BCA MEMBER: Jacqueline Sharp
BCA CHAPTER: Fairfield County, CT
Fraud Alert : Business and Investor’s Identity Theft
We hear frequently that we must take great measures in our personal life to protect our identity from theft to protect our personal assets and our credit worthiness.
Now it appears one or more relatively organized groups of criminals have found new targets: LLCs which: 1) may have property in foreclosure or in financial trouble, or 2) has failed complete all of their regular state filings in a timely manner and any changes of membership or shareholder is duly reported.
This group of fraudsters works nationwide. They simply spot a likely target by reviewing the above data, all of which is easily available online. They review the relevant county or city land records where the property is located. Then review the filings on the websites of the Secretaries of the States/Department of Business Services.
If the LLC has a property in foreclosure the criminal will simply file fraudulent information on the existing members of the LLC, create a fraudulent set of books, operating agreement and with these obtain a hard money cash out loan. None of the money from the loan will ever make its way to the LLC. The fraudsters take the money. The LLC will suddenly find itself saddled with this new debt. Its only way out is to prove the debt not valid by litigation or declare bankruptcy. The members can only pray the fraudster did not execute a personal guarantee. These are the days of e-signing remember!
In cases where entities hold properties for investment and other purposes but are not particularly diligent about doing regular filings. Fraudsters take a different tack. These properties are valuable to obtain after all, especially if you don’t pay for them. One thing such criminals will have are a series of LLCs, S Corps etc. at hand. They do not operate in their own names ever.
Then they may take a make an interim filing with the Secretary of the State changing the business address and the name of the members or the LLC to that of one of their entities. That filing can normally be done online and be effective in an hour. Once completed, the new member will deed the property which belonged to the LLC to the new Member. That will not stop that Member from deeding it 2 days later to another S Corp whose sole shareholder may be the same thief.
A few good ways to prevent being a victim:
1) Do not buy more than you can handle as an investment. It should be discretionary income invested.
2) If you have an entity do every filing on time, keep all names and addresses with all government agencies current.
3) Tell your tenants that should anyone send them a letter directing the rent be sent to a different address, please send or email the letter to you, or call you. It may be a scam. You want to protect them.