"There's a lot of ways to make money in this world. But I can't recommend insurance fraud." Words to live by.
Showing posts with label fraud. Show all posts
Showing posts with label fraud. Show all posts
Friday, October 28, 2016
Tuesday, November 5, 2013
Six Elements of Fraud
This blog has previously featured videos from Professor Robert Emerson at the University of Florida and will continue, from time to time, to post some of Professor Emerson's innovative and engaging materials.
Thursday, February 7, 2013
Caveat Emptor - on Crack?
Legal rules sometimes serve a logic that is not readily evident and can seem downright cruel. It's likely that is what a Pennsylvania homeowner is thinking today. Janet Milliken purchased a Thornton, Pa. house for herself and her children in June 2007 for $610,000 from the Jocono family. The Joconos had owned the house for about a year, having purchased it from the estate of Konstantinos Koumboulis - about 8 months after Koumboulis murdered his wife in the house and then committed suicide there. The Joconos knew of the murder-suicide, but neither they nor their real estate agent ever disclosed the incident to Milliken. While the incident was well publicized in Thornton, Milliken had moved from California and had no knowledge of the history of the house. The case raises issues similar to those found in the well-known Rye, NY haunted house case of Stambovsky v. Ackley - except for the result. In a split decision, an appellate panel of the Pennsylvania Superior Court ruled that caveat emptor applied.
The court first reviewed statutorily mandated disclosures and determined that murder-suicide was not among the categories of required disclosures. The court then dispatched with the common law fraud claim by determining that the fact was not "material." Because the defect was essentially a matter of the psyche for which a monetary value could only be subjectively determined, it could not be considered a material defect.
In making a pragmatic decision applying a logical desire to limit the law to matters of certainty and objectivity, the court seems to ignore the very human elements of the case. As a result, the law looks unreasonable and its legitimacy to the public eye is compromised. And while the court may have justified the result on legal reasoning, it could just as easily have found the other way with sufficient legal precedent (the court rejected persuasive precedent from Ohio on similar facts) as was pointed out by the dissent.
The majority did mention in a footnote that their support of caveat emptor was in some way justified given that the tragic incident would likely have turned up on an internet search. Unfortunately, the house address was never given in the decision so I could not repeat the search to see what turned up. The court did not specifically tie the internet search rationale to the justifiable reliance element of fraud, but referred to it generally as an argument to ameliorate the apparent harsh effects of caveat emptor.
Connecticut has a statute that covers this situation, but it hardly seems more helpful to the innocent buyer. The statute puts the burden on the buyer to notify the seller in writing that the fact that someone has died in the house is a material fact. Failing to do so is conclusive in shielding the Seller from a fraud claim for failure to disclose. At least the statute gives the buyer a chance. Apparently, in Massachusetts the fact of commission of a homicide in a house is defined by statute as not being a material fact.
The Thornton, PA house:
The court first reviewed statutorily mandated disclosures and determined that murder-suicide was not among the categories of required disclosures. The court then dispatched with the common law fraud claim by determining that the fact was not "material." Because the defect was essentially a matter of the psyche for which a monetary value could only be subjectively determined, it could not be considered a material defect.
In making a pragmatic decision applying a logical desire to limit the law to matters of certainty and objectivity, the court seems to ignore the very human elements of the case. As a result, the law looks unreasonable and its legitimacy to the public eye is compromised. And while the court may have justified the result on legal reasoning, it could just as easily have found the other way with sufficient legal precedent (the court rejected persuasive precedent from Ohio on similar facts) as was pointed out by the dissent.
The majority did mention in a footnote that their support of caveat emptor was in some way justified given that the tragic incident would likely have turned up on an internet search. Unfortunately, the house address was never given in the decision so I could not repeat the search to see what turned up. The court did not specifically tie the internet search rationale to the justifiable reliance element of fraud, but referred to it generally as an argument to ameliorate the apparent harsh effects of caveat emptor.
