An Elder Law Fraud Chase
From August 1993 through July 2004, Mrs. Hunt and her professional Conservator (and later Administrator) KAY TROUT sought restitution from Mr. Cheatham of Mrs. Hunt’s house title, insurance annuities, and bank accounts. In 1993 when Mrs. Hunt discovered that she no longer owned them, the chase to justice began.
Mrs. Hunt and Mr. Cheatham met at Family Savings Bank, where Mr. Cheatham sold annuities, using referrals from bank tellers to identify who had assets. His job wads to encourage transfers in from other banks, for funds to buy the annuities from the non-bank company that was contractually allowed to do this. The bank tellers were rewarded with non-monetary business points for bringing in the additional money.
The new money was invested in annuity policies. An annuity is a form of an insurance policy, but works in reverse: instead of paying monthly premiums to have a beneficiary receive the proceeds at death at the end of the policy, at the beginning of the policy a single premium (lump sum) is delivered to the insurance company to either grow (deferred annuity) or pay periodic income (immediate annuity, in “pay status”). The single premium is a fixed sum but the pay-out amount can be based on either the life expectancy term or the amount of monthly income needed, which may terminate before the life ends. An annuity can be a trust substitute (despite its internal costs) because the insurance company manages the money, not a Trust or Trust Company (which have annual fees).
Mrs. Hunt was familiar with annuities because she had had annuities with some Christian groups for a number of years. She had worked as a parlor maid for Nice Swedish Families, who banked her wages and in a sense, provided money management for her. She had paid cash for her 912 square foot house, which she bought with no mortgage. She needed her accumulated wages money to live on, to supplement her $744/month income from Social Security and Railroad Retirement, together. There was NO WAY that her home qualified for an Owner-Occupied Loan (since she lacked sufficient income to pay a loan) and there was NO WAY that Mr. Cheatham qualified for an Owner-Occupied loan, since he never lived there. Owner-Occupied loans have lower interest rates than Income Property loans, and Mrs. Hunt had occupied her own home all along. She NEVER gave her assets away. She NEVER intended not to own her house, her bank accounts or her insurance annuities.
GP 003231 Conservatorship of Person and Estate of Margaret Leola Hunt; was filed with Mrs. Hunt as Petitioner to tell her story under penalty of perjury and to provide a duly qualified plaintiff to stand in Mrs. Hunt’s shoes in civil litigation to chase Mrs. Hunt’s assets and to take care of her elder care needs. The new Elder Abuse Dependent Adult Civil Protection Act (EADACPA) had just been passed, and was expected to protect people in Mrs. Hunt’s situation by providing a full recovery.
Should the civil case be filed in Probate Court (where it is all about her, in rem, and they do serve elders) or Civil Court (where everyone is at arm’s length)? Despite taking Mrs. Hunt to court ~ thanks to medical transportation ~ six times to tell it to the Judge, Mrs. Hunt was never heard by the Court and became too ill to keep going to Court.
But before she died, excellent forensic accounting was work done by Supervised Independent Paralegal JODI BRUCKEL. Based on that accounting work, the Hon. COLEMAN A. SWART was able to return her house title to Mrs. Hunt, subject to further hearing about the mortgage which had been assigned to Freddie Mac, where it ‘looked like an asset’ on Freddie Mac’s books. Also Included was a $151,921.62 Fraud Surcharge Order for restitution of the purloined funds to be paid by Mr.
Cheatham. This Judgment later became final. Unfortunately, Mr. Cheatham no longer had the bank account money from which to make restitution.
GP 005479 Probate of Estate of Margaret Leola Hunt was opened of necessity to handle her medical creditors. Mrs. Hunt died a Medi-Cal recipient, which no one ever begrudged to her. Her last days were at South Pasadena Convalescent, with the Fraud Surcharge Order safely pinned in plastic above her headboard.
GC 012435 (civil) Mrs. Hunt vs. EXCEL MORTGAGE, FEDERAL HOME LOAN MORTGAGE CORPORATION (aka “Freddie Mac”), the civil case, addressed the third party issues, resulted in five appeals in the Second District:
B094352 Hunt vs. The Holden Group (insurance carrier)
B096337 Hunt vs. Family Savings Bank (Bank)
B108023 Cheatham’s appeal of the Fraud Surcharge Order
B111206 Hunt vs. Freddie Mac (no settlement)
B129660 Hunt vs. Freddie Mac (a Bona Fide Encumbrancer?!!!)
