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Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 1 of 79 PageID #:1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS Federal Deposit Insurance Corporation, as Receiver for Founders Bank, Plaintiff, Case No. v. Honorable Chicago Title Insurance Company, Chicago Title and Trust Company, and Property Valuation Services, LLC, Defendants. COMPLAINT Plaintiff the Federal Deposit Insurance Corporation, as Receiver for Founders Bank ( FDIC ) for its Complaint against Defendants, states as follows: PARTIES 1. Founders Bank ( Founders ) was a commercial bank with its principal place of business located in Worth, Illinois. 2. On July 2, 2009, the Illinois Department of Financial and Professional Regulation, Division of Banking closed Founders, and appointed FDIC receiver of Founders. FDIC accepted the appointment pursuant to 12 U.S.C. 1821(c)(5). 3. FDIC is a corporation organized and existing under the laws of the United States. 12 U.S.C. 1811, et seq. FDIC is an instrumentality of the United States of America and is charged with, among other duties, the orderly liquidation of failed banks such as Founders. 12 U.S.C. 1821(d). Pursuant to 12 U.S.C. 1821(d)(2), the FDIC as Receiver succeeds to all of the rights, powers, and privileges of the insured institution.

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 2 of 79 PageID #:2 4. Defendant Chicago Title Insurance Company, is a corporation organized and existing under the laws of the State of Nebraska, and is doing business in Cook County, Illinois. Each of the transactions at issue in this Complaint closed in Cook County, Illinois. 5. Defendant Chicago Title and Trust Company, is a corporation organized and existing under the laws of the State of Illinois. Defendants Chicago Title Insurance Company and Chicago Title and Trust Company shall be referred to collectively in this Complaint as Chicago Title. 6. Chicago Title holds itself out as among the leading providers of escrow and title insurance services in the nation. Chicago Title offers professional escrow services to lenders, such as Founders, in which Chicago Title closes mortgage loan transactions pursuant to the lender s instructions so that the lender s representatives do not need to attend closing. 7. Upon information and belief, Douglas Shreffler ( Shreffler ) is an Illinois attorney, and at all relevant times, was an approved agent for Chicago Title. 8. Defendant Property Valuation Services, LLC ( PVS ) is an Illinois corporation with its principal place of business in Chicago, Illinois. PVS provides professional appraisal services in connection with mortgage loan transactions. JURISDICTION AND VENUE 9. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. 1331 and 1345 and 12 U.S.C. 1819(b)(1) and (2). 10. This Court has personal jurisdiction over Defendants pursuant to 735 ILCS 5/2-209(a) and (b). 11. Venue is proper in this district pursuant to 28 U.S.C. 1391(b). 2

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 3 of 79 PageID #:3 FACTUAL BACKGROUND from THE www.appraiserlaw.com 2218-2224 NORTH BISSELL TRANSACTION 12. Founders was approached in 2005 to finance the acquisition and construction of certain real estate located at 2218-2224 North Bissell Avenue, Chicago, Illinois (the Bissell Property ). 13. According to representations made to Founders, an Illinois limited liability corporation named 2218-2224 North Bissell LLC ( Bissell LLC ) was to be the purchaser of the Bissell Property. Bissell LLC was formed by Shreffler, and the members of Bissell LLC were listed as Marcel Iorga, Gheorghe Pop and Mehry Khoylou (collectively the Bissell Principals ). 14. According to the real estate contract for the Bissell Property furnished to Founders, the purchase price was $3,250,000. This purchase price was to be funded in part by a down payment of twenty percent of the purchase price, to be deposited in escrow by Bissell LLC. The remainder of the purchase price was to be funded from $2,636,000 of the proceeds of a mortgage loan made by Founders to Bissell LLC. The rest of the Founders loan proceeds were to be used to fund interest reserves and a construction escrow connected to the project to be disbursed after closing. 15. The sale of the Bissell Property to Bissell LLC was scheduled to close on February 10, 2006 at the offices of Chicago Title (the Bissell Closing ). A true and correct copy of the escrow instructions executed by Founders and Chicago Title, as escrowee, is attached hereto and incorporated herein as Exhibit 1 (the Bissell Escrow Instructions ). 16. Chicago Title agreed to be the escrowee responsible for closing the sale of the Bissell Property and the Founders loan in accordance with the Bissell Escrow Instructions, and Chicago Title received one agreed amount of remuneration for such services out of the proceeds 3

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 4 of 79 PageID #:4 of the Founders loan. In reliance on the escrow trust services to be performed by Chicago Title, Founders did not attend the closing. The Chicago Title escrow officer for this transaction was Melissa Conn ( Conn ), who also was an Illinois notary public. 17. Subsequent to February 10, 2006, Conn sent Founders a copy of the Escrow Trust Disbursement Statement for the Bissell Closing, which was identified as Escrow Trust No. D2026007053-001 (the Bissell Closing Statement ). A true and correct copy of the Bissell Closing Statement is attached hereto and incorporated herein as Exhibit 2. The bottom of the Bissell Closing Statement is time stamped 12:37 p.m. on February 10, 2006. Upon information and belief, the Bissell Closing occurred on or about this time. 18. The Bissell Closing Statement lists a payment to Chicago Title Insurance Company with Payment as Directed in the amount of $2,588,436.30. The Bissell Closing Statement listed the purchase price as $3,250,000. Sarmisgeturza Investment LLC ( Sarmisgeturza ) was identified as a party to the closing and listed as receiving $583,506.50 as [Sarmigeturza] Net Proceeds to Seller. The Bissell Closing Statement also stated that North Bissell LLC had made a deposit of $650,000, with the Founders escrow proceeds of $2,636,664.99. 19. Upon information and belief, on the same day Bissell LLC purchased the Bissell Property with Founders loaned funds, there was another escrow closing for sale of the Bissell Property that was identified by Chicago Title as Escrow Trust No. D2026006285-001. Upon information and belief, this additional closing occurred on February 10, 2006 at or about 10:39 a.m. and it purported to involve the sale of the Bissell Property by the actual owners of the Bissell Property, Michael Zucker, Michael Sato, and Kenneth Motew (collectively the Bissell 4

