With potentially hundreds of millions of dollars unaccounted for, the Philadelphia Sheriff’s Office has suspended, and intends to terminate, most of the managers who have handled sheriff’s sales of foreclosed Philadelphia properties. The Director of Finance and Compliance, the Solicitor and the Real Estate Supervisor – all suspended. The private company that handled sheriff’s sales – fired. All sheriff’s sales are on hold for the next two months, and the Philadelphia District Attorney has been put on notice. This upheaval is mostly due to the hard work and investigation of Philadelphia’s City Controller, Alan Butkovitz, who concluded that former Sheriff John D. Green and his staff created “an opportunity for fraud” by failing to adequately track $53 million handled by the Sheriff’s Office.
The Sheriff’s Office auctions thousands of homes and other real-estate parcels every year, with the bulk of the proceeds going to pay tax bills and creditors, such as banks, mortgage companies and utilities.When the properties sell for more than the amounts owed, the extra money is supposed to go to the former owners. When the owners can’t be located, the money is supposed to be forwarded to the state treasurer, who runs periodic advertising to alert citizens to their unclaimed property. However, these procedures do not appear to have been followed for over four years.
Apparently, Butkovitz reports that thousands of deposits cannot be reconciled with bank statements, and thousands more were listed merely as “cash adjustments” without documents or explanation. Butkovitz is seeking certified fraud examiners to weed through the Sheriff’s Office’s computer databases. The records that have been reviewed to date show the following: (1) more than 5300 accounts totaling $716 million dollars which cannot be reconciled with bank statements or other records; (2) more than 50,000 cash adjustments to transactions that cannot be accounted for; (3) three title companies that handled more than $322 million without a contract; (4) $88 million paid by the Sheriff’s Office to the Water Department, Philadelphia Gas Works and various banks to settle liens when these are items typically paid by title companies; and (5) $45 million moved into various unclaimed-funds accounts.
Not surprisingly, this investigation has left many unanswered questions. Where did the money go? And were the unaccounted hundreds of millions of dollars stolen from the city? Was it an accounting error? Or were these millions stolen from the pockets of former Philadelphia homeowners? While Butkovitz claims that it is his responsibility to determine “whether an opportunity for fraud has matured into actual fraud,” Philadelphians, who have lost their homes to foreclosure, should begin to investigate themselves whether they have been the subject of actual fraud. Foreclosed homeowners should find out whether the selling price of their foreclosed home exceeded the amount owed to the bank. While it may cost the city millions more dollars to pay a forensic accounting team to explain this financial quagmire – some foreclosed homeowners may be able to more quickly answer these questions by conducting their own independent investigation. Many former homeowners probably have no idea money may be owed to them from the city.
The attorneys at Pogust Braslow & Millrood are experienced at handling class action matters. If you believe that you were a victim of the Philadelphia Sheriff’s Department’s fraudulent accounting, please contact our firm to investigate.