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April 25, 2003


The opinion of the court was delivered by: Paul E. Plunkett, United States District Judge


Plaintiffs have sued defendants for their alleged violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and stale law. Defendants Equicredit Corporation of America ("Equicredit"), Fairbanks Capital Corporation ("Fairbanks"), Bank One, Citizens Bank ("Citizens") and the Provident Bank d/b/a PCFS Financial Services, Inc. ("Provident") have filed motions to dismiss the claims asserted against them pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). For the reasons set forth below, the motions are granted in part and denied in part.


The Parties

Plaintiffs Matilda Pulphus, Barbara Vanzant, Sylvia Manderson and Stephanie Barnas are elderly homeowners and unsophisticated consumers who are unfamiliar with the details of modern mortgage transactions. (Compl. ¶¶ 4-7.) Defendant Sullivan operates New Look Home Services, an Illinois company ostensibly engaged in the business of providing home improvement services. (Id. ¶¶ 8-9.) Defendant MDR Mortgage is an Illinois corporation that provides mortgage brokerage services. (Id. ¶ 11.) Defendant Gold is a mortgage broker employed by MDR Mortgage. (Id. ¶ 10.) Defendant Heritage Title Company is an Illinois corporation doing business as a real estate title company. (Id. ¶ 13.) Defendant Alfaro-Giler is a mortgage loan closer employed by Heritage Title. (Id. ¶ 12.) Defendant Hartford Financial Services is an Illinois corporation doing business as a mortgage broker and lender. (Id. ¶ 14.) Defendant Citizens is a Tennessee banking corporation that does business in Illinois as a residential mortgage lender. (Id. ¶ 15.) Defendant Bank One is a national banking corporation that does business in Illinois. (Id. ¶ 16.) Defendant Equicredit is a Delaware corporation that does business in Illinois as a residential mortgage lender or servicer. (Id. ¶ 17.) Defendant Fairbanks is a Utah corporation doing business in Illinois as a residential mortgage lender or servicer. (Id. ¶ 18.) Defendant Provident is an Ohio bank that does business in Illinois as a residential mortgage lender or servicer. (Id. ¶ 19.)

Scheme to Defraud Pulphus

In the fall of 1999, Pulphus applied for a grant to CEDA, a governmentally-funded program that provides assistance to those who need help paying their utility bills. (Id. ¶ 20.) Shortly thereafter, defendant Sullivan contacted her, told her he was from CEDA and offered to do some home repair work through the Weatherization Program. (Id. ¶ 21.) Having received an energy efficient furnace through the Weatherization Program some years before, Pulphus believed Sullivan's claims. (Id. ¶¶ 22-23.)

When Sullivan came to Pulphus' home, he offered to do a variety of work, including installing new windows, a new back porch and a roof. (Id. ¶ 24.) Sullivan did not quote a price for the work and did not give Pulphus a written contract. (Id. ¶ 25.) He did, however, agree to do work only when Pulphus was present. (Id. ¶ 26.)

A few days later, Pulphus returned home from an appointment to find that Sullivan had removed her back porch. (Id. ¶ 27.) Subsequently, Sullivan and defendants Gold and Alfaro-Giler gave Pulphus a number of documents to sign, which they said were related to the Weatherization Program. (Id. ¶ 28.) Pulphus, who has only a third-grade education, was unable to read or understand the documents, but signed them because she thought that was the only way she would get her porch replaced. (Id. ¶¶ 29-30.) The documents cleated a mortgage in favor of defendant Citizens in the amount of $71,000.00 with an annual interest rate of 10.722%. (Id. ¶ 31.)

Among the documents were two conflicting Truth in Lending disclosures and a post-dated confirmation that Pulphus was not exercising her three-day right to cancel the transaction. (Id. ¶¶ 32-33.) Missing from the documents, however, was a HUD-1 Settlement Statement setting forth the charges and disbursements of the loan proceeds. (Id. ¶ 34.)