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 5 of 79 PageID #:5 Sellers ) to Sarmisgeturza or its principal, Pavel Zissou, for a price of $2,600,000 (the Shadow Bissell Closing ). 20. A true and correct copy of the Escrow Trust Disbursement Statement for the Shadow Bissell Closing is attached hereto and incorporated herein as Exhibit 3. Conn was the escrow trust officer for the Shadow Bissell Closing. The Escrow Trust Disbursement Statement for the Shadow Bissell Closing listed a purchase price of $2,600,000, a transfer per closing from Chicago Title of $2,588,436.30, and disbursements to third parties, including Pavel Zissu for $23,600, Gheorge Pop for $20,000, and Petru Laba for $20,000. Upon information and belief, Sarrnigetuza is an entity that was formed by Shreffler for Bissell LLC. Chicago Title and Conn concealed the existence of the Shadow Bissell Closing and the information contained on Exhibit 3 from Founders. 21. Upon information and belief, there was no deed or other conveyance of the Bissell Property to Sarmisgeturza or its principal, Pavel Zissou from the Bissell Sellers, and there were no funds deposited in connection with the Shadow Bissell Closing by Sarmigetuza or on its behalf to fund the payment of the purchase price to the Bissell Sellers for the sale of the Bissell Property. According to Chicago Title s Closing Disbursement Statement for the Shadow Bissell Closing, the only funds available to satisfy the purchase obligations at that closing were funds that were distributed in the Bissell Closing and transferred to the Shadow Bissell Closing. 22. It was a violation of the Bissell Escrow Instructions for Chicago Title to disburse the Founders loan proceeds and allow them to be used in the Shadow Bissell Closing without disclosure to and authorization by Founders. Under the Bissell Escrow Instructions, Chicago Title was not authorized to disburse the Founders loan proceeds that had been deposited in escrow unless and until Chicago Title: a) prepare[d] a RESPA (HUD-1) pursuant to financial 5

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 6 of 79 PageID #:6 information provided by Lender and Seller ; b) obtain[ed] Lender approval of any Mortgagor Credits above nominal or customary amount ; and c) pa[id] net sale proceeds to Seller pursuant to Buyer/Seller escrow instructions. Chicago Title failed to satisfy these conditions prior to distributing the loan proceeds for this loan. 23. Chicago Title s Closing Disbursement Statement for the Shadow Bissell Closing indicates that the purchase price for the Bissell Property paid by Sarmisgeturza was $2,600,000. Upon information and belief the $3,250,000 purchase price represented to Founders was fabricated for the sole purpose of increasing the amount Founders would be willing to lend. Neither Sarmigetuza nor its principal, Pavel Zissou, ever held title or ever provided other consideration that warranted the $650,000 differential in price between the Bissell Closing and the Shadow Bissell Closing. 24. All or a substantial portion of the $650,000 deposit purportedly paid into escrow in connection with the Bissell Closing by or on behalf of Bissell LLC was illusory because substantially all of those funds were disbursed by Chicago Title out of the escrow to or for the benefit of the he Bissell Principals or an entity controlled by one or more of them in the same closing as described below. In short, Bissell LLC contributed no down payment for the purchase of the Bissell Property and that fact was concealed from Founders via the Shadow Bissell Closing administered by Chicago Title and the other acts and omissions described in this Complaint. 25. Contrary to the Bissell Closing Statement, net proceeds of $583,506.50 were not paid to the seller of the Bissell Property. Upon information and belief, Chicago Title knew that the entity listed as the recipient of that payment, Sarmigetuza, was a straw party, who never acquired or conveyed title to that property. Moreover, the Bissell Closing Statement falsely 6

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 7 of 79 PageID #:7 shows that the amount of $583,506.50 was paid to Sarmigetuza. Rather, Chicago Title issued a check in that amount payable to 7000 S Chapel LLC, an entity controlled by one or more of the Bissell Principals. 26. Even though there were two purported sales of the Bissell Property on February 10, 2006, both closed by Chicago Title, Chicago Title only recorded a single deed, which conveyed that property from the Bissell Sellers to Bissell LLC. Despite the fact that the purchase price actually paid to the Bissell Sellers for the Bissell Property was only $2,600,000 and no other consideration was paid for the purchase of the property, the transfer taxes paid by Chicago Title were calculated based on the higher price of $3,250,000. Upon information and belief, this was done to further conceal the true nature of this transaction. 27. Upon information and belief, there were no purchaser s or seller s closing statements submitted to Chicago Title in connection with the Bissell Closing and at least certain of the prorations/credits for the buyer, including the amount reflected in the Bissell Closing Statement for the amount of the earnest money deposit, were fictitious. 28. Upon information and belief, the disbursements to Pavel Zissou ($23,600), Gheorghe Pop ($20,000), and Petru Laba ($20,000) noted on the Closing Statement for the Shadow Bissell Closing were not reflected on the Bissell Closing Statement or otherwise disclosed to Founders. Upon information and belief, there was no legitimate purpose for these payments to be made in connection with the transaction. 29. Upon information and belief, in order to facilitate the concealment of the above payments and the payment of $583,506.50 to 7000 S Chapel LLC, Chicago Title deviated from its customary and ordinary practices by, among other things, failing to maintain in its 7

