April 01--The Crownsville co-owner and president of a Greenbelt-based title company was sentenced to 18 months in prison for a wire fraud scheme that cost lenders and another title insurance company $3.1 million, federal prosecutors said.
James Kevin Hughes, 53, will be on supervised release for three years and must pay back the millions he stole. He also was ordered to forfeit his interest in a South Carolina condominium and perform 300 hours of community service.
The sentence was handed down Thursday by U.S. District Judge William N. Nickerson in Baltimore.
Hughes, co-owner and president of Troese/Hughes title company, and Brenda Lukenich, the company's escrow accountant, pleaded guilty last fall to defrauding the victims of $3.1 million.
Lukenich, 60, of Hughesville, will be sentenced April 10.
Title company co-owner Stephen J. Troese pleaded guilty in October to defrauding the victims of at least $937,000. He was sentenced in February to a year in prison and three years of supervised release.
According to the plea agreement, Hughes oversaw daily activities at the company and was a signatory on the escrow account.
Prosecutors said the company had an agency agreement with Chicago Title that enabled Troese/Hughes to provide title insurance -- making Chicago Title liable for title defects to homeowners and lenders.
Hughes' company shared an escrow account with another title company, Troese Title Services. Hughes was unaware the escrow account was shared, but prosecutors said he was informed about shortages within the account.
In 2006, the company opened a new escrow account. Lukenich then assigned a $1 million escrow shortage to the new Troese/Hughes account, according to the plea.
The real estate market began to slow that year. And as business slowed, it became the policy of Troese/Hughes to check with Lukenich about when mortgage payoff checks would be mailed out to ensure there were sufficient funds in the escrow account to cover them. Prosecutors said those mortgage payoff checks were filed in Federal Express envelopes under a credenza in Hughes' office.
The plea says Hughes made efforts to fill the company's escrow shortage by refinancing his own home twice and not paying the previous mortgage -- causing a$1 million loss to Chicago Title.
According to the plea, when another company employee refinanced his home, Hughes caused the previous mortgage on that residence to not be paid off so the funds could be used to fill the escrow shortage. This caused Chicago Title an additional loss of $217,000.
Chicago Title terminated its relationship with Troese/Hughes in early 2008 and operations at Troese Title and Troese/Hughes were then consolidated into a single operation, Troese/Prestige. Hughes was not permitted to play an active role in the operations of that company, the plea says.
But he continued to bring in new settlement deals, while Lukenich remained the escrow accountant.
Prosecutors said there was an agreement between Hughes, Lukenich and others that funds from any new settlement conducted by the company would be used to cover the outstanding mortgage payoffs. Eventually, there weren't enough settlements to cover the shortages. Chicago Title was eventually tipped off that a mortgage hadn't been paid off and conducted an unannounced audit of Troese/Prestige.
In the meantime, Chicago Title was forced to pay off the mortgages, the funds due to sellers at settlement, and recording fees.
Hughes' sentence is harsher than the year in prison and three years supervised release handed down to co-owner Troese in February.
Troese's son, Tony Troese, said that unlike Hughes and Lukenich, his father did not know about or benefit from the scheme.
According to the plea, Stephen Troese turned a blind eye to what was happening within his company.