Holly Pasut, author of “A Strange Path to Freedom”, talks with REAL Trends editor-in-chief, Tracey Velt about her time as a North Carolina real estate agent and her lessons learned from her time spent in prison for mortgage fraud.
Listen or read the full podcast interview below.
Mortgage fraud. I’m sure that [for] a lot of people, their ears perked up once they heard that. Let’s start at the beginning and tell me a little bit about your background.
Basically I would say I was a widowed mother of three. As far real estate goes, I was a nationally recognized real estate agent. I worked in the Charlotte, North Carolina, or the southeast market. I was licensed in ’99 and became successful right out of the gate and thought that I was just a good mom, hardworking realtor, and enjoyed life. And that’s enough of my background unless you have specific questions like where was I born and you know?
Tell me when this all started and what was the market like at the time?
I was licensed in ’99, and then during the big boom in the market, the houses were selling fast and furious. You may have heard of the “no doc verification.” It was pretty much if you were breathing the banks would give you a loan, and homes were appreciating 6 percent a year and people were just buying homes and big homes and going to flip in two years and make all this money and so on and so forth.
Every year I was doing better and better and better, and I thought “this is awesome. This is great.” I had lots of lots of clients and [was doing] very, very well. Well, then when the market crashed, things changed, and that’s when I started … The market changed and my life was beginning to unravel. I guess we’re going to get into how it unraveled. You’re going to ask me. I just know you’re going to ask me, Tracey!
What happened is in a nutshell, I trusted a group of very bad people who I thought that I knew, and I say this gently because we tend to talk in phrases like that. Like oh, I know this person. Well, I would caution listeners right now. You never really know anybody. But I thought that I knew them because they were business affiliates and sadly they were orchestrating mortgage fraud.
What happened was in 2006, somewhere around there give or take, I was selling million-dollar homes, that was my market, and it turned out that I was a listing agent and somebody came along and wanted to buy the home, we sold the home. What I didn’t know was right after that home closed, they were reselling that home for an inflated price, and then they never paid the mortgage, and then that home foreclosed.
My case was extremely, extremely complex. Honestly, I can’t even tell you all the ins and outs of it. I wasn’t orchestrating the mortgage fraud, but I would say I had touched pieces of paper. I had made decisions that landed becoming charged with committing mortgage fraud and money laundering.
So give me a little more specifics about how you got caught I guess and how, because it was a pretty big case from what I understand, and it encompassed quite a few people. I think it was over 100 people. Tell me about the day that they questioned you.
I was in my office and the receptionist said that there were some people in the lobby that were here to see me. It’s very rare that I would have clients come to the office, certainly just dropping in. As a listing agent, I predominantly went to their home. And so I thought “oh that’s strange.”
I go down the hall and I go around the corner and I look in the lobby, and there’s two very nicely dressed, and I have to say handsome, men standing in the lobby. And I reached out my hand to shake. I said, “Hi. I’m Holly.” And they shook my hand, and then he handed me a card and it said FBI. And I looked at him, and I said, “Oh my God. FBI.” I said, “What’s wrong?” And they said, “Do you have a conference room we can go to?” I said, “Sure.” We go to this small room, shut the door, and he said, “Holly, do you know … “, and he mentioned somebody’s name. And I said, “Yes, I do.” He said, “May we ask you a few questions?” I said, “Sure. Ask me anything you want.” He asked me a few questions, and he said, “Holly, we advise you to get a criminal attorney.” And I said, “What?” He said, “Well, we don’t want to ask any more questions. We don’t want to go into anything, but you are going to need to get a criminal attorney.” And then they left. And then I went in to see my broker in charge, and I told her what had happened, and then I started looking for a criminal attorney.
I know that sounds like whoa. To give you a little bit of background, after the market crashed, I started hearing things and learning things, just like many of the realtors. We started hearing the name straw buyer. We started hearing the name incited appraisal, and we started to hear all these things.
Well, none of us, or many of us, really didn’t know what this was. After the market crashed, I started kind of connecting some dots. I had a builder that I represented, and he asked me one day about a home that foreclosed, and I looked this home up and it was like I knew the man that foreclosed, but I had nothing to do with that house, but how did I know the man? I was introduced to this man through this man, and this kind of stuff. When I say connecting the dots. And I ended up realizing that there was a common denominator, and it was this “one person”. And I had gone to my broker and I said, “I know the FBI is out in a particular neighborhood where I’ve sold homes.” And I said, “And they’re questioning people.” I said, “I think I should talk to them.” And she said, “No. Don’t do that. If the FBI wants to talk to you, they will find you.” I said, “Are you sure?” She said, “Yeah.”