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 8 of 79 PageID #:8 Bissell Closing escrow file various documents that would have disclosed the true recipient of those funds. 30. By virtue of the foregoing circumstances, Chicago Title breached its duties to Founders by disbursing funds in violation of the Bissell Escrow Instructions, by failing to provide to Founders an accurate closing statement or other records reflecting the transactions and disbursements that occurred at the Bissell Closing and at the Shadow Bissell Closing, and by failing to maintain accurate and complete records that would have disclosed the concealed aspects of the transaction. 31. The irregularities associated with Escrow Trust Nos. D2026007053-001 and D2026006285-001, both involving the same Chicago Title escrow officer, were substantial and known to Shreffler and Conn. Shreffler and Conn were each a duly authorized employee, agent, or representative of Chicago Title clothed with apparent authority to act as Chicago Title s agent in connection with the Bissell Property transactions. Chicago Title breached its duty to disclose those irregularities to Founders prior to disbursing the proceeds of the loan to Bissell LLC. 32. Chicago Title owed a fiduciary duty to Founders not to disburse any proceeds of the Founders loan without first contacting Founders, disclosing these irregularities and obtaining further direction prior to disbursing the proceeds of the Founders loan. Chicago Title breached its duties to Founders by failing to do any of the foregoing. 33. Founders would not have permitted the loan to Bissell LLC to close and would not have authorized the disbursement of its loan proceeds if Chicago Title had disclosed to Founders the true nature of the Bissell Property transactions or the facts that were known to Chicago Title regarding these transactions 8

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 9 of 79 PageID #:9 34. On or about February 2, 2006, Defendant PVS prepared an appraisal for the Bissell Property, in which PVS represented that the Bissell Property had an As Is value of $3,250,000 (the Bissell Appraisal ). The Bissell Appraisal was submitted to Founders for the purpose of facilitating a mortgage finance transaction for the purchase of the Bissell Property. 35. Upon information and belief, the true value of the Bissell Property was substantially lower than the value reflected in the Bissell Appraisal. Founders would not have permitted the loan to Bissell LLC to close and would not have authorized the disbursement of its loan proceeds if PVS had accurately indicated the true value of the Bissell Property in the Bissell Appraisal. THE 851 NORTH LA SALLE TRANSACTION 36. Founders was approached in 2005 to finance the acquisition and construction of certain real estate located at 851 North LaSalle Street, Chicago, Illinois (the LaSalle Property ) 37. According to representations made to Founders, an Illinois limited liability corporation named LaSalle and Chestnut, LLC was to be the purchaser of the LaSalle Property. LaSalle and Chestnut, LLC was formed by Shreffler, and the members of LaSalle and Chestnut, LLC were listed as Marcel Iorga, Gheorghe Pop, and Petru Laba. Marcel Iorga and Gheorghe Pop were also members of the entity involved in the Bissell Property transactions described above. 38. According to the real estate contract for the LaSalle Property furnished to Founders, the purchase price was $3,100,000. This purchase price was to be funded in part by a down payment of twenty percent of the purchase price, to be deposited in escrow by or on behalf of LaSalle and Chestnut, LLC. The remainder of the purchase price was to be funded from $2,514,050 of the proceeds of a mortgage loan made by Founder to LaSalle and Chestnut, LLC. 9

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 10 of 79 PageID #:10 The rest of the Founders loan proceeds were used to be used to fund interest reserves and a construction escrow connected to the project subsequent to the closing. 39. The sale of the LaSalle Property to LaSalle and Chestnut, LLC was scheduled to close on February 13, 2006 at the offices of Chicago Title (the LaSalle Closing ). A true and correct copy of the escrow instructions executed by Founders and Chicago Title, as escrowee, is attached hereto and incorporated herein as Exhibit 4 (the LaSalle Escrow Instructions ). 40. Chicago Title agreed to be the escrowee responsible for closing the sale of the LaSalle Property and the Founders loan in accordance with the LaSalle Escrow Instructions and Chicago Title received the agreed amount of remuneration for such services out of the proceeds of the loan. In reliance on the escrow trust services to be performed by Chicago Title, Founders did not attend the closing. The Chicago Title escrow officer for this transaction was Patricia Butler ( Butler ), who also was an Illinois notary public. 41. Subsequent to February 13, 2006, Butler sent Founders a copy of the Escrow Trust Disbursement Statement for the LaSalle Closing, which was identified as Escrow Trust No. D2026010786-003 (the LaSalle Closing Statement ). A true and correct copy of LaSalle Closing Statement is attached hereto and incorporated herein as Exhibit 5. The bottom of the LaSalle Closing Statement is time stamped 1:46 p.m. on February 13, 2006. Upon information and belief, the LaSalle Closing occurred on or about this time. 42. The LaSalle Closing Statement lists a payment to Chicago Title Insurance Company with Payment as Directed in the amount of $2,353,550.99. The LaSalle Closing Statement listed the purchase price as $3,100,000.00. North Star Deferred Exchange was listed as receiving $689,675.00 as [North Star] Net Proceeds to Seller. The LaSalle Closing 10

