Evans brothers commercial real estate parceling dazed lenders
Since two Jackson metro area brothers were sued by a Madison title insurance company for allegedly perpetrating commercial real estate and title insurance fraud, parties have worked to unravel the alleged scheme and speculated on the way the alleged fraud occurred.
Mississippi Valley Title Insurance Company (MVT) filed its first lawsuit against Jon Christopher Evans, Charles Evans Jr. and more than 30 of their companies in September in Madison County Chancery Court. MVT alleges the brothers committed mortgage fraud on banks and induced MVT to issue fraudulent title insurance policies. Charles Evans Jr. was an approved attorney for MVT who issued title insurance policies for commercial property loans obtained by Chris Evans.
MVT alleges that the Evans brothers repeatedly defrauded the title company and banks by borrowing funds using property that the Evans’ companies did not own as collateral.
Allegedly, the Evans brothers used the phony titles to get commercial property loans in the names of the various companies they established.
MVT has received 65 claims from banks, totaling more than $41 million, according to an MVT bankruptcy court filing. MVT has approximately $35 million in claims reserves, which are funds reserved for paying claims on policies. Its parent company, Old Republic National Insurance Company, jointly issued MVT policies.
In October, Chris Evans filed for bankruptcy, which stayed civil proceedings. The case is under the jurisdiction of federal bankruptcy court. A federal investigation is underway although details are not known.
HOW THE ALLEGED FRAUD HAPPENED
The original September lawsuit was amended by MVT to include “John and Jane Does 1-10,” described as additional unknown individuals or entities who participated in fraud.
Dusty Desper of Trinity Title Abstract, LLC, has recently helped several banks who made loans to the Evans brothers and are trying to determine their lien positions.
Abstractors provide a comprehensive overview of the status of a land title — which includes current ownership, liens and encumbrances, rights of way, easements, tax information and any issues or title defects that could have an adverse effect on the marketability of title of the tract. Abstractors base their findings upon a search of the land records and court and tax records of the appropriate county in which the land exists.
An abstractor’s summary report of title status can be used by attorneys, title insurers, banks and Realtors for various land transactions.
Regarding the Evans case, Desper said “from a title abstract perspective, a simple check of the Tax Assessor’s and Chancery Clerk’s records would have revealed that the vast majority of the borrowers did not hold title to the land being used as collateral.”
“I have personally checked the titles to many of these tracts in the past couple of months, and the complexity of some of the legal descriptions, along with there being so many mortgages executed by parties not vested with title, create quite a mess. It would have been nearly impossible to produce an accurate title report on these tracts without having been given an overview of the situation beforehand,” Desper said.
“It is hard for me to believe that a fraud of this magnitude could have gone on for so long without the assistance of additional parties. I would think a check of any of the Evans entities (Cedar Lake Investors, for example) on the Secretary of State’s web site would have raised suspicion as to a link between the closing attorney, Charles Evans Jr. and the borrower, Jon Chris Evans,” he said.
When a property owner approaches a bank to obtain a loan, a bank usually conducts an appraisal of the property. By law, banks must hire an independent appraiser to estimate the value of a property using a random selection process. Parties involved with a loan decision cannot use their own appraiser.
Appraisers estimate the market value of a property based on comparable properties and current market trends. Most appraisers are members of the state Board of Realtors.
If a plat, or map, is not filed with a chancery clerk’s office and a metes and bounds description is used for a parcel instead, an appraiser will consult a surveyor or an attorney. If given a particularly complex metes and bounds parcel description, an appraiser would likely turn to the attorney who supplied the description for explanation.
The Evans brothers described their parcels using the metes and bounds system, which uses physical features of geography, along with directions and distances, to define boundaries. Using this method, boundaries are described in a running prose style, working around the parcel of the land in sequence, starting at and returning to the point of origin. Some of the Evans land descriptions were two pages long, and the brothers did not file plats.
Title insurance protects an owner’s or lender’s financial interest in real property against loss due to title defects, liens or other matters.
The American Land Title Association (ALTA), a national trade association of title insurers, has guidelines for auditing, which include reviewing the files of the title attorney or agent to examine title searches, tax lien and judgment research, legal descriptions and survey documents and escrow accounts.
“Stacking of loans is a very common mortgage fraud scheme,” said David Townsend, member of ALTA governmental affairs committee. The ways stacking is perpetrated differ, but “convoluted legal descriptions appear to be the subterfuge (in the Evans case),” he said. Townsend is also CEO of Agents National Title Company, which is based in Missouri and Indiana and licensed to issue title insurance in Mississippi.
Title company insiders have more access to commit fraud, and underwriters have to be vigilant. However, title agents can also prevent a lot of fraud, Townsend said. “A lot of the time (insiders) are the first line of defense against fraud,” Townsend said. “Unfortunately, some bad players are in it… No matter how vigilant we are, criminals are smart people.”
Chris Evans and entities under his control owned properties in Madison, DeSoto and Harrison counties and in the State of Texas.
Public records show that Chris Evans’ company Old Agency Business Park Inc. purchased a property of approximately 38 acres on Highland Colony Parkway in Madison in 2003. Chris Evans had a local surveyor write legal descriptions dividing the 38 acres into 10 separate tracts. Through various limited liability companies he owned, Chris Evans obtained commercial loans from Mississippi banks on each of the 10 smaller parcels. The title for the land, however, remained vested in Old Agency and was never conveyed to any of the other entities through which loans were obtained. This particular property has more than 25 mortgages recorded against it, which are held by entities not owning title to the land.