Well, I didn’t feel great about that, but I took her advice. I also later went to the North Carolina Real Estate Commission and I talked to them because there were some things that I did that I ought not have done, and I was afraid that because I did that they might think I was trying to commit mortgage fraud, and I was not trying to commit mortgage fraud, but because I was involved with people who were I was charged with conspiracy to commit it.
And that’s the scary part.
Obviously, there are many real estate professionals, they trust too much, or even lack of education. They have trouble navigating the ethical issues of real estate not purposefully but because of, like I said, lack of education or trusting people that they probably shouldn’t. Most don’t even understand what they’re doing might be wrong. What advice do you have for these professionals on avoiding issues like this?
Yeah, that’s a good question because lack of education … I will tell you, getting your real estate license is not an easy task. I mean, the classes and what people have to go through especially today, I mean it is very complex and it is hard, and they do have to study and realtors continue to go through continuing education, but knowledge is not always enough motivation to do the right thing. That stands for all of us. We know what is right and wrong. We know what is legal and illegal, but what happens is I think we tend to make poor decisions when we base our decisions, when we feel that others are perceiving us in a certain way, we tend to risk compromise.
For example, I think a lot of people can relate to it. I don’t think a lot of people realize it though. People pleasing.
Fear of disappointing your clients. Seeking approval. For example, you’re not supposed to pay a non-licensed person a referral fee. Well, I paid … What I got spun around, he called it a consulting fee. No agent wants to pay a referral fee, Tracey. Nobody wants to give a part of their commission to somebody, but I ended up … he said, “Well Holly, it’s not a big deal. My company will invoice your company.” Here I’m thinking, well it’s not really a consulting fee. Excuse me, it’s not really a referral fee because I wasn’t really working with the client. He was consulting the client. They were non-represented. I got my head all spun around, and I’m not going to make an excuse for it, but I didn’t want him to be mad at me. I thought he was smarter than me. I was straddling the line. That was a very gray area. I should not have done that, and those kinds of decisions were I knew I wasn’t supposed to pay a referral fee, but I made a decision emotionally and not intellectually, and it was the beginning of my “slippery slope.”
And what are some red flags? What do you see as red flags in a transaction that people just need, real estate professionals need to be hard on?
Well, I think that they need to understand that they can go down no matter how big of agent they are, and just because they’ve been doing business a certain way for so many years, it doesn’t necessarily mean that it is right. It might mean that they haven’t been questioned.
If you’ve got a client who’s doing something that they ought not to be doing, that’s when you’re going to become possibly questioned or involved in something. You could be doing something that’s really not ethical, and you might get away with it forever. What happens is because you keep getting away with it, you keep doing it. Your life will change on that day you’re questioned about it. I think a lot of agents kind of go along to get along. They’re asked to do things all the time that put them in vulnerable situations, and they have to make sure that they don’t straddle the line is what I would say.
Let’s be more specific. What are some, I’m looking for red flags in working with certain people. The time that you should have just said no and walked away and didn’t. What was happening?
He asked me to meet him and show him a home. I said, “Sure.” I went and showed him a home. We walked through the home.
This is a buyer?
No, this was the guy that was orchestrating the mortgage fraud. He called me up one day and he said, “I’m over here at this house. Can you come over?” It was under construction. I said, “Sure.” I go over to the home. We’re walking through the home. He’s there with his father and his little boy. They just look like a nice little family. And we were talking about the home, and he said, “Yeah, this home is too big.” And blah, blah, blah. I said, “Okay.” He said, “Let me walk you to your car.” He walks me to the car and he hands me an envelope. I said, “What’s this?” He said, “It’s a commission check.” I said, “For what?” And he said, “Well, a piece of property closed and everybody agreed that you could have a commission.” And I said, “Why?” And he said, “Well, because you showed me a lot of property. You’ve driven all over North and South Carolina. You work hard. It’s not a big deal. It’s just kind of my way of saying thank you.”
Now, I didn’t feel that was right. All right? And I thought, you’re just going to give me a commission check? Who just walks up and gives someone a commission check?