Of the $71,000.00 loan proceeds, $27,000.00 went to the bank that held the first mortgage on Pulphus' home. (Id. ¶ 37.) The rest went, to defendants Sullivan and Gold. (Id. ¶¶ 35-36.) The maximum value of the work Sullivan performed on Pulphus' home was $6,000.00. (Id. ¶ 39.)

Immediately after the transaction, Citizens assigned the mortgage and note to defendant Bank One. (Id. ¶ 43.) Pulphus has made monthly payments to Bank One. (Id. ¶ 44.)

Scheme to Defraud Vanzant

In October 2000, Vanzant hired New Look to make small improvements to her home at a cost of $2,916.00. (Id. ¶ 46.) In December 2000, Sullivan convinced Vanzant to do substantial improvements to her home. (Id. ¶ 47.) He did not give her a written proposal, contract or price for the job, but told her he could arrange for a mortgage to finance the project and for special insurance that would pay off the mortgage in the event of her death. (Id. ¶¶ 48-50.)

On January 12, 2001, Gold, who Vanzant understood to be an employee of New Look, took her to an office on the north side of Chicago, where she signed the mortgage documents. (Id. ¶¶ 52-53.) Because Sullivan asked Vanzant to give him the loan documents shortly after the transaction was consummated, it is not clear whether Vanzant received copies of all of the documents at the closing. (Id. ¶ 56.) When he returned the documents to her, however, neither the note nor the HUD-1 Settlement Statement was included. (Id. ¶ 58.)

The documents created a mortgage in favor of defendant Hartford in the amount of $50,000.00 with an annual interest late of 12.01%. (Id. ¶¶ 59, 62.) Vanzant received $4,200.00 of that amount with the rest going to defendants New Look and MDR Mortgage. (Id. ¶¶ 59-60.) On February 6, 2001, Hartford assigned the loan to defendant Equicredit. (Id. ¶ 65.)

New Look started some of the work, but did not complete it. (Id. ¶¶ 57, 68.) When Vanzant complained, Sullivan told her she would have to "re-do" the mortgage to complete the work. (Id. ¶ 69.) As compensation for the delay in the work, however, Sullivan said that New Look would give her "8 months of payments" on the second mortgage and that the loan would include "(1) garage to be built; (2) fence in front and side; (3) cement additional work where needed; (4) any electric needed." (Id.)

On March 27, 2001, Vanzant executed another set of mortgage documents. (Id. ¶ 72.) These documents created a mortgage in favor of Hartford in the amount of $80,000.00, with an adjustable interest rate of between 7.5% and 14.75%. (Id. ¶ 73.) of that amount, $50,305.00 went to Equicredit to pay off the note Vanzant had signed less than three months earlier, $28,742.31 went to defendants Sullivan, Gold, Alfaro-Giler and/or New Look MDR Mortgage, Hartford and Heritage Title. (Id. ¶¶ 76, 78.) The remaining $952.69 went to Vanzant. (Id. ¶ 77.)

On April 10, 2001, Hartford assigned the loan to Equicredit. (Id. ¶ 83.) On April 1, 2002, Equicredit assigned the loan to defendant Fairbanks, (Id. ¶ 84.) Vanzant has made monthly payments to Equicredit and Fairbanks. (Id. ¶ 85.)

New Look never completed the work, and what little was done was done poorly. (Id. ¶¶ 57, 80.) After Vanzant complained to the authorities, Sullivan produced copies of two contracts and a release on which Vanzant's signature had been forged. (Id. ¶¶ 86-87.)

Scheme to Defraud Manderson

In February 2000, Sullivan gave Manderson an estimate of $350.00 to replace a leaky pipe, rod out her pipes and clean her catch basin. (Id. ¶¶ 89-90.) At Sullivan's request, Manderson showed him her mortgage documents, which disclosed a first lien in favor of Capital One for $62,000.00 and a second lien in favor of Conti Mortgage for $8,100.00. (Id. ¶¶ 88, 91.) He told her that he could get someone to refinance her mortgage at a lower interest rate. (Id. ¶ 92.)