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 11 of 79 PageID #:11 Statement also stated that Marcel Iorga had made a deposit of $620,000, with the Founders escrow proceeds of $2,514,050. 43. Upon information and belief, on the same day LaSalle and Chestnut, LLC purchased the LaSalle Property with Founders loaned funds, there was another escrow closing for sale of the LaSalle Property that was identified by Chicago Title as Escrow Trust No. D2026010786-001. Upon information and belief, that closing occurred on February 13, 2006 at or about 12:45 p.m. and it involved the sale of the LaSalle Property by the actual owner of the LaSalle Property, Park National Bank, as Successor Trustee to Cosmopolitan National Bank, as Trustee under trust agreement dated April 4, 1996 and known as Trust Number 30434 (the LaSalle Seller ) for a price of $2,400,000 to LaSalle and Chestnut, LLC (the Shadow LaSalle Closing ). 44. A true and correct copy of the Escrow Trust Disbursement Statement for the Shadow LaSalle Closing is attached hereto and incorporated herein as Exhibit 6. Butler was the escrow trust officer for this escrow. The Escrow Trust Disbursement Statement for the Shadow LaSalle Closing listed a purchase price of $2,400,000 and $0.00 in receipts. Chicago Title and Butler concealed the existence of the Shadow LaSalle Closing and the information contained on Exhibit 6 from Founders. 45. Upon information and belief, there was no deed or other conveyance of the LaSalle Property to LaSalle and Chestnut LLC from the LaSalle Seller and there were no funds deposited in connection with the Shadow LaSalle Closing to fund the purchase price for the sale of the LaSalle Property. According to Chicago Title s Closing Statement for the Shadow LaSalle Closing, the only funds available at that closing was the $2,353,550.99 transferred from the funds that were distributed in the LaSalle Closing. 11

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 12 of 79 PageID #:12 46. It was a violation of the LaSalle Escrow Instructions for Chicago Title to disburse the Founders loan proceeds and allow them to be used in the Shadow LaSalle Closing without disclosure to and authorization by Founders. Under the LaSalle Escrow Instructions, Chicago Title was not authorized to disburse the Founders loan proceeds that had been deposited in escrow unless and until Chicago Title: a) prepare[d] a RESPA (HUD-1) pursuant to financial information provided by Lender and Seller ; b) obtain[ed] Lender approval of any Mortgagor Credits above nominal or customary amount ; and c) pa[id] net sale proceeds to Seller pursuant to Buyer/Seller escrow instructions. Chicago Title failed to satisfy these conditions prior to distributing the loan proceeds for this loan. 47. Chicago Title s Closing Disbursement Statement for the Shadow LaSalle Closing indicates that the purchase price for the LaSalle Property paid by Petru Laba was $2,400,000. Upon information and belief the $3,100,000 purchase price represented to Founders was fabricated for the sole purpose of increasing the amount Founders would be willing to lend. 48. All or a substantial portion of the $620,000 deposit purportedly paid in connection with the LaSalle Closing by or on behalf of LaSalle and Chestnut LLC was illusory because all or substantially all of those funds were disbursed by Chicago Title to or for the benefit of one or more of the principals of that entity in the same closing as described herein. 49. Contrary to the LaSalle Closing Statement, net proceeds of $689,675.00 were not paid to North Star Deferred Exchange or the LaSalle Seller. Rather, Chicago Title issued a check in that amount payable to 7000 S. Choppel LLC, an entity controlled by one or more of the principals of the LaSalle and Chestnut LLC. 50. Upon information and belief, in order to facilitate the concealment of the payment of $689,675.00 to 7000 S. Choppel LLC, Chicago Title deviated from its customary and 12

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 13 of 79 PageID #:13 ordinary practices by, among other things, failing to maintain in its LaSalle Closing escrow file various documents that would have disclosed the true recipient of those funds. 51. Even though there were two purported sales of the LaSalle Property on February 13, 2006, both closed by Chicago Title, Chicago Title only recorded a single deed, which conveyed the LaSalle Property from the LaSalle Sellers to LaSalle and Chestnut, LLC. Despite the fact that the actual purchase price paid to the LaSalle Sellers for the LaSalle Property was only $2,400,000, the transfer taxes paid by Chicago Title were based on a price of $3,100,000. Upon information and belief, this was done to further conceal the true nature of this transaction. 52. By virtue of the foregoing circumstances, Chicago Title breached its duties to Founders by disbursing funds in violation of the LaSalle Escrow Instructions, by failing to provide to Founders an accurate closing statement or other records reflecting the transactions and activities that occurred at the LaSalle Closing and at the Shadow LaSalle Closing, and by failing to maintain accurate and complete records that would have disclosed the concealed aspects of the transaction. 53. Chicago Title further breached its duties to Founders by preparing and delivering to Founders the LaSalle Closing Statement, which materially misrepresented the transaction for the sale of the LaSalle Property purportedly represented therein. 54. The irregularities associated with Escrow Trust Nos. D2026010786-001 and D2026010786-003, were substantial and known to Shreffler and Butler. Shreffler and Butler were each a duly authorized employee, agent, or representative of Chicago Title clothed with apparent authority to act as Chicago Title s agent in connection with the LaSalle Property transactions. Chicago Title breached its duty to disclose those irregularities to Founders prior to disbursing the proceeds of the loan to LaSalle and Chestnut, LLC. Chicago Title owed a duty to 13

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 14 of 79 PageID #:14 Founders not to disburse any proceeds of the Founders loan until it contacted Founders, disclosed the irregularities and received further direction prior to disbursing the proceeds of the Founders loan. 55. Founders would not have permitted the loan to LaSalle and Chestnut, LLC to close and would not have authorized the disbursement of its loan proceeds if Chicago Title had disclosed to Founders the true nature of the LaSalle Property transactions or the facts known to Chicago Title regarding these transactions. 56. On or about January 20, 2006, Defendant PVS prepared an appraisal for the LaSalle Property, in which PVS represented that the LaSalle Property had an As Is value of $3,000,000 (the LaSalle Appraisal ). The LaSalle Appraisal was submitted to Founders for the purpose of facilitating a mortgage finance transaction for the purchase of the LaSalle Property. 57. Upon information and belief, the true value of the LaSalle Property was substantially lower than the value reflected in the LaSalle Appraisal. Founders would not have permitted the loan to LaSalle and Chestnut, LLC to close and would not have authorized the disbursement of its loan proceeds if PVS had accurately indicated the true value of the LaSalle Property in the LaSalle Appraisal. THE 5408-5410 N. CAMPBELL TRANSACTION 58. Founders was approached in or about early 2006 to finance the acquisition and construction of certain real estate located at 5408-5410 North Campbell, Chicago, Illinois (the 5408 N. Campbell Property ). 59. According to representations made to Founders, an Illinois limited liability corporation named 5408 North Campbell LLC ( 5408 N. Campbell LLC ) was to be the purchaser of the property. 5408 N. Campbell, LLC was formed by Shreffler, and John DeHelean 14

