Chicago Title gets a win in Champion-Cain’s $400M Ponzi scheme case

In a legal victory for Chicago Title, a federal court judge has given the title insurance firm
permission to sue Gina Champion-Cain’s former company, which it has long asserted is the real culprit in defrauding investors of hundreds of millions of dollars.

Already the target of multiple suits from victims and a court-appointed receiver claiming it was equally culpable, Chicago Title says the judge’s ruling on Monday will now give it a much better avenue for defending itself in court and even potentially recovering some money.

Champion-Cain, now serving time in federal prison, used Chicago Title to oversee escrow accounts for what she offered up as a legitimate investment opportunity — making high-interest loans to liquor license applicants who could not afford to pay up front a required sum of money while their applications were pending. In truth, no loans were ever made during the course of her eight-year-long Ponzi scheme. Instead, much of the money she solicited from investors was diverted to her company, ANI Development, and used to prop up failing businesses, including her portfolio of now closed Patio restaurants.

At issue in the ruling Monday by U.S. District Court Judge Larry Burns is a longstanding plea by Chicago Title to lift the court’s more than two-year prohibition against allowing the title insurance company to sue ANI, now in the hands of a receivership. Given that receiver Krista Freitag has completed her financial review of the morass of properties and accounts held by Champion-Cain when the Securities and Exchange Commission filed fraud charges against her in 2019, it makes sense to permit Chicago Tile to go after ANI, Burns said.

“The stay has been in place for twenty-seven months, during which time the Receiver completed her forensic accounting, ‘monetized or otherwise resolved nearly all real and personal property assets of the Receivership Entities,’ and filed numerous lawsuits on behalf of the Receivership Entities, including a suit against CTC itself,” Burns wrote.

“It is no longer “plausible . . . that [the Receiver] needs more time to explore the affairs of the [Receivership Entities]” before engaging in litigation with CTC (Chicago Title Company) over those parties’ respective roles, so the issue of timing supports granting CTC’s motion.”

While Chicago Title has not admitted to any culpability in the $400 million Ponzi scheme, it has so far consummated settlements with more than 300 Champion-Cain investors who have claimed a loss of $128 million, according to attorneys representing the company. Those suing Chicago Title have claimed that former escrow officers had to have been aware of the fraudulent scheme, alleging that they received cash and gifts from Champion-Cain and were aware of fake emails used to perpetuate the liquor license lending platform.

“Chicago Title’s position is that Chicago Title did not know about or participate in this fraud but if it were to be determined by a judge or jury that Chicago Title bears any responsibility for losses to investors, Chicago Title believes it should be indemnified for those losses by ANI,” said attorney Steve Strauss of Cooley LLP, who is representing the company. That means, depending on what the receiver’s final bank account is, it would be able to stand in line with other creditors and recover money from the receivership.”

Given the number of Ponzi scheme investors who have yet to realize any financial recovery, as well as those victims who have settled for a percentage of their net losses, it’s not very likely that Chicago Title will collect any money from ANI, say some attorneys.

In all, more than 300 investors suffered net losses of $184 million, the receiver has previously reported. In her most recent status report to the court, Freitag said the receivership has a bank balance of $26 million, including more than $4.3 million recouped from those investors who actually made a profit in the fraudulent loan program. While there is very little personal property of value remaining to be recovered, Freitag said she will continue to pursue “clawback” claims from profiting investors.

Attorney William Caldarelli, whose 48 investor clients settled with Chicago Title in 2020 for a 65 percent recovery of nearly $23 million in losses, explained that the Burns’ order not only opens the door for potential financial remuneration for the insurance company, it also lets the firm mount a legal offense against the receivership entities — in addition to its ongoing defense of the litigation against it.

“At this point, the court has allowed everyone to sue Chicago Title, so the judge is now saying, if I’ve allowed people to take a shot at you, you, Chicago Title, can now punch back,” Caldarelli explained. “Right now, this ruling is primarily for Chicago Title’s benefit. How could it help others? Maybe it allows access to additional forms of recovery such as an insurance policy.”

Strauss did not say how soon it would be filing suit against ANI but explained that it would be filed as a cross-complaint in the lawsuit that the receiver recently filed against Chicago Title.

“This is about trying to defend the receiver’s claims against us. At least now it’s a fair fight,” Strauss said. “We can say Gina, you induced Chicago Title to open an escrow account that you knew you were going to use to steal money from innocent investors. So now we can show that ANI, dominated by Cain, is the real fraudster.”