'Buy Low, Sell High': Rory the foreclosure fraud lizard king

SPECIAL TO THE WEB

Rory Sykes was about a foot shorter than Bam-Bam Baker but just as clever. He briefly operated as a traditional real estate agent before opening his own business, Sykes Real Estate Services, in 1999, which focused on the acquisition of residential properties in the late stage of foreclosure and quick-turnaround sales. "Buy low, sell high" was Rory's secular mantra.

Rory had a deep understanding of the complex minutiae of the foreclosure process and an equally deep understanding of the lack of scrutiny exercised on the contents of documents filed in the county recorder's office. Rory wanted to gain an advantage over his numerous competitors in acquiring specific properties after a sheriff's foreclosure sale, and to enhance the likelihood of owning these properties at the end of the redemption periods at the least possible expense. So he filed documents — affidavits, lien notices, documents of conveyance — containing one or more false statements designed either to discourage redemption by others or to minimize the cost of his acquisition of the properties. He also timed the filings of these fraudulent documents so that no others could have a good chance at redeeming.

FALSE FILINGS GALORE

The Hennepin County Attorney's Office detailed Rory's acquisitions of seven properties in its case against him. In three of these acquisitions, Rory filed Notices of Lien for Payment of Property Taxes, Notices of Intent to Redeem Under Property Tax Lien, an Affidavit of Amounts Owed and a subsequent Corrected Affidavit of Additional Amounts, all falsely stating he or Sykes Real Estate Services had paid property taxes on the parcels.

In five of these acquisitions, Rory filed other Affidavits of Amounts Owed on Redemption or on the Sheriff's Certificate, which falsely claimed expenses that were never incurred, that were misstated as to type of expense (certain expenses incurred in the acquisition of a foreclosed property are allowed, others are disallowed) and/or that were grossly inflated.

In two of these acquisitions, Rory filed quitclaim deeds (QCD) conveying the properties from the owners to him after he had directly paid each of these owners $2,500 and $6,250 respectively. (A quitclaim deed transfers the owner's interest in a parcel of real estate to another with no warranties of the status of the property title.) A false statement was printed on each of these QCDs — "total consideration is less than $500" — which resulted in the minimum deed tax assessment of $1.70 rather than an accurate deed tax calculated on the actual consideration paid to the owners.

In one acquisition, Rory filed an Assignment of Sheriff's Certificate for the benefit of and on behalf of Sykes Real Estate Services, falsely stating "[t]he total consideration for this transfer of property is $500 or less," for which a deed tax of $1.70 was again assessed. This property was being foreclosed based on a default of townhome association dues of a fairly minimal amount.

In one acquisition, Rory filed a mortgage that falsely stated that it had been issued "in consideration of the sum of $5,000 to Mortgagor in hand paid by Mortgagee" rather than the accurate figure of $6,250, and filed a Notice of Intention to Redeem upon the mortgage containing the false statement. In another acquisition, Rory filed a mortgage from himself to his corporate alter ego, Sykes Real Estate Services, and a subsequent Mortgage and a Notice of Intent to Redeem from the Mortgage, signed by Rory, resulting in an issuance of a Sheriff's Certificate of Redemption to Sykes Real Estate Services.

BUY LOW, SELL HIGH

While the false statements in these documents may seem picayune to the outside observer, they had their desired effect. Rory acquired certain properties at amounts significantly beneath their true market value and cost — after he'd discouraged others from redeeming or buying them — and shortly afterward resold the properties at substantial profits. Owners or estate heirs redeemed back other properties or competitors acquired them after they paid inflated amounts back to Rory. One of the property owners was in prison, another was suffering from profound lung problems that required him to use an oxygen tank, another was dead, two were elderly and one was being foreclosed upon for default on a $15,000 second mortgage that would have been forgiven had she been able to remain in the property for a few more years. Buy low, sell high.

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At Play in the Fields of the County Recorder's Office

SPECIAL TO THE WEB

Annette Simmons-Brown, CFE

It's easy to record a document onto the title of a real property. Typically one needs only to have the proper form of a real estate document — a "conveyance of ownership" instrument, a mortgage document, a lien form, a power of attorney, an affidavit — and the appropriate legal information about the property, access to a notary's approval (or just a notary's stamp or seal) and filing instructions for the county recorder's office (or comparable office in your local jurisdiction). Then, bingo, the document can be filed and recorded with no verification of the truth of the information it asserts. Easy filing — coupled with no need to verify the filing's substance — enable significant, varied and lucrative frauds.

Within six months, the Hennepin County Attorney's Office (HCAO) in Minneapolis, Minnesota, charged two separate defendants with various criminal offenses in which false filings of documents at the county's registrar of titles/county recorder's office played significant roles.

The defendants — both 34-year-old men with professional résumés in real estate and investments — stole hundreds of thousands of dollars by the time they were charged with racketeering and other assorted fraud-related counts. Their routine fraudulent activities highlighted the vulnerabilities of public systems that are entirely dependent on personal honesty. (Neither defendant knew each other, for which we can be grateful.)

In part one of this two-part article, we'll examine the peregrinations of one Trevor "Bam-Bam" Baker — a financial crime generalist and all-around tiresome individual. In part two, we'll examine the specialized antics of Rory Sykes — whom I call the Lizard King of Foreclosure Fraud. Although their schemes were different, their common playground was the county recorder's office, and their respective hauls were substantial.

THE ADVENTURES OF BAM-BAM BAKER

Trevor Baker was a 6'6" bruiser of a self-styled home builder/renovator and all-around real estate whiz in Hennepin County. Before he discovered the fraud potential in real estate, he worked for a national investment house as a sales and executive investment trainee and learned the logistical operations of this and similar companies. He later became a mortgage loan officer and a commissioned notary public in the mid-2000s. His bar buddies gave him the nickname Bam-Bam, for reasons that faileth human understanding, and so that's how investigators and prosecutors later referred to him.

Bam-Bam had eight business entities registered in three states: Lucerne Capital L.P., Lucerne Builders, Lucerne Group, Marketech Investments Inc. (two entities with the same name), Geneva Capital L.L.C., Geneva Trust and Geneva Capital Trust. Remarkably, all of these entities operated out of a post office box the size of a toaster oven at a UPS outlet in a Hennepin County suburb known for its higher median incomes and relative transience. Bam-Bam listed himself variously as the "qualifying person," "general partner," and "director of investments" for these entities.

Bam-Bam also had a mother, Pamela, who had some business integrity "issues"; an honest grandmother, Edith; a soon-to-be ex-wife, Melissa, who had a healthy income and an increasing contempt for Bam-Bam; and a soon-to-be ex-brother-in-law, Dennis, whom Bam-Bam could easily manipulate.

Melissa's contempt for Bam-Bam was well-founded. For although Bam-Bam had all of these wonderful business entities, Melissa never saw him build or renovate anything unless it was a residence in which he lived. He bought, built or renovated these residences by fraudulently obtaining large loans, and he facilitated these loans by regularly filing false documents with the county recorder's office. 

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