“I believe that a good lawyer has to acknowledge what the law in the system can do, but also what the law in the system cannot do. And that is brought into relief by this case. The law is primarily reactive. It is often playing catchup, and in the case of financial fraud, in particular, a legal remedy more often than not comes too little too late.”
Working on this week’s Perfect Scam podcast, I recently heard this raw, honest, and frankly depressing, observation on the American legal system. Too little, too late. If you are wondering why so many Americans seem angry about everything, you might start there. Under Gotcha Capitalism, cheating and stealing are business models — and they can outlast most efforts to rein them in, especially when all the agencies devoted to making things more fair have been gutted. It all means much more “too little, too late” in the system. We’ll get back to that in a moment.
This week’s episode begins with a remarkable performances on a college football field – a single day, so perfect, that it led to a career in the NFL. And it ends with a set of families on Chicago’s west side fighting to save their homes after a smooth-talking criminal stole them. With a pen. It’ll make you wonder how far our country has strayed from the notion of basic fairness. Because while the criminal who stole their homes is now in jail, the families whose equity has been stolen face a constant, never-ending threat of foreclosure. In some situations, the case has dragged on so long that children, or even grandchildren, are still fighting to keep their homes.
One of the main themes of The Red Tape Chronicles is that most people know they are getting ripped off, they just don’t know who to be mad at. Anyone outside the 1 percent can’t afford anything resembling a secure standard of living right now. Most know they are one illness away from financial disaster. If they know any young family looking for a home, they know regular people with regular jobs can’t afford regular homes — pretty much anywhere. Couples are working two full-time jobs, they are working side hustles, and still falling behind, well aware they can’t meet all the demands that parenthood has placed on them. And on it goes.
Meanwhile, when something really goes wrong — and they are forced to appeal to America’s justice system for fairness — the stark reality of our societal breakdown becomes obvious. Our legal system generally rewards cheating, at least in the short and medium term, and that’s a bitter pill to swallow.
For this week’s episode, I interviewed David Herron. On one perfect day in 1969, his brother Mack scored six touchdowns playing against powerhouse Oklahoma. David was there; it was homecoming day at Kansas State. Mack went on the play in the Canadian football league after that, but when Oklahoma coach Chuck Fairbanks was hired by the New England Patriots, Fairbanks remembered that day Mack Herron ran all over the field against his Sooners. So Mack went on to play several years for the Patriots. He made a decent living doing so; he did well enough to help his mom buy a very humble home in Chicago.
Fast forward a few decades and the Herron home was targeted by a financial criminal named Mark Diamond. Over a 10-year-plus reign of financial terror, Diamond manipulated the Herrons and more than 100 other families into signing up for a reverse mortgage. He’d lied and told them they were getting a government grant to help with critical home repairs.
Eventually, Diamond was convicted of fraud and sentenced to 17 years in prison. But banks who issued these loans still want their money. As one community organizer told me for this episode, every one of these families has been threatened with foreclosure. Loyola Law School professor Juliet Sorensen is part of a legal team that has spent nearly 10 years trying to clear up the cloud hanging over these victims. She gave me the “too little, too late” quote above. Here’s a little more of that conversation.
[00:29:58] Juliet Sorensen: Once the original victim is no longer living, and in the event that their heirs are unable to make payments… I should add by the way, if they want to sell the house, it’s also now encumbered by a reverse mortgage. So regardless of whether or not you want to keep it as a family home for generations or sell it because, you know, you no longer wish to keep it, your parent is deceased, this scam hits you in the face out of the blue as the heir of the original victim.
[00:30:27] Bob: And yet years later some of these people are still facing foreclosures? Still some of these families might still lose their homes even though they got nothing, and someone’s in jail? How can that be?
[00:30:39] Juliet Sorensen: There’s a presumption in the law that defies commonsense and basic principles of contract law. And that is that once a foreclosure process has begun, the presumption favors the lender, that is to, say the bank. It does so even when the underlying mortgage itself was procured by fraud. We all learn in our first year of law school that a contract is void if both parties don’t knowingly enter into a contract, and that’s exactly what a mortgage is. And yet, Professor Tenenbaum and I have repeatedly encountered courts that without considering the equities of the case, simply point to that presumption under foreclosure law in favor of the lender. I’d also add one other thing which is that you know the law as a matter of policy has what’s called a statute of limitations. After a certain amount of time has passed, neither a criminal nor a civil action can be taken if the number of years is more than the statute of limitations provides for. And there are reasons for that, but a statute of limitations doesn’t make sense if an individual doesn’t learn that they have been defrauded until after years go by. And that’s precisely what happened in many instances in this case, because reverse mortgage payments don’t become due and owing until the original borrower is no longer living. So there have been a series of systemic obstacles that we have encountered in our efforts to get a measure of justice for our clients that really fly in the face of what justice means.
[00:32:19] Bob: So somehow or another, foreclosure law trumps criminal law in this situation?
[00:32:23] Juliet Sorensen: No, these are two separate concepts actually, Bob. Um, so…
[00:32:28] Bob: Yeah, I’m sorry, I’m not asking you a legal question, it’s just the, the emotional reaction one has, you know.
[00:32:32] Juliet Sorensen: Yeah, no, totally. So you know, I mean with regard to the criminal law, Mark Diamond has now pled guilty, he’s been sentenced, he got, you know, a significant sentence. He was sentenced to 17 years in prison. Accompanying that sentence is an order of restitution that he has to make payment to his victims. Mark Diamond spent his ill-gotten gains long ago.
[00:32:55] Bob: Yeah, and so as you mentioned, the opportunities for relief are very small, but you know normally in that situation we’re talking about, um, you know, someone who invested, you know, $50,000 in a crypto scam, they can’t get their money back, but in this case, an entity is legally coming after the home that they live in, still years after this person’s in jail. It’s just hard to swallow.
[00:33:15] Juliet Sorensen: Yes, yep, their, their shelter, as I said, that they worked hard and long for and was their pride and joy.
Purchased with pride and joy — enabled by an amazing display of pride and joy on a college football field. And now, threatened by a system that delivers justice too little, too late.
There’s a lot more to this story. I hope you’ll give it a listen.
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