Later we were told that Freddie Mac’s defense attorneys billed and were paid $145/hour for the extended term of the litigation.
This was one of those cases where everyone knew the poor woman had been swindled, but no one yet knew what to do about it. On one occasion, one of the several various Presiding Judges overseeing this journey to justice said, “Yes, it’s a civil matter, but I don’t want you having to explain The Fiduciary Duty all over my Courthouse.”
Well, NOW The Fiduciary Duty IS being explained all over the place:
- at CSUF’s Fiduciary Management education program for three Certificates (for Conservatorship, Trustee, and Advanced) http://www.csufextension.org/Classes/Certificate/CertificateClasses.asp?GN=3140&GV=2&LID=
- at the first Monday 1:30-4:30 PM monthly trainings at the LASC Central Courthouse at 111 North Hill Street, LA, CA 90012 for FAMILY MEMBERS who are serving or considering serving;
- at possible future trainings for the education requirements for Judges, according to some of the public comments at the Judicial Council website http://www.courtinfo.ca.gov/invitationstocomment/prevprop.htm
But I digress….
93-LA20635RA in Los Angeles: Ch. 11 Bankruptcy of Charles H. Cheatham: Mrs. Hunt’s Conservator KAY TROUT appeared in 3 Adversary Proceedings in this Los Angeles matter. The requested Ch. 11 relief was granted initially, so that Mrs. Hunt was ‘crammed down’ to a Class 10 creditor, since her house title was claimed by the Debtor-In-Possession (a different kind of fiduciary, but still a fiduciary).
Thanks to a special bankruptcy Attorney (who still has never been paid) Mr. Cheathm;’s Ch. 11 discharge was reversed and relief denied on Motion by the Office of the U.S. Trustee, filed on 3 grounds, any one of which would have been sufficient being based on fraud on the Court.
96-31296-R-7 in San Francisco: Ch. 7 Bankruptcy of Charles H. Cheatham: Three years later, Mr. Cheatham filed a Ch. 7 to be rid of all debts. Three of Mrs. Hunt’s team appeared in San Francisco and heard Judge Montali say, “Well now, do we all agree that you cannot obtain up here what you failed to pursue down there?” to which Mr. Cheatham answered “yes”, and we three had no Objection.
What was the outcome, you may ask? Some of us are still digesting the experience.
One success was that we succeeded in keeping Mrs. Hunt in her house for 3 years on a 10-day TRO. But before we conclude that this was a really big success, let us remember that Freddie Mac’s defense attorneys were being paid hourly fees of $145/hour while we plaintiff’s lawyers labored on without pay and diligently making multiple cost advances from our own funds, plus all the overhead costs of such a Hydra-headed matter .
So for Mrs. Hunt and her team, this was not only what businessmen eschew as a zero-sum game, but a really large loss.
Noteworthy in this case are the number issues. The financial losses involved lots of 7’s which may have been Biblical (Mrs. Hunt was very religious) and no 6’s.
Financial fraud involves numbers, and sometimes patterns appear. But here, in addition to a patterns of the same fraud running parallel against the home of his relative (of a small loan and then a big wrap-around loan), we also had some odd external coincidences, outside of the financial documents:
- For example, Mrs. Hunt and I had the same birthdate, May 27, which she took to be a sign from God. She forgot to tell me that she’d consulted 3 other attorneys, and they had turned her down. And I hadn’t thought to ask.
- For another example, both bankruptcies were filed on March 26. The first Bankruptcy was filed on March 26, 1993, and the second Bankruptcy was filed on March 26, 1996, exactly 3 years later to the day, and a few days after our Fraud Surcharge Order was announced by the Court, who was assured by Mr. Cheatham that there would be no second bankruptcy.
- Later, getting ready for trial of the Bona Fide Encumbrancer issue, to put on the evidence in support of our Fraud In the Factum position, our Trial Attorney dashed out of his office quite agitated:
“Check this date! Check this date! Look here!!”
“I know, it’s a coincidence, but it really did happen. I’ve already checked it”.
“Yes, I checked it when I put it on the chart, when I made the copies, and with every transcript.”
“Why are you so upset?”
“Well, March 26 is ……….my birthday.”
“See?!! Mrs. Hunt was RIGHT! You WERE Heaven-sent to her!”
“Well, I don’t think THAT is where THIS case came from.”