Connecticut has a statute that covers this situation, but it hardly seems more helpful to the innocent buyer. The statute puts the burden on the buyer to notify the seller in writing that the fact that someone has died in the house is a material fact. Failing to do so is conclusive in shielding the Seller from a fraud claim for failure to disclose. At least the statute gives the buyer a chance. Apparently, in Massachusetts the fact of commission of a homicide in a house is defined by statute as not being a material fact.
The Thornton, PA house:
Monday, October 29, 2012
More Lying Your Way to Success
This post questioned the effect of politicians (law-makers) who lie with impunity under the protection of political free speech as role models for students. Lying, of course, is not limited to the political realm. But as with politicians, it may be employed intentionally as a strategy for success - even in unlikely areas.
NPR recently interviewed Bloomberg Markets senior writer David Evans about an investigative report in the October issue of Bloomberg chronicling the practice of fundraisers who lie to potential donors about the percentage of the raised funds that are being paid to the charities. And, amazingly, the charities agree to the practice! According to the report, some charities actually agree to contracts with the fundraisers that pay no funds at all to the charity. The charities' rationale is that donors will hopefully become used to donating to their cause and that future donations may increase. In explaining his charity's agreement with the fundraiser's policy of lying to donors, one spokesman pointed out that, "If we came into it and said, 'Geez, I'm not going to make a dime on this,' do you think we'd have anyone who'd give us money?" Can anyone say "scienter?"
Sure, lying in this manner is illegal, but the sanctions are so small in relation to the take that it is profitable fraud.
What does it mean to embrace the entrepreneurial spirit when this is the business that you create? Should "job creation"include starting a business that takes on-line courses for overworked students, or sells research papers, or takes your SAT's for you? I fear for our brightest students who misunderstand the concept of "risk-taking" to include legal risks in the pursuit of profit.There are far too many examples out there.
InfoCision is mentioned in the Bloomberg report:
InfoCision creates hundreds of new jobs with good pay in Ohio:
NPR recently interviewed Bloomberg Markets senior writer David Evans about an investigative report in the October issue of Bloomberg chronicling the practice of fundraisers who lie to potential donors about the percentage of the raised funds that are being paid to the charities. And, amazingly, the charities agree to the practice! According to the report, some charities actually agree to contracts with the fundraisers that pay no funds at all to the charity. The charities' rationale is that donors will hopefully become used to donating to their cause and that future donations may increase. In explaining his charity's agreement with the fundraiser's policy of lying to donors, one spokesman pointed out that, "If we came into it and said, 'Geez, I'm not going to make a dime on this,' do you think we'd have anyone who'd give us money?" Can anyone say "scienter?"
Sure, lying in this manner is illegal, but the sanctions are so small in relation to the take that it is profitable fraud.
What does it mean to embrace the entrepreneurial spirit when this is the business that you create? Should "job creation"include starting a business that takes on-line courses for overworked students, or sells research papers, or takes your SAT's for you? I fear for our brightest students who misunderstand the concept of "risk-taking" to include legal risks in the pursuit of profit.There are far too many examples out there.
InfoCision is mentioned in the Bloomberg report:
InfoCision creates hundreds of new jobs with good pay in Ohio:
Monday, October 15, 2012
Google it or Lose it?
Advancements in technology and changing societal norms and practices are factors that heavily impact the evolution of the law. Certainly, no technological/societal advancement has had a greater impact on the law than the development of the internet and its ability to bring information into the living rooms of the general public. I have speculated with my class about how the internet may serve to bring a halt to one developing area of law.
Hess v. Chase Manhattan Bank: Seller, a bank that had taken the property by foreclosure, failed to disclose a known, ongoing EPA investigation of the property for groundwater contamination.
