Will Chicago Title Be Prosecuted In Champion Cain Ponzi Scheme?

Federal prosecutors in San Diego have considered indicting Chicago Title, a nationally known title insurance company, for its role in the massive pyramid scheme orchestrated by former businesswoman Gina Champion-Cain, who is now in prison on securities fraud charges.

Just six months ago, attorneys hired by the company filed a lengthy, confidential “white paper” outlining the reasons why she should not be prosecuted. The Aug. 21 document, authored by attorneys from the Cooley law firm, says it was prepared at the request of the US Attorney’s Office in the Southern District of California in San Diego that “the conduct” of Chicago Title in Champion- Cain “examined”. Scam.

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Champion-Cain, a once-celebrity restaurateur, has admitted her guilt and is serving a 15-year federal sentence for operating a nearly decade-long pyramid scheme in which she raised hundreds of millions of dollars from private individuals and corporate investors and promised them her money hat would be used to make high-interest loans to alcohol license applicants, such as B. Restaurant owner to award.

Their investments were then allegedly parked in individual escrow accounts at Chicago Title, giving them peace of mind that their money was safe, according to investors. In truth, there were no real applicants for liquor licenses or loans. Instead, the money was pooled into general purpose escrow accounts that Champion-Cain could access and use for her other businesses and for herself. The program raised 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 state that the facts, the statute and all relevant considerations do not support the prosecution of CTC,” in accordance with the guidelines the Department of Justice for when corporations should be charged with crimes.

As part of its defense, the company appears to argue that there may be individual liability, but not corporate fault. For example, it notes that it terminated a fiduciary, Della DuCharme, and her assistant, Betty Elixman, who allegedly violated company policy when they allegedly quit during the time they worked with her in the incorporation Accepted substantial gifts from Champion-Cain Liquor Licensing Scheme Trust accounts.

“To the extent of CTC’s wrongdoing, it has been confined to a single trustee and her assistant in a single office,” Chicago Title’s attorneys wrote. “Management had no role whatsoever in Champion-Cain’s fraud… Put simply, there is not a shred of evidence that wrongdoing is pervasive at CTC or that management is complicit in any wrongdoing.”

The white paper was not the company’s first communication with prosecutors. The paper refers to a July 2 letter to the bureau “outlining the side effects that would result from an indictment against CTC.”

And in April 2020, the same law firm filed a PowerPoint presentation with the Justice Department on the findings of an internal investigation into the Champion Cain system. This document, marked confidential, provides an overview of his relationship with Champion-Cain and her company ANI, and also discusses the alleged roles of DuCharme and Elixman. As in the white paper, Chicago Title said there was no evidence that management was aware of Champion-Cain’s fraudulent scheme or alleged receipt of “gifts and entertainment” from Champion-Cain.

It is unknown if Chicago Title successfully persuaded prosecutors not to charge the company. The US Attorney’s Office in San Diego declined to comment on the case. Michael Attanasio, a former federal prosecutor and a prominent criminal defense attorney who filed the report with a second counsel for Cooley, declined to comment.

In a statement, Chicago Title downplayed the documents. “Given the size and scale of the scam perpetrated by Gina Champion-Cain, it is unremarkable that the government is conducting a thorough investigation,” the company said. “Chicago Title has fully cooperated and will continue to cooperate with any inquiries from the Department of Justice.”

The company has been the target of nearly a dozen civil lawsuits and to date has settled a large portion of the litigation, resolving $128 million in losses from more than 300 individuals and organizations. In each of its settlements, it has admitted no liability. The company, in its white paper defense, highlights the payouts it will make to victims, noting that “as DOJ (Department of Justice) principles imply, a company’s ‘efforts to pay itself prior to a court order ‘A factor are against prosecution.’

In a proposed $47 million settlement with investment firm Ovation Partners filed in Superior Court this week, Chicago Title points to a recent deposition by Champion-Cain that now casts strong doubts on his guilt .

“During her testimony in January, Cain testified that she never told anyone at Chicago Title, including Chief Trustee Della DuCharme, that the liquor licensing business was a fraud,” attorney Megan Donohue wrote in the brief. “Instead, she testified that she tried at all times to give the impression [to Chicago Title] that [she was] run a legitimate business.’ She further acknowledged that only she and others at ANI knew that the “liquor license buyers and the liquor license loans were fictitious…” his associates are in serious doubt.”

It is common for companies that learn they are being investigated by federal prosecutors to hire outside firms to conduct an internal investigation and report those findings to federal authorities.

The reports can be treated in different ways, but often address allegations of wrongdoing, explain who may or may not have been responsible, and outline the steps the company has taken to improve its internal controls. It may also include a compliance plan outlining actions the company would take to ensure that the same behavior does not occur in the future.

Chicago Title’s white paper does just that, noting that its parent company, Fidelity National Financial, has a robust compliance program designed to detect and deter potential wrongdoing, and detailing how its fiduciary controls operate has strengthened.

Lawyers, who often represent companies and individuals under federal scrutiny, said the internal investigation is a common tactic companies use when state investigators investigate corporate wrongdoing.

White papers are part of the same process and address questions prosecutors may have after the internal investigation is filed, say lawyers with experience in such matters. The documents are part of months of back and forth as companies try to persuade 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 wrongdoing.

Among the changes are that prosecutors must consider a company’s entire criminal, civil and regulatory history with the government when making decisions, and that companies must disclose all information about individuals involved in wrongdoing to receive credit for cooperation.

Chicago Title stated in the conclusion of its white paper that “the actions of two individuals in no way reflect the company’s culture or its obligation to be a good corporate citizen, and that prosecuting the company would not serve the public interest in punishment.” , deterrence, rehabilitation or redress.”

A potential hurdle for Chicago Title is the criminal and civil lawsuits arising from a massive mortgage fraud scheme in San Diego that surfaced in 2007 when former financial planner Rollo “Rick” Norton pleaded guilty to mail fraud. Norton used the financial credentials of its investors without their consent to obtain loans for a condominium project.

Norton pleaded guilty, testifying that his fraud was aided by Chicago Title employees who helped prepare and sign fraudulent documents that perpetuated the scheme. The company faced numerous civil lawsuits and paid out millions to investors.

The white paper and PowerPoint documents produced by Chicago Title are subject to a court order for protection and as such are intended to remain confidential, Chicago Title said. As part of the discovery process for the lawsuits, Chicago Title’s attorneys said the company shared the documents with the plaintiffs

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