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 15 of 79 PageID #:15 ( DeHelean ) was listed as the manager and was at least one of the members of 5408 N. Campbell, LLC. 60. According to information furnished to Founders before the closing, the purchase price of the 5408 N. Campbell Property was to be $1,165,000. This purchase price was to be funded in part by a down payment of twenty percent of the purchase price, to be deposited in escrow by or on behalf of 5408 N. Campbell, LLC. The remainder of the purchase price was to be funded from the proceeds of a mortgage loan made by Founders to 5408 N. Campbell, LLC. The rest of the Founders loan proceeds were to be used to fund interest reserves and a construction escrow connected to the project. 61. The sale of the 5408 N. Campbell Property to 5408 N. Campbell, LLC was scheduled to close on April 24, 2006 at the offices of Chicago Title (the 5408 N. Campbell Closing ). A true and correct copy of the escrow instructions executed by Founders and Chicago Title, as escrowee, is attached hereto and incorporated herein as Exhibit 7 (the 5408 N. Campbell Escrow Instructions ). 62. Chicago Title agreed to be the escrowee responsible for closing the sale of the 5408 N. Campbell Property and the Founders loan in accordance with the 5408 N. Campbell Escrow Instructions, and Chicago Title received the agreed amount of remuneration for such services out of the proceeds of Founder s loan. In reliance on the escrow trust services to be performed by Chicago Title, Founders did not attend the closing. The Chicago Title escrow officer for this transaction was Butler, who was also the escrow officer for the LaSalle Property transaction described above. 63. Subsequent to April 24, 2006, Butler sent Founders a copy of the Escrow Trust Disbursement Statement for the 5408 N. Campbell Closing, which was identified as Escrow 15

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 16 of 79 PageID #:16 Trust No. D2026035879-001 (the 5408 N. Campbell Closing Statement ). A true and correct copy of 5408 N. Campbell Closing Statement is attached hereto and incorporated herein as Exhibit 8. The bottom of the 5408 N. Campbell Closing Statement is time stamped 1:58 p.m. on April 24, 2006. Upon information and belief, the 5408 N. Campbell Closing occurred on or about this time. 64. The 5408 N. Campbell Closing Statement lists a payment to Chicago Title Insurance Company in the amount of $818,454.98. The 5408 N. Campbell Closing Statement listed the purchase price as $1,165,000.00. Frank R. Palm was identified as a party to the closing and listed as receiving $318,535.45.00 as [Frank R. Palm] Net Proceeds to Seller. The 5408 N. Campbell Closing Statement also stated a receipt of Founders escrow proceeds of $917,328.00. 65. Upon information and belief, on the same day 5408 North Campbell LLC purchased the 5408 North Campbell Property with Founders loaned funds, there was another escrow closing at Chicago Title for the sale of 5408 N. Campbell Property, which involved the sale of the 5408 N. Campbell Property by the actual owners of that property, Frank R. Palm, Marilyn E. Palm, William J. Hendricks and Kathleen Hendricks (the 5408 N. Campbell Sellers ) for a price of $845,000 to a straw purchaser named Stefan Piuian (the Shadow 5408 N. Campbell Closing ). 66. A true and correct copy of the closing statement for the Shadow 5408 N. Campbell Closing is attached hereto and incorporated herein as Exhibit 9. Butler was the escrow trust officer for this escrow. The closing statement for the Shadow 5408 N. Campbell Closing listed a purchase price of $845,000. Chicago Title and Butler concealed the existence of the Shadow 5408 N. Campbell Closing and the information contained on Exhibit 9 from Founders. 16

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 17 of 79 PageID #:17 67. Upon information and belief, there was no deed or other conveyance of the 5408 N. Campbell Property from the 5408 N. Campbell Sellers to 5408 N. Campbell, LLC and 5408 N. Campbell, LLC there were no funds deposited in connection with the Shadow 5408 N. Campbell Closing to fund the purchase price for the sale of the 5408 N. Campbell Property; rather, the only funds available in connection with the Shadow 5408 N. Campbell Closing were funds that had been transferred from the 5408 N. Campbell Closing. 68. It was a violation of the 5408 N. Campbell Escrow Instructions for Chicago Title to disburse the Founders loan proceeds and allow them to be used in the Shadow 5408 N. Campbell Closing without disclosure to and authorization by Founders. Under the 5408 N. Campbell Escrow Instructions, Chicago Title was not authorized to disburse the Founders loan proceeds that had been deposited in escrow unless and until Chicago Title: a) prepare[d] a RESPA (HUD-1) pursuant to financial information provided by Lender and Seller ; b) obtain[ed] Lender approval of any Mortgagor Credits above nominal or customary amount ; and c) pa[id] net sale proceeds to Seller pursuant to Buyer/Seller escrow instructions. Chicago Title failed to satisfy these conditions prior to distributing the loan proceeds for this loan. 69. The Closing Statement for the Shadow 5408 N. Campbell Closing indicates that the purchase price for the 5408 N. Campbell Property paid by Stefan Piuian was $845,000. Upon information and belief, the $1,165,000 purchase price represented to Founders was fabricated for the sole purpose of increasing the amount Founders would be willing to lend. 70. All or a substantial portion of the $330,000 deposit purportedly paid in connection with the 5408 N. Campbell Closing by or on behalf of 5408 N. Campbell LLC was illusory 17

