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International Law

: Misleading Advertising Law

Gut Feelings, Deception and Action

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Image by Andres Rueda via Flickr

The Baltimore News reports on a foreclosure scam:

A Baltimore woman who tried to save her home from foreclosure by answering a television advertisement claims she's now in worse financial trouble and could lose her home.

Claretta Taylor said she has lived in a modest row home for 12 years and has been struggling to keep it. She said she was reeled in by Michael K. Lewis when she saw a television commercial for his business that seemed to fit her predicament. Taylor contacted him, hoping to learn how to keep her home.

"My gut feeling told me not to go, but I was in a desperate situation.

I needed help," she said.

The story has the usual ending:

A man convicted of targeting desperate homeowners in a mortgage fraud scheme was sentenced to six and a half years in federal prison on Friday.

Lewis made no comment as he arrived at federal court. Judge Deborah Chasanow ordered him to serve the six and a half years for conspiracy to commit wire fraud and five years for bankruptcy fraud at the same time.

In a tearful statement, Michael K. Lewis apologized in court to the homeowners who trusted him, saying, "I would never hurt these people. I would never hurt them."

He said he still believed in his MKL Financial Diet, telling the judge, "I am truly sorry for hurting these people. I was focused on teaching people how to bring in more money."

According to the FBI Press Release on the MKL Financial Diet fraud:

According to his plea agreement, from at least 2004 until May 2008, Lewis aired television advertisements that targeted financially vulnerable individuals, representing that he could improve their credit, save their homes from foreclosure and assist them with bankruptcy.

Viewers who called the toll-free number were scheduled to meet with Lewis, for a fee.

At the meetings, Lewis solicited individuals to become MKL Associates and to purchase a variety of for-fee services, such as the Michael K. Lewis Financial Diet for reducing debt, as well as a pre-paid legal plan, income tax return preparation services and bankruptcy petition preparation.

Lewis specifically targeted individuals who owned and had equity in their homes, but were facing foreclosure on their homes because of their inability to make monthly mortgage payments.

The goal of Lewis and his co-conspirators was to steal the homeowners' equity out of their property by inducing the homeowners to sell their property to Earnest Lewis and converting sale proceeds to the use of the conspirators.

Lewis and his co-conspirators did this by fraudulently representing to the homeowners that their "lease/buy-back program" would help the homeowners to keep their homes.

Lewis and Winston Thomas, a senior loan officer with a mortgage lender, told the homeowners that the "good credit" of Earnest Lewis would be used to temporarily refinance their homes, that they had to sign their homes over to Earnest Lewis and that they could repurchase the homes in roughly one year, or once they regained their financial footing.

During the interim, they could remain in their homes only by paying inflated "rent" and fees by having their bank accounts directly debited to an account belonging to co-conspirator Cheryl Brooke's company "In the House Technologies."

Brooke then made payments to Earnest Lewis and Thomas, with the remaining funds being used by Michael K. Lewis and Brooke for their personal benefit.

We have the predator crying crocodile tears, the victim wondering why she was "betrayed", and me wondering how gut feelings can be made more effective monitors of scams and frauds?