(Source: By Heather Rawlyk, The Capital, Annapolis, Md.) - The Davidsonville owner of multiple real estate title companies was sentenced to a year in prison this week for defrauding lenders and another title insurance business of hundreds of thousands of dollars, federal prosecutors said.
Stephen J. Troese Sr., 72, pleaded guilty last October in U.S. District Court in Baltimore to defrauding the victims of at least $937,183. In addition to prison time, U.S. District Judge William M. Nickerson ordered three years of supervised probation upon release.
Two of Troese’s employees, James Kevin Hughes, 53, of Crownsville, and Brenda Lukenich, 60, of Hughesville, also entered pleas in Baltimore last fall to defrauding the victims out of $3.1 million. They will be sentenced Feb. 15 and Feb. 28, respectively.
According to the pleas, Troese, Hughes and Lukenich conspired for more than four years to misuse escrow funds and keep their businesses afloat. These businesses included Troese Title Services in Camp Springs, Troese/Hughes Title Services in Greenbelt and Troese/Prestite Title Services in Ellicott City.
Troese is the owner of the companies. Hughes is co-owner and president of one of the companies, and Lukenich is the escrow accountant.
Beginning in 2004, the escrow accounts of Troese Title and Troese/Hughes began showing substantial shortfalls. By the following spring, Lukenich estimated the shortfall at more than $2 million, according to the indictment.
Officials with the two companies concealed the shortfalls from Chicago Title Co. – the firm that underwrote the insurance policies that Troeses’s companies sold – by delaying required payoffs in order to use funds from new transactions to handle old accounts.
Funds that were initially held three to five days over time were eventually held three weeks, and sometimes longer.
Federal prosecutors said Troese and Hughes covered up the shortfalls by refinancing their homes and misappropriating the funds. Instead of using the money to pay off their old mortgages, they instead used the bulk of it to pay off old jobs pending in their escrow accounts. Chicago Title insured those deals, the indictment said.
Troese concealed the fact the mortgages were not paid off by continuing to make monthly mortgage payments on all three loans he’d taken out. As a result, Chicago Title lost $937,183, which it was required to pay to satisfy the two previous mortgages and pass clear title to the new lender, prosecutors said.
Chicago Title ended its agency agreements with Troese Title and Troese/Hughes in May 2008. But the agency continued to work with related companies, including Troese/Prestige.
The escrow accounts of Troese Title and Troese/Hughes were allegedly still short at least $1.5 million that spring.
Prosecutors said that in an continuing effort to hide the truth, Troese continued operating Troese Title and Troese/Hughes from their offices in Camp Springs and Greenbelt. But all of the paperwork sent to Chicago Title indicated that the settlements were being performed by Troese/Prestige.
Prosecutors said Troese did not inform the manager and employees of that related company about usurping their business’ name.
The loss to Chicago Title stemming from the Troese/Prestige payoffs was $1.7 million.
The loss attributed to Troese as result of the wire fraud schemes is more than $2.83 million, prosecutors said.
—
hrawlyk@capgaznews.com
www.twitter.com/ rawlyk_capital
___
©2012 The Capital (Annapolis, Md.)
Visit The Capital (Annapolis, Md.) at www.hometownannapolis.com
Distributed by MCT Information Services
