Escrow Company Executive Allegedly Misused Customers’ Funds
Employee Charged Separately with Stealing from Company
|U.S. Attorney’s Office February 27, 2014|
CHICAGO—The co-founder and president of a defunct mortgage escrow company was indicted on federal fraud charges for allegedly misappropriating more than $500,000 of customer funds for his own personal use, as well as to pay operating expenses of two other businesses. The defendant, Derek Lurie, who controlled American Escrow LLC until it collapsed in March 2009, was charged with five counts of mail fraud in an indictment returned by a federal grand jury yesterday and announced today. Lurie also allegedly engaged in a Ponzi-type scheme in which American Escrow made the property tax and insurance payments for some customers ahead of other customers.
Separately, a former American Escrow employee, Jacqueline Cruz, was indicted earlier this month for allegedly fraudulently obtaining more than $400,000 from the company.
Lurie, 40, of Highland Park, was ordered to appear for arraignment on March 11 in U.S. District Court. Cruz, 38, formerly of Highland Park and currently residing in Okinawa, Japan, pleaded not guilty on February 19 to three counts of mail fraud, following her indictment on February 5.
According to the Lurie indictment, American Escrow―which had offices on West Randolph and North May streets in Chicago―fraudulently obtained and managed more than $5 million of customer escrow funds and purported that it would hold the money in secured FDIC-insured accounts to make timely tax and insurance payments for customers. Instead, between 2003 and March 2009, Lurie used approximately $554,000 for such personal expenses as parking tickets, car payments, and renovating a condominium in Miami, as well as to operate his other business interests, American Tax Reporting Inc. and Woodland Technologies Inc., the charges allege.
Lurie allegedly knew that all of the customers’ escrow funds were not FDIC-insured, that American Escrow was operating at a deficit and that the funds were being used for unauthorized purposes. As a result of the deficit, Lurie made Ponzi-type payments to satisfy earlier customers’ tax and insurance debts with more recent customers’ escrow funds and concealed the scheme from his customers, the indictment alleges.
Cruz, whose duties included accounting, issuing company checks, and overseeing the payment of customers’ property taxes and private mortgage insurance, allegedly misappropriated approximately $412,000 from American Escrow. Between May 2005 and March 2009, she wrote 122 company checks to herself, knowing that they were unauthorized and she was not entitled to the funds, according to her indictment. It alleges that she either forged Lurie’s signature or signed the check herself.
Both indictments seek forfeiture of the alleged fraud proceeds: $554,000 against Lurie and $412,000 against Cruz.
In both cases, each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictments were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorney Jessica Romero.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.