Background
Todd Leary and Joseph Garretson worked together in a multi-million dollar fraud case. The two were accused of misappropriation of funds, corporate business influence and unlawful loan activities. Leary and Garretson conspired to divert more than $1 million from Fort Wayne Title, a title insurance company, between March 2008 and February 2009 (State of Indiana).
Garretson was an officer and principal of Fort Wayne Title. Several homeowners arranged with Garretson to refinance their mortgages using title insurance, settlement, and escrow services. However, Garretson failed to pay off his clients’ original loans which caused them to default. As stated in an the Courier Press, “The normal practice in real estate refinancings is for the escrow agent to immediately pay off the existing mortgage with proceeds from the refinancing process” (“IU color announcer,” 2010). Thirteen homeowners whose previous mortgage was never satisfied have been confirmed of using Garretson. Garretson’s fraud totaled $2,950,000 due to unpaid mortgages on refinancing through the Fort Wayne Title.
Leary’s involvement with Garretson’s fraud appeared when Leary had been misappropriating funds from Fort Wayne Title to an S&S Real Estate Solutions account. Leary needed the money to cover $289,000 he embezzled from Legends Title, a company he co-owned. Leary and Garretson met each other through Brian Evans, a former teammate of Leary’s. In 2004, Garretson hired Leary to work for, Mortgage Links, a mortgage company Garretson opened in Indianapolis. Leary left Mortgage Links in 2006. When Leary found himself in debt, he went to Garretson for money. Leary told Garretson that if Garretson did not help him, Leary would disclose Garretson’s financial fraud. Between March 2008, and February 2009, $1,047,405 had been transferred from Fort Wayne Title to the S&S account. Between March and April of 2008, $262,500 had been transferred from the S&S account to Legends Title, along with $690,000 Leary withdrew from the S&S account (State of Indiana).
Fraud Triangle
According to the textbook, Accounting Information Systems written by Marshall Romney and Paul Steinbart, a fraud consists of three parts: pressure, opportunity and rationalization. Each side of the fraud triangle consists of its own requirements.
Pressure can be defined as a person’s incentive or motivation for committing fraud. There are three common areas in which a person’s pressure can come from; financial, emotional, or lifestyle. Todd Leary’s pressure was based on a financial crisis. He needed the money from Garretson to cover the funds he had stolen from Legends Title.
Opportunity is considered the situation that allows a person to commit the fraud. To allow a person to commit fraud, opportunity consists of committing the fraud, concealing the fraud and converting the theft or misrepresentation to personal gain. Garretson was able to steal from Fort Wayne because he was in charge of that company. Leary was able to get Garretson to give him the funds he needed because Leary was aware of Garretson’s fund misappropriation. In both instances, Garretson and Leary fulfilled all three requirements that allowed them to commit fraud.
The last component of the fraud triangle is rationalization, which allows perpetrators to justify their illegal behavior. The rationalization applied both to Garretson’s and Leary’s case may come from the fact that they believed the mortgages would be paid off before anyone noticed. It is yet to be stated clearly as to why Garretson and Leary began stealing money in the first place (Romney and Steinbart).
Summary
Joseph Garretson has been banned from acting as a loan broker and Fort Wayne Mortgage Company has lost its license. Garretson turned himself in to officials and was released on $100,000 bond (Green, 2009). Todd Leary has been indicted with seventeen counts of felony charges including theft and misappropriation of real estate title funds (“IU color announcer,” 2010). On February 10, 2010, a judge has made a preliminary not guilty plea for Leary. The prison sentence for these types of crime is up to four years for each offense.
References
IU color announcer Todd Leary arrested and charged with financial fraud.
(2010, February 5). Courier Press. Retrieved from
http://www.courierpress.com/news/2010/feb/05/iu-color-
announcer-todd-leary- arrested-and-charged/
Evanoff, Ted. (2010, February 6).IU basketball analyst held in alleged
fraud. Indy Star. Retrieved from
http://www.indystar.com/article/20100206/
BUSINESS/2060385/1003/BUSINESS/IU-basketball- analyst-held-in-
alleged-fraud
McCutcheon, Matt. (2010, February 5).Former IU player, announcer
arrested. Retrieved from http://www.wane.com/dpp/news/wane-fw-
Former-IU-player-radio-caller-arrested
Green, Rebecca. (2009). Mortgage refinancing scheme alleged. Journal Gazette,
Retrieved from http://www.journalgazette.net/article/20091218/LOCAL03/
312189947/1002/LOCAL
State of Indiana vs. Todd Leary. Retrieved from
http://docs.google.com/viewer?a=v&q=cache: Mb48UVBi37YJ:media2.wane.com/_local/site/PDFs/News/Leary.pdf+leary+and+garretson&hl=en&gl=us&pid=bl&srcid=ADGEESgHgTaX673me0et9WnbcRr-XtJafxv6rmt_ir16BQ4zrny-Nptc_Z8ZKLgix6WzSmsGcySBenvW4ReYGHtCbhUrYKJhlbf22NtuWVd7HyXJSA_uI5dGdvQIgpNndlz9Z9-MV6Sx&sig=AHIEtbRBkMBym0hiWWhHiSSSD-JQSCEYTw