But in each if these cases, the sales took place prior to the heightened prevalence of the internet (Approx 1981, 1989, and 1999 respectively). If the seller's silence was material, then the buyer must also be able to prove reasonable reliance. In the pre-Google search days, the murder, the haunted reputation or the investigation would not be readily discoverable by an out of town buyer. But today, a simple internet search on the property address would likely have turned up this information. Is a court now justifies in turning the responsibility back upon the Buyer to make reasonable internet inquiry on the object of a real estate purchase? Courts place the burden on buyers to do reasonable home and pest inspections or suffer the consequences of not having done so. Will courts see information searches, no longer onerous, as the new norm in protecting against failure to disclose?
Oddly, with all the "before you buy a home..." advice sites on the internet, I couldn't find a single one that suggested doing an internet search on the address before buying. Yet, when I recently looked at a condo for a potential purchase, the first thing I did after viewing the property was a google search.
Selling a haunted house:
Pest infestation:
Google searches:
At Common law, "Caveat Emptor" (Buyer Beware) ruled the area of real estate sales. Sellers had no obligation to disclose latent defects to a prospective buyer. Certainly, a Seller was not allowed to make a false statement about the condition of the property or to lie in response to a direct question, but the thorny area was how to deal with the failure to offer negative information about the property. Under the doctrine of caveat emptor the seller's silence (failure to disclose defects) could not be the basis for a misrepresentation claim. And, in some cases, even where the Seller has made statements about conditions ("Nope - no termite damage in this house") courts have been unwilling to assist a Buyer who relies on the representation without engaging in his/her own inspection. However, the "modern trend" in the law has been to see more and more obligation placed on the Seller to come forward with known information that might impact on the demand for the property. We have all seen cases in texts such as:
Reed v. King: Seller failed to disclose that the house had been the scene of a murder a decade prior.
Stambovsky v. Ackley: Seller failed to disclose that the house had a reputation for being haunted - a reputation that the seller helped to create.
Hess v. Chase Manhattan Bank: Seller, a bank that had taken the property by foreclosure, failed to disclose a known, ongoing EPA investigation of the property for groundwater contamination.
But in each if these cases, the sales took place prior to the heightened prevalence of the internet (Approx 1981, 1989, and 1999 respectively). If the seller's silence was material, then the buyer must also be able to prove reasonable reliance. In the pre-Google search days, the murder, the haunted reputation or the investigation would not be readily discoverable by an out of town buyer. But today, a simple internet search on the property address would likely have turned up this information. Is a court now justifies in turning the responsibility back upon the Buyer to make reasonable internet inquiry on the object of a real estate purchase? Courts place the burden on buyers to do reasonable home and pest inspections or suffer the consequences of not having done so. Will courts see information searches, no longer onerous, as the new norm in protecting against failure to disclose?
Oddly, with all the "before you buy a home..." advice sites on the internet, I couldn't find a single one that suggested doing an internet search on the address before buying. Yet, when I recently looked at a condo for a potential purchase, the first thing I did after viewing the property was a google search.
Selling a haunted house:
Pest infestation:
Google searches:
Thursday, September 27, 2012
"Caveat Emptor," Law Students
So, you are thinking about attending law school. You do your "due diligence" by investigating schools, including reviewing placement statistics reported by the school. Three years later, $100,000 in debt and unemployed, you make a more critical examination of those placement statistics and find them to be . . . misleading, at best. Can you sue?
Some Cooley Law School graduates did - and lost. A U.S. District Court judge in Michigan dismissed the case on the grounds that no reasonable person could have relied on the placement statistics compiled and reported by the school.
With red flags waiving and cautionary bells ringing, an ordinary prudent person would not have relied on the statistics to decide to spend $100,000 or more [on law school tuition and fees].
Barring no holds, the opinion continues, Sometimes hope and dreams triumph over experience and common sense. Nevertheless, it would be unreasonable for Plaintiffs to rely on two bare-bones statistics in deciding to attend a bottom-tier law school with the lowest admission standards in the country.
