigned by the secretary of state.

Documents show that the closings for the three fraudulent mortgages also were attended by a downtown attorney and a loan officer at a now-shuttered mortgage brokerage.

Lawyer Lorie Westerfield’s name is on the three loan-closing packages, as the title agent, a notary who verified signatures and attorney for the purported sellers.

Westerfield, who maintains a busy downtown bankruptcy and real estate law practice while investing in Chicago property, declined to comment. She faces civil fraud allegations in an unrelated lawsuit; a family accuses her of helping to orchestrate a mortgage scheme that cost them their home. Westerfield has not filed court papers in response to that lawsuit.

Records show that the three “Ross” mortgage applications were prepared by a loan officer from Express Mortgage, a rapidly growing Chicago loan brokerage that submitted mortgage applications to banks and lending companies. Express received $13,800 in fees.

Federal agents raided Express’ offices in 2004 as part of a criminal investigation. The company closed last year amid tax debts and fraud allegations in civil court.

The Express loan officer listed on the “Ross” loans, Owen Pittman, 32, was on probation for a felony weapons conviction. Pittman remained in the home loan business, holding a state provisional loan originator license from August 2004 through June 2005, when it expired. He could not be located.

In the documents from the first “Ross” transaction on June 10, 2003, a person posing as Ruth Williams sold a property to a person posing as Ross.

The real Ruth Williams had no idea what was happening.

The address given as Williams’ was actually the headquarters of Elite Mortgage Services, a loan firm that had worked with Westerfield on other deals.

A handwritten “letter of direction,” purportedly signed by Williams, assigned all sale proceeds to RMD LLC, a variant name of the company created by forger Freddie Johnson.

A day later, Johnson endorsed the $75,818 check and deposited it. The check cleared a day after that, records show.

The second sale and mortgage closing took place the next day, on June 13, 2003. This time, someone posing as Ross borrowed $114,300 to buy a nearby two-story.

The home address listed for owner Corey D. Latimer was actually a vacant lot. The real Latimer couldn’t have attended the sale and mortgage closing: He was incarcerated in Wisconsin for an armed-robbery conviction, court records show.

Latimer also purportedly signed a handwritten “letter of direction,” diverting his $104,398 payout to “Richard M. Preston,” 59, a supposed resident of Flossmoor, a Chicago suburb. The Tribune could locate no such person.

The third closing, for a brick three-story apartment building, came a few weeks after the Latimer sale. This time, “Richard Preston” cashed a $177,511 mortgage check.

More than a year later, in October 2004, city attorneys cited the building for dangerous housing-code violations and put it on the fast track for demolition. City attorneys said in court that the untended shell was being used by squatters and drug dealers.

The company by now holding the fraudulent mortgage, Deutsche Bank National Trust Co., objected in court to the building’s demolition. The property is scheduled for a court-supervised foreclosure sale.

The mortgage placed in Ross’ name on that building has continued to haunt her. In October, the city sent her an unpaid $715 water bill from the property.

Ross treated it as one more hassle in the ongoing mess. Now 25, she graduated from college with perfect credit. When she took out a loan to buy her first car, she didn’t need a co-signer. She calls those days “such a long-ago memory.”

Today, Ross said, “credit card companies won’t talk to me, because they don’t know it’s me.”

And what of her friend whose wallet was stolen at the same time? So far, she has had no problems.