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News & Press: Industry News

Fraud Alert: LLC Identity Theft

Tuesday, January 15, 2019  
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According to ALTA, Limited Liability Company (“LLC”) fraud has evolved over the past year and criminals are now hijacking legitimate LLC real property owners by filing fraudulent annual statements of information with Secretaries of State, presenting fraudulent operating agreements, impersonating managing members with counterfeit identification and obtaining hard money cash out loans. This is typically happening with free and clear vacant land, meaning the criminals disappear with the money.

In many instances, the criminals are utilizing the websites of Secretaries of State to modify the statements of information (“SI”) online. Traditionally, title companies have relied on the validity of Secretary of State filings to help confirm the managing member, a practice that no longer seems prudent given the changes in how LLC fraud is now perpetrated. In addition, many Secretaries of State are not reviewing statements of information to confirm that the last managing member shown on the previous filing is the same as the latest filing, which makes it much easier for bad actors to hijack an LLC.

Title companies should carefully scrutinize all LLCs, including a review of the entire Secretary of State SI chain, comparing the date of the operating agreement to when they were incorporated & purchased the property. Another factor for consideration is cash out hard-money brokered loans whether there is a loan broker/lender that has never met with principals.

California Land Title Association

1215 K Street #1816 Sacramento, CA 95814-3905
Email:  |  Phone: 916-444-2647  |   Fax: 916-444-2851