Ouch! Although, the plaintiffs may have doomed their case by alleging in the amended complaint: Cooley publishes its own law-school rankings, which have been met with “great skepticism, if not outright ridicule, and no reputable academic or legal commentator takes it serious.”
The decision concludes, "The bottom line is that the statistics provided by Cooley and other law schools in a format required by the ABA were so vague and incomplete as to be meaningless and could not reasonably be relied upon. But, as put in the phrase we lawyers learn early in law school–caveat emptor.
Law schools, apparently, should be placed in the category with used car salesmen. A prospective "buyer" should expect to be guarded against a healthy dose of "puffing."
Legal employment is a difficult market:
Some Cooley Law School graduates did - and lost. A U.S. District Court judge in Michigan dismissed the case on the grounds that no reasonable person could have relied on the placement statistics compiled and reported by the school.
With red flags waiving and cautionary bells ringing, an ordinary prudent person would not have relied on the statistics to decide to spend $100,000 or more [on law school tuition and fees].
Barring no holds, the opinion continues, Sometimes hope and dreams triumph over experience and common sense. Nevertheless, it would be unreasonable for Plaintiffs to rely on two bare-bones statistics in deciding to attend a bottom-tier law school with the lowest admission standards in the country.
Ouch! Although, the plaintiffs may have doomed their case by alleging in the amended complaint: Cooley publishes its own law-school rankings, which have been met with “great skepticism, if not outright ridicule, and no reputable academic or legal commentator takes it serious.”
The decision concludes, "The bottom line is that the statistics provided by Cooley and other law schools in a format required by the ABA were so vague and incomplete as to be meaningless and could not reasonably be relied upon. But, as put in the phrase we lawyers learn early in law school–caveat emptor.
Law schools, apparently, should be placed in the category with used car salesmen. A prospective "buyer" should expect to be guarded against a healthy dose of "puffing."
Legal employment is a difficult market:
Thursday, March 22, 2012
Featured Case Update: Stambovsky v. Ackley
In a post last September, this blog featured the contracts case of Stambovsky v. Ackley - the Nyack, NY Haunted House case. The Court's decision that the Seller was required to disclose to her Buyer the belief that the house was haunted, was premised primarily on an article that the Seller wrote for Reader's Digest magazine entitled, Our Haunted House on the Hudson. Now, thanks to the Halloween Addict Blog, that 1977 Readers Digest article is available for viewing. Thank you, Halloween Addict, for sharing this important classroom resource.
Further update: An important part of the court's rationale included:
The fact that a house's reputation for being haunted may not have been easily discoverable upon inspection was likely true in 1991. But is it still true today? A potential buyer need not employ Ghostbusters but may exercise a simple Google search to discover the Seller's boasts of living in a haunted hosts. Is a "Google search" a reasonable requirement to impose by law on the Buyer, rather than imposing a duty to disclose on the Seller?
Photo credit: Halloween Addict Blog
Further update: An important part of the court's rationale included:
From the perspective of a person in the position of plaintiff herein, a very practical problem arises with respect to the discovery of a paranormal phenomenon: "Who you gonna' call?" as a title song to the movie "Ghostbusters" asks. Applying the strict rule of caveat emptor to a contract involving a house possessed by poltergeists conjures up visions of a psychic or medium routinely accompanying the structural engineer and Terminix man on an inspection of every home subject to a contract of sale. . . . In the interest of avoiding such untenable consequences, the notion that a haunting is a condition which can and should be ascertained upon reasonable inspection of the premises is a hobgoblin which should be exorcised from the body of legal precedent and laid quietly to rest.
The fact that a house's reputation for being haunted may not have been easily discoverable upon inspection was likely true in 1991. But is it still true today? A potential buyer need not employ Ghostbusters but may exercise a simple Google search to discover the Seller's boasts of living in a haunted hosts. Is a "Google search" a reasonable requirement to impose by law on the Buyer, rather than imposing a duty to disclose on the Seller?
Photo credit: Halloween Addict Blog
Thursday, February 9, 2012
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