And then I started to justify it. Well, closing constitutes acceptance. It’s already closed. It’s already been through the checks and balances. Maybe I am entitled. I have driven him all over the place. Thank goodness these never came to fruition. And I’m thinking wow, I spent a lot of time and money and gas and I was starving. He never offered to buy me a cup of coffee.
You can easily start to justify. And then he goes, “Holly, I’m just being nice. What’s wrong with being nice?” I’m thinking to myself, yeah, what is wrong with being nice? And then I started to, Tracey, then I started thinking, you know, and I do talk about this, and I do know agents that have received commission checks for services they never performed.
And I thought, and I say this and people laugh, but I seriously thought yeah, something good happened to me. It never happened to me before. I ended up accepting it. My behavior, by behaving that way, I showed it to be right or reasonable. But it really wasn’t. It was not. And builders send … if a couple comes in, or a man or woman or whoever, comes in and they’re not represented by an agent, sometimes builders will send a commission to some big-time agent because they want to remind that agent, hey don’t forget about my site over here. Bring us some buyers, we’ll take care of you. Wink, wink.
That’s what I did. And that was money laundering! And I didn’t even know it.
Okay. That’s interesting.
Well, see. Knowledge. I didn’t know what I didn’t know. I believed him that he was “just being nice,” and my actions showed it to be right or reasonable. And that’s how I became charged with conspiracy to commit money laundering.
Tell me about that time that you spent in prison. You were charged, and you were sentenced to how many years?
Well, I was sentenced for 21 months. I was eligible, that’s active time. Okay? Yes, 21 months of active prison time. I was eligible to come home after 10 months of federal prison. They made some errors in my paperwork, and when it was time for them to release me, they were sending me to the wrong state. They were supposed to send me back to North Carolina and they were sending me somewhere in West Virginia, and I said, “That’s not my state.” And they said, “Oh, we’ll need to get this corrected so you’re just going to have to hang around until we get it corrected.” I said, “I’m just supposed to hang out in federal prison while you get your paperwork corrected?” But what can you say? You’re at their mercy.
We say, I say, “we,” like I’m a prisoner still, but whoever has the keys has the power. They had those keys, not me, so there was nothing I could but hang out and wait. I ended up staying in prison for 13 months. Then after prison, I don’t know if people know this, but you don’t just come home from federal prison, then you move into a halfway house.
Because they want you to “transition” back into society. I was there for four months, and then you’re on probation. I mean, it’s very, very difficult to get your footings again after that. It is a traumatic, eventful experience.
Right. And I assume you never practiced real estate again?
That is correct. I can probably move to another state and get my license, but I’ve already done that. I’ve asked for God to give me something new. I’ve already been there. I’ve already done that. It’s time to move on, and I don’t want to go back into real estate, but I love talking to Realtors.
Okay. Tell me about what you’re doing now, and are you still feeling the effects of the fallout? That was how many years ago that you got out?
Three years ago. The effects, well, it depends what day you ask me. Okay? It’s difficult. It is difficult because I’m classified as a felon, and I never thought I would be classified as a felon and when I ever heard the word felon I thought of some nasty, horrible criminal, but I gave a speech one time and I said, I started my opening line was, “What does a felon look like?” And everybody in the room started laughing. Oh, it’s the guy in the orange jumpsuit and blah, blah, blah. And then I had this dress on and I kind of opened up the jacket, and I said, “Well how do you like my jumpsuit?” And everybody started laughing, and they’re like, “What?” I said, “You’re in a room. You don’t know who’s in the room with you. If you go to church every Sunday or you’re shopping or you go in the parking lot or you’re driving on the freeway, you’ve got lots of felons all around you. You just don’t know the story, the real story.”
It is difficult though. I do tell audiences that we all have chips. Sometimes they can turn to positive, and even though I’m a felon, it’s not fatal. But you can look at it like it’s a life-long sentence or you can look it at like you know what? I’m going to define the title felon. I’m not going to let that title define me. That’s the avenue. That’s how I’ve chosen to look at things.
Okay. And now you have three children? And how old were they when you went to prison?
It was perfect timing! How about that. They were not little. They all had, the last one had returned from college and was getting ready to go out on his own. Basically, they were all adults. They were on their own.
They were my warriors, I will say. And in an odd way I’m kind of grateful for my experience because they know how important it is to be able to say, “No.” They have given me stories about their bosses have asked them to do things, and how they thought they might get fired if they said no, but they realized it’s better to get fired than to go to prison. If I had to be the leader for that to be drilled into their head, I am really okay with that.