Document Fraudster Gets Three Years

document-fraudLenders applaud when they see stories like this.

Jail time is an important deterrent to one of the most widespread and underreported problems in mortgage lending: document fraud.

Three years of incarceration is what William Priest-Phillips has to look forward to after pleading guilty to one count of fraud over $5,000 and one count of uttering forged documents.

The charges are in connection with his submission of “several mortgage applications containing falsified documents to Scotiabank.”

Priest-Phillips, a 49-year-old former Dominion Lending Centre broker in Nackawic, N.B., “plead guilty right away,” says investigator Andrea Grasman from the RCMP’s Commercial Crime Section. As such, details of the fraud were not laid out in court.

RCMPIn essence, Grasman says, “Priest-phillips was submitting fraudulent documents to boost the clients’ chances of approval.”

Lest you think this kind of thing is rare, it’s not. “More than a few percent of applications involve documents that have been altered in some way,” says one credit risk manager we spoke with at a major bank. (He didn’t want to be identified as few banks like to talk about this kind of thing.)

Document fraud is typically not reported. “There is no way any bank is going to say we got something by fraudulent documentation,” he says. “No one wants to admit their underwriters are incompetent.”

Underwriters and document processors are the first line of defence and it’s the inexperienced ones that have the highest rate of overlooked fraud.

“It’s often a lack of common sense,” he adds. Young underwriters have a higher probability of looking at documentation and missing subtle grammatical errors, cut-and-paste logos, made-up business addresses and so on.

In certain cases, underwriters rely too heavily on automated systems. Occasionally they fail to verify even basic information like purported company addresses and property tax amounts.

To be fair, however, most underwriters are highly skilled and professional. And most are under tremendous pressure these days to provide branches, mortgage specialists and/or brokers with fast approval turnarounds. That doesn’t help matters from a fraud perspective.

As for Priest-Phillips, a Dominion Lending Centres spokesperson provided this statement:

“Dominion Lending Centres Inc. and all of its independently owned and operated franchises across Canada wish to state that William Priest has no association, direct or indirect with Dominion Lending Centres.

Dominion Lending Centres severed all ties with William Priest and company once we were notified of the allegations against him and the impending investigations against him and his companies. Dominion Lending Centres officially terminated William Priest on April 19th, 2012.

DLC actively cooperates and supports the efforts of our regulators, policymakers and government enforcement agencies, will act swiftly to terminate all offending parties and supports maximum penalties.”

The fact is, this type of thing could have happened at any number of lenders or brokerages across the country, and it too often does.

Rob McLister, CMT

  1. Good for the judge, 3 years, wow. I pressed charges against a client for the same crime and he received 6 months house arrest for a second offence.

  2. It is “positive” to see charges filed, but one conviction in a myriad of bad business practices does not change our industry. We all know there is a serious problem (anecdotal vs hard numbers,) and more reporting (and charges) of these incidents is needed. One broker told me that I am “old school”; “everyone does it today” (creates paperwork vs collecting paperwork), and besides “my (his) clients’ arrears are not out of line with any other broker”. Certainly, the escalating real estate values of the last years have hidden many bad lending (and broker?) practices, but that hardly justifies fraudulent activities. Ultimately we all lose, including our clients. When my prime client with 30% down, 800 plus beacon, and 15 year tenure at a major corporation is made to feel like a 5% down, terrorist buyer, by the amount of paperwork (and backup to that paperwork) that is required, to get an otherwise simple approval, something is out of line. Obviously, someone thinks we have a problem in our industry !! and yes Rob, I agree- “one of the most widespread and underreported problems in mortgage lending: document fraud.”

  3. the banks make it hard for regular people to get funding,so what do you expect. i can pay rent of 1500.00 per month for five years without ever being late,but can i get the same amount of mortgage payments, yes i can as long as i make 5000.00 per month give or take, but i am only making 4000.00. go figure i am good to rent but not to own. like they say the rich get richer the poor get poorer. when the bankers mess up ,the the poor people get to chip in to help the bankers out. bankers world rules. yeah .

  4. I’m on the homebuyer side of th equation, not industry.
    I had a real estate agent tell me to put an income of 190K (and send it to scotiabank, incidentally, because they’re the most accommodative in her words).
    I suspect that mortgage brokers are stuck between a rock and a hard place. Real estate agents probably refer more clients to mortgage brokers who play with the rules than play by them.
    I don’t envy your predicament.

  5. @mia,
    From your tone i guess you’d also complain if the bank loaned you more than you could carry after interest rates went up and forced you to sell.
    The banks aren’t out to get you, or keep the poor poorer.
    They will loan to you if they can turn a profit. That they aren’t means that they don’t think they can make money from your business.
    It’s not a conspiracy. They want to take your money, but you’re apparently just too high a risk in this market.
    It’s better to be turned down for a loan than to be foreclosed on.

  6. Is that real estate agent that desperate for a sale that she encourages fraud?
    For salaried lenders the lenders ask for the most recent paystub so they can check the YTD gross earnings. They also ask for an employment letter as to length of time and pay rate. Self employed are different but they ask for NOAs and possibly letters showing income from their accountants.

  7. I’m self-employed… She wanted me to get in before the mortgage rules changed.
    What does she care if she incites me to commit fraud? As long as she gets her commission, I’m sure it makes no difference to her.
    Besides have you seen the ScotiaBank self-declaration of income form?
    What a joke. Scotiabank basically begs you to lie to them.

