Homebuyers lose life savings during wire fraud transaction, sue Wells Fargo, realtor and title company
Posted on June 28, 2017 by Safe Escrow
DENVER - A Colorado couple, who lost their life savings while trying to buy their dream retirement home, has filed suit against Wells Fargo Bank, Land Title Guarantee Co., Envoy Mortgage Ltd., Kentwood Real Estate Services LLC and realtor Karen Porras, alleging that none of them did enough to protect sensitive financial information.
James and Candace Butcher sold their house in Longmont and were using the proceeds - more than $272,000 - as a down payment on a new home, at 41467 Sunny Farm Circle in Parker.
They said they wanted a place closer to their son and one big enough for grandchildren.
"We were truly excited, when through negotiations, we won the bid," Candace Butcher said. "Through the entire process, I kept saying, 'I can't believe this is going to be our house.'"
Within 24 hours of closing, not only was it not their house, but they lost all their money.
Butcher told Denver7 that she got a phone call from Wells Fargo the following day alluding to problems.
"They never said up front that it was fraud," Mrs. Butcher said. "They said, 'we're trying to check into it.'"
"I was sick," she added. "That was our life savings, the equity that we had built up in our home."
The complaint filed in Denver District Court outlines the couple's allegations.
They say that during the negotiation, inspection and closing process, the defendants routinely sent sensitive financial information through non-secure email, violating their own and industry guidelines.
On March 30, Ms. Porras emailed the Butchers and notified them that they would be receiving wiring instructions from Shannon at Land Title prior to closing, which was then scheduled for April 5, 2017.
On April 3, the couple received an email at 7:49 a.m. and 8:37 a.m. from someone identified as Shannon Ryon at Land Title, requesting that they wire $272,535.96 cash to close, and requested that they reply to the email to confirm receipt.
The email did not identify the domain name of the receiver.
At 9:04 a.m., Ashley Johnson of Envoy emailed the Butchers a "final" closing disclosure, which stated that the couple would need to wire funds in the amount of $272,535.96 to close on the property.
The dollar amount had never been discussed, nor disclosed until the Butchers received emails, with identical numbers, from a Shannon Ryon and from Ashley Johnson.
The couple's attorney, Ian Hicks, says it appears that someone hacked into one of the companies' servers and retrieved financial information and then sent a bogus email to the homebuyers.
Hicks said Land Title claims on its website that "Nothing is more important to us than the security of your money and your personal information... you can rest assured that your investment is protected... [w]e undergo independent, third-party audits surrounding the security procedures, safeguards and best practices... in order to provide you with the peace of mind you deserve."
Hicks said Kentwood has made representations to the public at large, through at least its website, that it has the expertise, knowledge, and skills that enable it to safely conduct real estate transactions... and that it is familiar with the latest technology affecting the real estate transactions it handles.
He added that Envoy states on its website that it has been successful for over fifteen years because of its people, systems and technology... Envoy stands behinds its promise to make the home financing process as efficient, stress-free, and pleasant as possible for home buyers.
The Butchers told Denver7 that they went to the Wells Fargo Smoky Hill branch and spoke with a personal banker, who then contacted the fraud department. The personal banker apparently informed the couple that she was unable to get any status on the wire transfer, or any investigation by Wells Fargo, even though that it was Kelly Vance at Wells Fargo who allegedly first contacted the Butchers, to inform them the wire transfer was fraudulent.
Hicks said the Butchers asked to speak to the branch manager, Lyndsey Dehate, and said she opened a case and provided the Butchers with a reference number, and further indicated that an investigator, as well as the legal and wire fraud groups at Wells Fargo, were involved.
After spending hours at the branch, the couple went home.
On April 5, the Butchers called the branch and asked Ms. Dehate if she had contacted the FBI.
The complaint quotes Dehate as saying "Wells Fargo has a policy of not contacting the FBI in situations like this."
Hicks told Denver7 that neither Dehate, nor anyone at Wells Fargo, ever informed the Butchers that the FBI can initiate what is known as a "Financial Fraud Kill Chain," where the FBI can stop a wire transfer and return the funds to a U.S. victim's bank account within 72 hours.
James Butcher called the FBI and then, with an agent on the line, contacted Wells Fargo.
"They were shuttled from one department to another," Hicks said. "Wells Fargo couldn't provide basic information... and repeatedly contradicted itself."
"They said there was an investigation and then they said there was not," he said. "They said they had a number assigned to the case and then said they couldn't see it. It's unbelievable."
Risks known for years
Hicks said the defendants are all aware that scammers have been stealing money via wire fraud.
In 2016, Land Title issued an advisory explaining that over $1 billion in losses have been suffered as a result of the same scam used to victimize the Butchers.
In that advisory, Land Title listed a series of preventive measure that should be taken by real estate professionals and others involved in real estate transactions to mitigate the risks of wire fraud, including but not limited to instructing that:
- 1) Sensitive financial information should never be sent over unsecure email.
- 2) Clients should be made aware to never wire funds without first calling the intended recipient by telephone to confirm the information provided.
In May of 2016, the National Association of Realtors published an advisory warning of the risk of wire fraud in residential real estate transactions.
The advisory stated that wire fraud was so prevalent that when the audience at a recent trade association event was asked if they, or someone they knew, had been victimized, one -third of the people raised their hands.
The NAR advisory listed recommendations to ensure the security of transactions but not limited to:
- 1) Build a standard warning about wire scams and avoid sending sensitive information over email.
- 2) At the beginning of every transaction, tell clients what your communication practices are.
- 3) If you, or your agents, do engage in a wire transfer with a client, call them on the phone immediately prior to the transfer of funds, so they know they're sending money to a legitimate source.
- 4) Always using strong passwords and change them regularly, and encourage your clients to do the same thing.
- 5) Brokers should consider employing a staff person who's responsible for monitoring, updating and implementing information security systems and procedures at your company.
Bank offers money
Hicks said Wells Fargo offered to return some of the couple's money, if they relieved them of liability.
"I rejected that offer," Hicks said.
James Butcher said, "It concerns me that they couldn't come forward and share with us exactly how much. It could very well be a large sum of money, and I don't know, or it could very well be a small amount of money. I can't afford that."
Future up in the air
On April 7, an Envoy representative called the Butchers and asked if they still planned to close on the property. The couple informed her that it was unlikely.
According to the complaint, that Envoy representative informed the Butchers that a similar scam had just been attempted but prevented because Envoy was no longer dealing with wire transfers, only cashier's checks.
That's bittersweet news to the Butchers, who are now living in their son's basement.
"We don't even have a down payment to go buy another home," Candace said, "so what do we do from here? Are we going to move back into an apartment?"
A spokesman for Wells Fargo said they don't normally comment about customers' cases.
The Butchers say they've closed all their Wells Fargo accounts and no longer do business with the bank.
Denver7's calls to Land Title Guarantee and Kentwood Real Estate have not been returned.
Originally posted by Denver7