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 18 of 79 PageID #:18 because all or substantially all of those funds were disbursed by Chicago Title to or for the benefit of one or more of the principals of that entity in the same closing as described herein. 71. Contrary to the 5408 N. Campbell Closing Statement, net proceeds of $318,215.45 were not paid to Frank R. Palm or the 5408 N. Campbell Seller. Rather, Chicago Title disbursed payments in the following amounts: $10,000 to Petru Laba, $60,000 to DeHelean, $112,291.99 to Stefan Piuian, and $135,923.46 to Gheorge Pop. 72. Upon information and belief, in order to facilitate the concealment of the above payments, Chicago Title deviated from its customary and ordinary practices by, among other things, failing to maintain in its 5408 N. Campbell Closing escrow file various documents that would have disclosed the true recipient of those funds. 73. Even though there were two purported sales of the 5408 N. Campbell Property on April 24, 2006, both closed by Chicago Title, Chicago Title only recorded a single deed, which conveyed the 5408 N. Campbell Property from the 5408 N. Campbell Sellers to 5408 N. Campbell, LLC. Despite the fact that the actual purchase price paid to the 5408 N. Campbell Sellers for the 5408 N. Campbell Property was only $845,000, the transfer taxes paid by Chicago Title were based on a price of $1,165,000. Upon information and belief, this was done to further conceal the true nature of this transaction. 74. By virtue of the foregoing circumstances, Chicago Title breached its duties to Founders by disbursing funds in violation of 5408 N. Campbell Escrow Instructions and by failing to provide to Founders an accurate closing statement or other records reflecting the transactions and activities that occurred at the 5408 N. Campbell Closing and at the Shadow 5408 N. Campbell Closing. 18

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 19 of 79 PageID #:19 75. Chicago Title further breached its duties to Founders by preparing and delivering to Founders the 5408 N. Campbell Closing Statement, which materially misrepresented the transaction for the sale of the 5408 N. Campbell Property purportedly represented therein. 76. The irregularities associated with 5408 N. Campbell Closing and the Shadow 5408 N. Campbell Closing were substantial and known to Shreffler and Butler. Shreffler and Butler were each a duly authorized employee, agent, or representative of Chicago Title clothed with apparent authority to act as Chicago Title s agent in connection with the 5408 N. Campbell Property transactions. Chicago Title breached its duty to disclose those irregularities to Founders prior to disbursing the proceeds of the loan to 5408 N. Campbell LLC. Chicago Title owed a duty to Founders not to disburse any proceeds of the Founders loan until it contacted Founders, disclosed the irregularities and received further direction prior to disbursing the proceeds of the Founders loan. 77. Founders would not have permitted the loan to 5408 N. Campbell LLC to close and would not have authorized the disbursement of its loan proceeds if Chicago Title had disclosed to Founders the true nature of 5408 N. Campbell Property transactions or the facts known to Chicago Title regarding these transactions. 78. On or about April 11, 2006, Defendant PVS prepared an appraisal for the 5408 N. Campbell Property, in which PVS represented that the 5408 N. Campbell Property had an As Is value of $1,165,000 (the 5408 N. Campbell Appraisal ). The 5408 N. Campbell Appraisal was submitted to Founders for the purpose of facilitating a mortgage finance transaction for the purchase of the 5408 N. Campbell Property. 79. Upon information and belief, the true value of the 5408 N. Campbell Property was substantially lower than the value reflected in the 5408 N. Campbell Appraisal. Founders would 19

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 20 of 79 PageID #:20 not have permitted the loan to 5408 N. Campbell LLC to close and would not have authorized the disbursement of its loan proceeds if PVS had accurately indicated the true value of the 5408 N. Campbell Property in the 5408 N. Campbell Appraisal. THE 5412-5414 N. CAMPBELL TRANSACTION 80. Founders was approached in or about early 2006 to finance the acquisition and construction of certain real estate located at 5412-5414 North Campbell, Chicago, Illinois (the 5412 N. Campbell Property ). 81. According to representations made to Founders, an Illinois limited liability corporation named 5412 North Campbell, LLC ( 5412 N. Campbell, LLC ) was to be the purchaser of the property. Like 5408 N. Campbell, LLC, 5412 N, Campbell, LLC was formed by Shreffler, and DeHelean was listed as the manager and was at least one of the members of 5412 N. Campbell, LLC. 82. According to information furnished to Founders before the closing, the purchase price of the 5412 N. Campbell Property was to be $1,335,000. This purchase price was to be funded in part by a down payment of $339,000.00 to be deposited in escrow by or on behalf of 5412 N. Campbell, LLC. $981,050 of the purchase price was to be funded from the proceeds of a mortgage loan made by Founders to 5412 N. Campbell, LLC. The rest of the Founders loan proceeds were used to fund interest reserves and a construction escrow connected to the project. 83. The sale of the 5412 N. Campbell Property to 5412 N. Campbell, LLC was scheduled to close on April 24, 2006 at the offices of Chicago Title (the 5412 N. Campbell Closing ). A true and correct copy of the escrow instructions executed by Founders and Chicago Title, as escrowee, is attached hereto and incorporated herein as Exhibit 10 (the 5412 N. Campbell Escrow Instructions ). 20

