Federal prosecutors in San Diego have considered criminally prosecuting Chicago Title, a nationally known title insurance company, for its role in the massive Ponzi scheme orchestrated by former businesswoman Gina Champion-Cain, currently in jail for securities fraud.
Just six months ago, lawyers hired by the company submitted a detailed and confidential “white paper” outlining why it should not face criminal charges. The Aug. 21 document, written by attorneys at the Cooley Law Firm, says it was prepared at the request of the U.S. Attorney’s Office for the Southern District of California in San Diego, which was “reviewing the conduct” of Chicago Title in the Champion-Cain case. scam.
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Once a top restaurateur, Champion-Cain has pleaded guilty and is serving a 15-year federal sentence for leading a nearly decade-long Ponzi scheme in which she raised hundreds of millions of dollars from individuals and corporations. corporate investors, promising them their money. would be used to provide high-interest loans to liquor license applicants, such as restaurant owners.
Their investments were then allegedly parked in individual escrow accounts with Chicago Title, which investors say gave them reassurance that their money was safe. In truth, there were no genuine applicants for liquor licenses or loans. Instead, the money was pooled in general purpose escrow accounts that Champion-Cain was able to access and use for her other businesses and herself. The scheme has grossed more than $400 million over eight years and resulted in losses of at least $184 million for more than 300 investors.
The San Diego Union-Tribune reviewed the confidential white paper in which attorneys for Chicago Title wrote that “we respectfully submit that a criminal lawsuit against CTC is unsupported by the facts, the law, and all relevant considerations” under Justice Department guidelines for when companies should be charged with crimes.
As part of its defense, the company appears to argue that there may be individual liability, but not corporate culpability. He notes, for example, that he fired an escrow agent, Della DuCharme, and his assistant, Betty Elixman, who he says violated company policy when they allegedly accepted substantial gifts from Champion. -Cain during the time they were working with her in setting up escrow accounts for the liquor license loan program.
“To the extent that there had been misconduct at CTC, it was limited to a single escrow agent and his assistant in a single office,” Chicago Title’s attorneys wrote. “Management had no role in the Champion-Cain fraud… Put simply, there is not a shred of evidence that misconduct at the CTC is pervasive, or that management is complicit in misconduct. “
The white paper was not the company’s first communication with prosecutors. The newspaper refers to a July 2 letter to the office “outlining the collateral consequences that would result from an indictment of CTC.”
And in April 2020, the same law firm submitted a PowerPoint presentation to the Department of Justice on the findings of an internal investigation into the Champion-Cain scheme. This document, marked as confidential, provides insight into his relationship with Champion-Cain and his company, ANI, and also discusses the alleged roles of DuCharme and Elixman. As in the whitepaper, Chicago Title said there was no evidence that company management was aware of Champion-Cain’s fraudulent scheme or the alleged receipt of “gifts and entertainment” from Champion-Cain. Cain.
It’s unclear whether Chicago Title was successful in convincing prosecutors not to charge the company. The U.S. Attorney’s Office in San Diego declined to comment on the case. Michael Attanasio, a former federal prosecutor and prominent white-collar defense attorney who submitted the report with a second attorney for Cooley, declined to comment.
In a statement, Chicago Title downplayed the significance of the documents. “Given the size and scope of the fraud operated by Gina Champion-Cain, it is not remarkable that the government is conducting a thorough investigation,” the company said. “Chicago Title has fully cooperated and will continue to cooperate with any request from the Department of Justice.”
The company has been the target of nearly a dozen civil lawsuits and has so far settled much of the litigation, having resolved $128 million in losses claimed by more than 300 individuals and entities. In each of its settlements, it has admitted no liability. The company, in its defense of the white paper, highlights the payments it will make to victims, noting that “as DOJ (Department of Justice) principles suggest, a company’s “efforts to pay even before any court order “is a factor against prosecution”.
In a $47 million settlement proposal with investment firm Ovation Partners that was filed in Superior Court this week, Chicago Title points to a recent Champion-Cain deposition that it says now casts strong doubt on his guilt.
“During her deposition in January, Cain testified that she never told anyone at Chicago Title, including senior escrow agent Della DuCharme, that the liquor license loan business was a fraud,” attorney Megan Donohue wrote in the brief. “Instead, she testified that at all times she ‘attempted to give the impression [to Chicago Title] this [she was] run a legitimate business. She further conceded that only she and others at ANI knew that “liquor license purchasers and liquor license lenders were fictitious…” Given this testimony, which took take place after the negotiation of the Ovation settlement, any liability of Chicago Title or its employees is in substantial doubt.
It is common for companies that learn they are under scrutiny by federal prosecutors to hire outside firms to conduct an internal investigation and present the findings to federal authorities.
Reports can vary in content, but they often address allegations of misconduct, explain who may or may not be responsible, and outline steps the company has taken to improve its internal controls. It may also include a compliance plan outlining the steps the company would take so that the same behavior does not happen again in the future.
Chicago Title’s white paper does just that, pointing out that its parent company, Fidelity National Financial, has a robust compliance program designed to detect and prevent potential misconduct, and it details how it has tightened its escrow controls. .
Lawyers who frequently represent companies and individuals under federal scrutiny said internal investigation is a common tactic companies deploy when government investigators investigate corporate wrongdoing.
The white papers are part of the same process, answering questions prosecutors might still have after the internal investigation is presented, say lawyers who specialize in such matters. The documents are part of the back and forth that occurs for many months as companies struggle to convince the government not to press charges.
The scrutiny by federal prosecutors here comes at a time when the Justice Department, under Attorney General Merrick Garland, has announced a tougher line on corporate misconduct.
Changes include requiring prosecutors to consider a company’s entire criminal, civil and regulatory history with the government when making decisions, and requiring companies to disclose all information about anyone involved in a fault to obtain credit for their cooperation.
Chicago Title asserted in the conclusion of its white paper that “the actions of two individuals in no way reflect the company’s culture or its commitment to being a good corporate citizen and that a criminal prosecution of the company would not serve not the public”. interest in punishment, deterrence, rehabilitation or restitution”.
A potential hurdle for Chicago Title is criminal and civil cases stemming from a massive San Diego mortgage fraud scheme that surfaced in 2007 when former financial planner Rollo “Rick” Norton pleaded guilty to mail fraud. Norton used its investors’ financial credentials without their consent to obtain loans on a condominium project.
Norton pleaded guilty and testified that his fraud was assisted by Chicago Title employees, who helped prepare and sign fraudulent documents that perpetuated the scheme. The company has faced numerous civil lawsuits and paid out millions to investors.
The white paper and PowerPoint materials prepared by Chicago Title are subject to a court protective order and as such are expected to remain confidential, Chicago Title said. As part of the discovery process of the lawsuits against Chicago Title, its attorneys said the company shared the documents with the plaintiffs.