  8. I am happy to see that so much publicity is given to this type of activity. It is certainly bad rep for mortgage brokers. It just might weed out the bad from the good out there. I have been in related roles to the mortgage industry for years….it is nice to see one got caught…that is all that I will say!!!!

  9. Fair enough that you are self-employed. As I said there are different rules. However from the self-employed applications that I have submitted, my lenders still are diligent in determining the validity of the numbers submitted

  10. They said the same thing in Australia… I agree there is going to be alot of finger pointing going on in the next year or 2 as supposed solid loans end up as juck due to inproper due dilligence. There should also be a very large fine to add to the deterrance.
    Fraud is easily hidden or can go unnoticed in an upward market with equity increases. But when prices level off or decrese then they stick out like a sore thumb.

  11. 3 years is a bit much for a small white collar crime (fraud over 5)
    when – robbing & assualt will usually get a 1 year peace bond for a first offence
    guy should get a laywer or fire the one he had and try again

  12. Draj, I am not sure of where you live but to shed some light on your thoughts, one of the reason this guy got 3 years is he lives on the east coast. The Maritime provinces hand out much stiffer punishments than Ontario judges.
    In Ontario this type of of offense, with a guilty plea would likely result in either very little jail time or none at all.

  13. Rob, if someone knows of agents or brokers doing similar things, where is the best place to report it?
    I am in Ontario.

  14. Draj, really, you think this is a “small white collar crime”? The law doesn’t differentiate between fraud over $5000 and fraud over $100,000. According to news reports, not only did he defraud the banks by submitting (multiple) fraudulent applications, he also “bilked family and friends of close to $600,000”!
    If anything, this guy got off light only being sentenced to 3 years!

  15. only by the banks not regular people. why is the world in the economic trouble now . thank you bankers.great job.

  16. This should not happen but how to prevent this from happening?
    Underwriters alone cannot be responsible for verifying every piece of papers.
    There should be a proper process. BTW we should not request OSFI to rule on this one too, banks can handle this I guess – if they want to.

  17. Sincere question : can you define diligence?
    In general and in particular with Scotia what do lenders ask for from self employed folks?
    Honestly, it scared the crap put of me when I saw what they needed, which was basically nothing.
    Full disclosure on my bias: I thought we were in a bubble before. When I saw what the RE agent asked me for, it scared me that credit was so easy and with govt finally paying attention, I’m not buying until people who were asked to fill out the same application I was asked to fill out are flushed from the marketplace.

  18. Please. A pawn goes to jail, while the kings lay in their beds. What about those that manipulated the LIBOR rates, or use theaccounts of their clients like MF Global. They get fined millions by making 100’s of millions off of their manipulation. Has even one person gone to jail? Home ownership should be a right, not a privilege. Mortgage amortization a should be extended, not shortened. They shoud remain at historic lows, and government should encourage people with less than 2% micro loans for home renovations. Think about all the real estate transfer fees, HST, and license fees the province, and municipalities would make. The old way isn’t working. We need to think in alternative ways to turn the economy around. Banks are useless, and should regulated and micro managed by the government. Not the other way around.

  19. Let’s get back on track on this matter. The true victims were not banks and other financial institutions, but rather the 9 family and friends of the accused who were ripped off for $600,000.00 and were not even permitted to testify before the court. The banks were certainly scammed, but will ultimatley get their money back from their customers who had nothing to do with this criminal activity.
    The true victims were family and friends of Will and Chris, his partner, who were conned into investing money with them at various crucial times in their lives, i.e. life insurance 2 months after death of husband, etc. In the 2 week period prior to his arrest Will and Chris apparently sold off all possessions in their home, etc., and apparently damaged their high market value home, reducing it’s value and leaving them minimal assets for potential victims. Where did this money go?
    Those 9 private victims who lost an estimated $600,000.00 had little to no access to the courts during the proceedings and have no access to any money or properties in control of the accused at this time or in the future. Their frauduently obtained monies went somewhere and will be available to Will and Chris somewhere down the road. Why no court order providing payment to the victims (not the banks) if this money can be traced and seized at some point?
    From what I have read the Judge in this matter was very supportive of the individuals who were victims of these crimes, but was not provided with information that would allow him to adaquetly impose a sentence ensuring some financial reimbursment for their losses. This falls back to a lack of responsibility on the part of the Crown Attorney in this instance, cooperation of the NB Securities Commission and supporting legislation ensuring proper disposition by the court.
    The Securities Commission was of little to no support for the real victims of these frauds and a review of their role and legislation governing how these matters will be dealt with is required if we are to support victims of these frauds, and not just the perpetrators.
    I am not casting personal blame at how this matter was handled, but maybe someone within the N.B. Securities Commission could have been more supportive of the true victims in this matter. It might have given the Court proper information to impose a sentence that would have been more positive for the victims of this crime.
    StevBrow …………

  20. Jail time? Why? Slapping a huge fine on him would be much better – it would hit him where it hurts the most. Obviously, this person is obsessed with money … soooh! Get him. Also, the fine would serve to REDUCE our joint deficit, while pampering him in one of our plush jails only ADDS to our deficit.

  21. Will gets out this month. Six months out of 3 years. Securities didn’t do their job. There wasn’t 9 of us. There was over 20. But I do thank everyone for their comments. At least it does show people do care, it is the lawyers and securities that doesn’t care. Will and Chris stole over 2 million.

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