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 21 of 79 PageID #:21 84. Chicago Title agreed to be the escrowee responsible for closing the sale transaction and the Founders loan in accordance with the 5412 N. Campbell Escrow Instructions, and Chicago Title received the agreed amount of remuneration for such services out of the proceeds of the loan. In reliance on the escrow trust services to be performed by Chicago Title, Founders did not attend the closing. Like with the transactions involving the LaSalle Property and the 5408 N. Campbell Property, the Chicago Title escrow officer for this transaction was Butler. 85. Subsequent to April 24, 2006, Butler sent Founders a copy of the Escrow Trust Disbursement Statement for the 5412 N. Campbell Closing, which was identified as Escrow Trust No. D2026035352-00l (the 5412 N. Campbell Closing Statement ). A true and correct copy of 5412 N. Campbell Closing Statement is attached hereto and incorporated herein as Exhibit 11. The bottom of the 5412 N. Campbell Closing Statement is time stamped 3:42 p.m. on April 24, 2006. Upon information and belief, the 5412 N. Campbell Closing occurred on or about this time. 86. The 5412 N. Campbell Closing Statement lists a payment to Chicago Title Insurance Company in the amount of $869,388.26. The 5412 N. Campbell Closing Statement listed the purchase price as $1,335,000. Frank R. Palm was identified as a party to the closing and listed as receiving $337,710.00 as [Frank R. Palm] Net Proceeds to Seller. The 5412 N. Campbell Closing Statement also stated that 5412 N. Campbell, LLC had made a deposit of $120,000, with the Founders escrow proceeds of $981,085.00. 87. Upon information and belief, on the same day 5412 N. Campbell LLC purchased the 5412 N. Campbell Property with Founders loaned funds, there was another escrow closing at Chicago Title for the sale of 5412 N. Campbell Property. Upon information and belief this 21

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 22 of 79 PageID #:22 additional closing occurred on or about 1:59 p.m. on April 24, 2006, and it involved the sale of the 5412 N. Campbell Property by the actual owners of the 5412 N. Campbell Property, Frank R. Palm, Marilyn E. Palm, William J. Hendricks and Kathleen Hendricks (the 5412 N. Campbell Sellers ) for a price of $895,000 to a straw purchaser named Stefan Piuian, who also acted as the straw purchaser of the 5408 N. Campbell Property (the Shadow 5412 N. Campbell Closing ). 88. A true and correct copy of the closing statement for the Shadow 5412 N. Campbell Closing is attached hereto and incorporated herein as Exhibit 12. Butler was the escrow trust officer for this escrow. The Escrow Trust Disbursement Statement for the 5412 N. Campbell Bissell Closing listed a purchase price of $895,000, $0.00 in receipts, and identifies the buyer as Stefan Pivian. Chicago Title and Butler concealed the existence of the Shadow 5412 N. Campbell Closing and the information contained on Exhibit 12 from Founders. 89. Upon information and belief, there was no deed or other conveyance of the 5412 N. Campbell Property from the 5412 N. Campbell Sellers to 5412 N. Campbell, LLC and 5412 N. Campbell, LLC did not deposit any funds in connection with the Shadow 5412 N. Campbell Closing to fund the purchase price for the sale of the 5412 N. Campbell Property. Upon information and belief, the only funds available at that closing were the $869,388.26 transferred from the funds disbursed in connection with the 5412 N. Campbell Closing. 90. It was a violation of the 5412 N. Campbell Escrow Instructions for Chicago Title to disburse the Founders loan proceeds and allow them to be used in the Shadow 5412 N. Campbell Closing without disclosure to and authorization by Founders. Under the 5412 N. Campbell Escrow Instructions, Chicago Title was not authorized to disburse the Founders loan proceeds that had been deposited in escrow unless and until Chicago Title: a) prepare[d] a RESPA (HUD-1) pursuant to financial information provided by Lender and Seller ; b) 22

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 23 of 79 PageID #:23 obtain[ed] Lender approval of any Mortgagor Credits above nominal or customary amount ; and c) pa[id] net sale proceeds to Seller pursuant to Buyer/Seller escrow instructions. Chicago Title failed to satisfy these conditions prior to distributing the loan proceeds for this loan. 91. Chicago Title s Closing Disbursement Statement for the Shadow 5412 N. Campbell Closing indicates that the purchase price for the 5412 N. Campbell Property paid by Stefan Piuian was $895,000. Upon information and belief the $1,335,000 purchase price represented to Founders was fabricated for the sole purpose of increasing the amount Founders would be willing to lend. 92. All or a substantial portion of the $339,000.00 deposit purportedly paid in connection with the 5412 N. Campbell Closing by or on behalf of 5412 N. Campbell, LLC was illusory because all or substantially all of those funds were disbursed by Chicago Title to or for the benefit of one or more of the principals of that entity in the same closing as described herein. 93. Contrary to the 5412 N. Campbell Closing Statement, net proceeds of $337,710.00 were not paid to Frank R. Palm or the 5412 N. Campbell Sellers. Rather, Chicago Title issued a check in that amount payable to 5222 South Drexel LLC, an entity controlled by one or more of the principals of 5412 N. Campbell, LLC. 94. Upon information and belief, in order to facilitate the concealment of the payment of $337,710.00 to 5222 South Drexel LLC, Chicago Title deviated from its customary and ordinary practices by, among other things, failing to maintain in its 5412 N. Campbell Closing escrow file various documents that would have disclosed the true recipient of those funds. 95. Even though there were two purported sales of the 5412 N. Campbell Property on April 24, 2006, both closed by Chicago Title, Chicago Title only recorded a single deed, which 23

