State Goes After Two Collection Agencies Over Identity Theft

St. Paul, MN – The Minnesota Department of Commerce is cracking down on identify theft in the state, targeting two collections agencies and a title insurance company in recent investigations.

The department has accused the three companies – Morris Abstract & Title Inc. of New Prague, HS and Associates of South St. Paul and First Financial Services Inc. of Lonsdale – and some of their principals of allegedly forging signatures or endorsements to gain access to and misappropriate consumer funds.

Companies and individuals found guilty of such violations can be subject to a number of civil penalties including revocation, suspension, censure, or fines and penalties.  In addition, Commerce may refer such cases to other law enforcement agencies for possible criminal prosecution.

“The people involved in these cases had access to sensitive personal information and they used that information for personal gain,” said Minnesota Commerce Commissioner Glenn Wilson.  “These cases show the department’s commitment to protecting consumers by ensuring companies respect the privacy of consumers and act in good faith.”

The recent cases illustrate the lead role the state of Minnesota is taking in the national battle against identity theft.  In July, the National Governors Association Center for Best Practices selected Minnesota as one of four states to participate in the “Combating Identity Theft Policy Academy” that will help all states improve how they capture, share and analyze information related to identity theft.

Work is already underway.  Earlier this month, the Minnesota Department of Public Safety’s Bureau of Criminal Apprehension held a summit for leaders in this effort.  The summit outcomes include innovative strides in investigation and prosecution, information systems and victim advocacy and prevention.

LEE HANNA AND HS AND ASSOCIATES, LLC

Earlier this month, the department issued a statement of charges and notice of hearing against a debt collector and collection agency, Lee Hanna and HS and Associates LLC, accusing the company and its principal of identity theft, removing client money from trust accounts and misappropriation of money.

Through its investigation, the department alleges that Hanna opened a credit card account in the name of John Schnell and misappropriated $14,389.91 to his own use.  Hanna also allegedly forged two checks in Schnell’s name totaling $6,500. The department also alleges that Lee Hanna transferred at least $19,000 of client money out of the HS and Associates trust account and misappropriated funds from the agency’s operating account for personal expenses.  Hanna also allegedly wrote checks for hundreds of dollars to several bars and paid rent to Hanna’s landlord and to Hanna himself.

A preconference hearing will be held on Wednesday, Dec. 23.

FIRST FINANCIAL SERVICES, INC.

Also in November, the department issued an order to revoke the collection agency license of Lonsdale-based First Financial Services, Inc., accusing the company of identity theft, forgery, and providing false information to the department.

The department alleges First Financial caused a bank to send a $40,000 check payable to two consumers to First Financial.  The company had contacted the consumers on numerous occasions attempting to collect on a purported debt, however the department alleges those consumers did not authorize the company withdraw $40,000 from their bank account or direct the bank to send a the check to the company.

The department alleges that First Financial directed or participated in the forging of the endorsement of the $40,000 check that was deposited into First Financial’s bank account.

The order against First Financial was served on November 3.  The company has 30 days to request a hearing.

ANDREW MORRIS AND MORRIS ABSTRACT & TITLE INC.

In the spring of 2009, the department received a complaint from a bank that was refinancing a mortgage on a property in Scott County.  The bank reported to the department that Morris Abstract & Title, which performed the closing on the loan, had allegedly forged the property owners’ signature on an agreement required by the bank.

That agreement would have given the refinanced mortgage first priority over a previous mortgage the homeowner obtained on the property.  In fact, the property owner did not authorize or otherwise consent to the agreement, the department alleges.  In order to facilitate the transaction, Morris allegedly forged the property owners’ signature.  Morris Abstract & Title then sold a mortgagor’s title policy on the property, the department alleges.

Another complaint from an attorney who claimed Morris allegedly failed to record a mortgage as part of a 2003 transaction involving her client led the department to conduct an inspection at Morris’ home.  During that inspection, Morris allegedly admitted that he had approximately 100 loan files from transactions as old as 2004 in which a policy still needed to be issued even though he received title premiums and other fees at closing.

Last week, the department issued a statement of charges and notice of hearing against Andrew Morris and Morris Abstract & Title.  The prehearing conference is scheduled for Monday, December 21.

ABOUT THE MINNESOTA DEPARTMENT OF COMMERCE
The Minnesota Department of Commerce has taken 106 enforcement actions and imposed $716,250 in civil penalties against collection agencies and debt collectors between fiscal year 2003 and fiscal year 2009, ended June 30.  In the same time period, the department took action against 833 insurance entities and agents and levied more than $10.8 million in civil penalties.

The Minnesota Department of Commerce licenses and regulates collection agencies and debt collectors operating in the state. The Department also regulates insurance, real estate, state chartered banking and other industries.

Consumers with complaints or questions may call the Minnesota Department of Commerce at (651) 296-2488 or toll free, 800-657-3602.