Lender Suffers Loss after Accepting Altered Title Docs from Borrower

A Federal criminal complaint charged an Orange County man, Mahender Makhijani, with defrauding a bank out of nearly $100 million by manipulating title policies to make collateral that had been pledged to the bank appear more valuable than it truly was.

According to an affidavit filed with the complaint, Makhijani controls Cantor Group V LLC, a Newport Beach-based company whose lender advanced nearly $100 million. Cantor was supposed to have pledged the loans it originated to secure the bank financing. As part of its due diligence the bank required Cantor to submit title insurance policies that showed Cantor had a first lien position. The complaint alleges that Makhijani or a subordinate falsified title insurance policies to show that Cantor was in the first lien position, lied about the title issues that the bank identified and caused a spreadsheet with false explanations for the title issues to be submitted to the bank. 
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The facts alleged in the complaint and affidavits point out the importance of lender risk management tools when it comes to title insurance documentation.