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 24 of 79 PageID #:24 conveyed 5412 N. Campbell Property from the 5412 N. Campbell Sellers to 5412 N. Campbell, LLC. Despite the fact that the actual purchase price paid to the 5412 N. Campbell Sellers for the 5412 N. Campbell Property was only $895,000, the transfer taxes paid by Chicago Title were based on a price of $1,335,000. Upon information and belief, this was done to further conceal the true nature of this transaction. 96. By virtue of the foregoing circumstances, Chicago Title breached its duties to Founders by disbursing funds in violation of the 5412 N. Campbell Escrow Instructions and by failing to provide to Founders an accurate closing statement or other records reflecting the transactions and activities that occurred at the 5412 N. Campbell Closing and at the Shadow 5412 N. Campbell Closing. 97. Chicago Title further breached its duties to Founders by preparing and delivering to Founders the 5412 N. Campbell Closing Statement, which materially misrepresented the transaction for the sale of the 5412 N. Campbell Property purportedly represented therein. 98. The irregularities associated with the 5412 N. Campbell Closing and the Shadow 5412 N. Campbell Closing were substantial and known to Shreffler and Butler. Shreffler and Butler were each a duly authorized employee, agent, or representative of Chicago Title clothed with apparent authority to act as Chicago Title s agent in connection with the 5412 N. Campbell Property transactions. Chicago Title breached its duty to disclose those irregularities to Founders prior to disbursing the proceeds of the loan to 5412 N. Campbell, LLC. Chicago Title had a duty to Founders not to disburse any proceeds of the Founders loan until it contacted Founders, disclosed the irregularities and received further direction prior to disbursing the proceeds of the loan. 24

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 25 of 79 PageID #:25 99. Founders would not have permitted the loan to 5412 N. Campbell, LLC to close and would not have authorized the disbursement of its loan proceeds if Chicago Title had disclosed to Founders the true nature of the 5412 N. Campbell Property transactions or the facts known to Chicago Title regarding these transactions. 100. On or about April 11, 2006, Defendant PVS prepared an appraisal for the 5412 N. Campbell Property, in which PVS represented that the 5412 N. Campbell Property had an As Is value of $1,335,000 (the 5412 N. Campbell Appraisal ). The 5412 N. Campbell Appraisal was submitted to Founders for the purpose of facilitating a mortgage finance transaction for the purchase of the 5412 N. Campbell Property. 101. Upon information and belief, the true value of the 5412 N. Campbell Property was substantially lower than the value reflected in the 5412 N. Campbell Appraisal. Founders would not have permitted the loan to 5412 N. Campbell LLC to close and would not have authorized the disbursement of its loan proceeds if PVS had accurately indicated the true value of the 5412 N. Campbell Property in the 5412 N. Campbell Appraisal. COUNT I: BREACH OF CONTRACT AGAINST CHICAGO TITLE 102. Plaintiff FDIC incorporates the preceding paragraphs of this Complaint herein by reference. 103. Chicago Title entered into a series of contractual relationships with Founders that were defined by the Bissell Escrow Instructions, the LaSalle Escrow Instructions, the 5408 N. Campbell Escrow Instructions, and the 5412 N. Campbell Escrow Instructions (collectively the Closing Instructions ). 104. In serving as Founders closing agent, Chicago Title assumed and owed Chicago Title a duty to strictly comply with all of the terms of the Closing Instructions. Defendant 25

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 26 of 79 PageID #:26 Chicago Title violated the parties agreements by failing to close the transactions involving the Bissell Property, LaSalle Property, 5412 N. Campbell Property, and 5412 N. Campbell Property (collectively, the Subject Transactions ) in accordance with the Closing Instructions. 105. Chicago Title s closing of the Subject Transactions violated the Closing Instructions in several material ways as set forth herein. 106. Founders reasonably relied upon Chicago Title s agreement to comply with the Closing Instructions in deciding whether to fund the subject loans referenced herein. 107. Chicago Title s breach of the Closing Instructions caused Founders to fund mortgage loans that it otherwise would not have funded. FDIC, as Founders successor in interest, has suffered a loss as a result of Defendant Chicago Title s breach of the Closing Instructions. COUNT II: BREACH OF FIDUCIARY DUTY AGAINST CHICAGO TITLE 108. Plaintiff FDIC incorporates the preceding paragraphs of this Complaint herein by reference. 109. Chicago Title, acting in its capacity as escrow company, assumed and owed a fiduciary duty to advise and/or protect Founders in connection with the Subject Transactions by providing its professional services for which it received a fee. 110. Founders relied on a relationship of trust and confidence with Chicago Title in the performance of these professional services, and understood that Chicago Title would act in a fiduciary capacity with regard to the escrow services it provided to Founders. 111. Chicago Title knew Founders would rely upon the proper performance of Chicago Title s professional services. 26

Case: 1:12-cv-05198 Document #: 1 Filed: 06/29/12 Page 27 of 79 PageID #:27 112. Chicago Title breached its fiduciary duty to Founders in several material ways as set forth herein, including but not limited to, failing to adequately describe the nature of the Subject Transactions, misrepresenting the true sales price and other critical information related to the Subject Transactions, and otherwise failing to notify Founders as to the existence of multiple escrows and straw purchasers utilized in the Subject Transactions. 113. Chicago Title s breach of its fiduciary duties caused Founders to fund mortgage loans that it otherwise would not have funded. FDIC, as Founders successor in interest, has suffered a loss as a result of Defendant Chicago Title s breach of fiduciary duties. COUNT III: NEGLIGENCE AGAINST CHICAGO TITLE 114. Plaintiff FDIC incorporates the preceding paragraphs of this Complaint herein by reference. 115. Chicago Title performed title, closing, and escrow services for Founders in connection with the Subject Transactions. Chicago Title was required to perform these services with reasonable care. 116. Chicago Title s duties as a title agent, closing agent, and escrow agent are defined by federal, state, and common law. Chicago Title s duties and obligations are further defined by industry standards and Founders Closing Instructions. Chicago Title breached these duties when it failed to perform services in a manner consistent with federal, state, and common law; industry standards; and Founders written instructions. 117. Chicago Title s negligent performance caused Founders to fund loans that it would not have otherwise funded. FDIC, as Founders successor in interest, has been damaged as a result of Chicago Title s negligence. COUNT IV: NEGLIGENT MISREPRESENTATION AGAINST CHICAGO TITLE 27