A few days later, Gold gave a number of documents, without any numbers on them, to Manderson and her daughter to sign. (Id. ¶ 93.) He told them they were loan application documents, which had to be completed before any work could be done on Manderson's home. (Id. ¶¶ 94-96.) Gold did not give copies of the documents to Manderson. (Id. ¶ 93.) In reality, the documents created a mortgage in favor of Hartford in the amount of $80,000 with a variable interest rate of between 12.0% and 19.0%. (Id. ¶ 102.)

Sometime later, Gold appeared at Manderson's home with a check for $1,799.00, which he told her to cash immediately. (Id. ¶ 97.) Gold gave her some, but not all, of the documents she had previously signed. (Id. ¶¶ 98-100.) When she complained, he mailed her some additional documents. (Id. ¶¶ 100-01.)

Before she received those documents in the mail, two workmen appeared at Manderson's home asking her to sign a contract to pay $1,000.00 to have her leaky pipe fixed. (Id. ¶ 103.) When she said Sullivan's estimate had been $350.00, the workmen called Sullivan who said the job would cost $1,000.00. (Id. ¶ 104.) Manderson signed the contract, but was not given a copy of it. (Id. ¶ 105.) In return, New Look did nothing more than put a patch on the leaky pipe. (Id. ¶ 106.) After Manderson's repeated complaints, New Look replaced a portion of the pipe. (Id. ¶ 107.) The pipe, however, still leaks. (Id.)

When Manderson received the documents in the mail, she realized for the first time that her mortgage obligations had increased from about $70,000.00 to $80,000.00 and that New Look had received about $7,000.00 of the loan proceeds. (Id. ¶ 108.) When Manderson questioned Gold about the transaction he said he would refinance her in twelve months at a lower rate. (Id. ¶ 110.)

Subsequently, Sullivan gave Manderson a copy of the contract she had signed, which had been altered to show a contract amount of $7,000.00, not $1,000.00. (Id. ¶ 111.) When Manderson complained, Sullivan refused to refund the $6,000.00, but offered to do additional work on her house. (Id. ¶ 112-13.) Manderson refused the offer. (Id. ¶ 114.)

Shortly after March 13, 2000, Hartford assigned Manderson's loan to defendant Provident. (Id. ¶ 115.) Manderson has made monthly payments to Provident. (Id. ¶ 116.)

Scheme to Defraud Barnas

On October 10, 2001, Barnas signed a contract with New Look for roof work and tuckpointing to be performed on her house, which she had inherited from her father. (Id. ¶¶ 117-19.) The contract did not set forth a price for the work. (Id. ¶ 119.)

The next day, Scott Chastain, a New Look employee, arrived at Barnas' house "to do the attic." (Id. ¶ 120.) Chastian said that. the work cost $2,400.00, which Barnas paid. (Id.)

A few days later, Chastain returned to her house with another New Look employee, to waterproof and paint the basement. (Id. ¶ 121.) Chastain charged Barnas $3,650.00 for the work, which she paid. (Id. ¶ 122.)

Over the next few weeks, New Look employees came to Barnas' house to do other work (Id. ¶ 123.) On November 1, 2001, Sullivan told Barnas that the work was complete and that she owed $4,000.00, which she paid. (Id. ¶ 123.)

At the end of that month, Sullivan demanded that she pay another $9,000.00 for the work New Look had performed. (Id. ¶ 125.) Though she protested, Barnas ultimately gave Sullivan the money. (Id.)

In return for the $19,050.00 Barnas paid, New Look patched her roof, partially installed some vinyl siding on her garage and back porch and did a little unworkmanlike tuckpointing. (Id. ¶ 126.)

On January 10, 2002, Chastain told Barnas that when her parents purchased the house they had borrowed $5,000.00, which she now had to repay (Id. ¶ 127.) Though Barnas did not believe the story, she paid the money anyway. (Id. ¶ 128.)

On a number of occasions in March 2002, Sullivan or his associates appeared at Barnas' home and demanded more money from her. (Id. ¶ 129.) Barnas acceded to their demands and gave them checks totaling $26,591.50. (Id. ¶¶ 130-32.) All of these checks were made ...

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