ACCT 4631Fraud Examination

SCENARIO

You receive an anonymous tip that George Chapman just "stole" $60,000 from a trust fund he was administering for the Widow Amy Johnson and her three minor children. Chapman allegedly used the stolen money for a $25,000 down payment on a recently-purchased lake cottage and to purchase a large powerboat. George and his wife, Susan, live in Madison, Wisconsin.

You don't have any direct documentary evidence to prove your fraud theory. So you decide to determine if George Chapman has recently been spending large amounts of cash. Accordingly, you plan to do the following:

1. Interview George Chapman to see what you can find out.

2. See what public records can tell you about George Chapman.

PART 1 - GEORGE CHAPMAN INTERVIEW

During your information-gathering interview with George Chapman, he admits that he just bought a Ski Master super powerboat and a lake cottage and provides copies of the purchase invoice for the boat (cost = $59,000) and the closing statement for the recently-purchase lake cottage (down payment = $25,000). Chapman then tells you the $84,000 came from the sale of his old house and then ends the interview abruptly by shutting the door in your face. You leave with copies of the documents, notes of what he said, and a suspicion that he may not be telling you the whole story.

Required question:

1. Does the information obtained from the interview support your fraud theory? Explain and defend your answer.

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PART 2 - SEARCH OF PUBLIC RECORDS

You decide to search the real estate records at the county registrar of deeds office to see if George Chapman did obtain $84,000 from the sale of his old house. You explain your objective to one of the clerks working at the county registrar of deeds office. Being a helpful soul, the clerk shows you how to search the real estate records and tells you that on January 1, 2009, the real estate transfer fee rate increased from $2.00 per thousand to $6.00 per thousand. You will need the transfer fee rates to determine the transaction amounts for most of the real estate documents.

Each of the real estate documents listed below are contained on pages 4-10. Each document tells a story about George Chapman's real estate activities. For each document, you are to concisely summarize the relevant Information, including the total transaction amounts. As an example of a concise summary of the first document:

The Warranty Deed indicates that George and Susan Chapman purchased a 'homestead property'which means that they purchased a developed piece of land with a house on itfrom Harvard Builders, Inc. for $xx,xxx on xx/xx/xx date.

The date is given but you will have to figure out the total purchase price using the real estate transfer fee rates. Once you've completed this part, you will have the information you need to proceed to Part 3

1. Document #1528537 (page 4)

2. Document #1528538 (page 5)

3. Document #2057172 (page 6)

4. Document #2057173 (page 7)

5. Document #2057174 (page 8)

6. Document #2068393 (page 9)

7. Document #2071138 (page 10)

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PART 3 - EVALUATE FINDINGS (you must show your work)

STEP 1: Determine Net Proceeds from Sale of Old Residence (i.e. how much cash did George Chapman pocket from the sale)

Note: You know that a 30-year mortgage, such as this, calls for mostly interest payments in the early years, and mostly principal payments in the later years. Your best estimate is that during the first 10 years of the 30, George Chapman probably paid about one-fourth of the principal.

STEP 2: Determine Cost of New Residence

STEP 3: Determine Cash Invested in New Residence

STEP 4: Required questions:

1. Does the information gleaned from the real estate records support your fraud theory? Explain and defend your answer.

2. Explain in detail the next step(s) you plan to take in this investigation.

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WARRANTY DEED

DOCUMENT NO. 1528537

This Deed, made between Harvard Builders, Inc., a Wisconsin Corporation, Grantor and George R. Chapman and Susan M. Chapman, husband and wife, as joint tenants, Grantee.

Witnesseth, That the said Grantor, for a valuable consideration, conveys to Grantee the following described real estate in Dare County, State of Wisconsin:

Lot 2, West Martin Hills, city of Madison, Dare County, Wisconsin; subject to all Restrictions, Easements and zoning ordinances of record.

Grantees acknowledge that the land to the southeast of the extension of Polk Road south and Perry Road east, is zoned R-3 or R-4 for future planned unit development; and, that the land south of Radford Road, north of Pioneer Road, and east and west of McKenry Boulevard extended to Radford Road is zoned C-1, R-3 or R-4 for commercial use, duplexes or apartments, and that Grantees or their successors will not object to such use.

TRANSFER

$176.00

FEE

This______is_______homestead property

(is) (is not)

Dated this ____18th_____________________________day of _____July___________________________________________,2006___________.

David Wm. Crowder (SEAL) Iris Rockland (SEAL)

David Wm. Crowder, President__ Iris J. Rockland, Secretary_______

AUTHENTICATION ACKNOWLEDGEMENT

STATE OF WISCONSIN

Signature(s)_______Stan Brown____________ ______Dare________Country,

____________________________________ Personally came before me this __18th__ day of __July__

__________________________authenticated ____, 20_06____the above named______________

This___18th__day of ______July___,2006__ David Wm. Crowder, President________________

____________________________________ Iris J. Rockland, Secretary____________________

Atty. Stan Brown______________________ of the above named corporation._______________

TITLE: MEMBER STATE BAR OF WISCONSIN _________________________________________ (If not,______________________________)

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DOCUMENT NO. 1528538

D-MORTGAGE

REGISTER'S OFFICE

DARE COUNTY, WI. SS

RECORDED ON

July 19 l 53 PM 106

Vol 10882 PAGE 26

MORTGAGE

THIS MORTGAGE ("Security Instrument") is given on July 18th 2006. The mortgagor is George R. Chapman and Susan M. Chapman, his wife and in her own right

("Borrower"). This Security Instrument is given to

Department of Veterans Affairs______________which is organized and existing under the laws of _

and whose address is 77 North Bremer Street, Madison, Wisconsin

53901 ("Lender"). Borrower owes Lender the principal sum of Eighty two thousand two hundred---------------- Dollars (U.S. $ 82,200-------------------------------- ). This debt is evidenced by Borrower's note dated the same date as this Security Instrument ("Note") which provides for monthly payments, with the full debt, if not paid earlier, due and payable August 1, 2036 . This Security Instrument secures to Lender: (a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modifications; (b) the payment of all other sums, with interest, advanced under paragraph 7 to protect the security of this Security Instrument; and (c) the performance of Borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower does hereby mortgage grant and convey to Lender, with power of sale, the following described property located in Dare County, Wisconsin:

Lot 2, West Martin Hills, city of Madison, Dare County, Wisconsin

Which has the address of 2300 Warren Road; Madison, Wisconsin 53713

TOGETHER WITH all the improvements now or hereafter erected on the property, and all easements, rights, appurtenances, rents, royalties, mineral, oil and gas rights and profits, water rights and stock and all fixtures now or hereafter a part of the property. All replacements and additions shall also be covered by this Security Instrument. All of the foregoing is referred to in this Security Instrument as the "Property."

BORROWER COVENANTS that Borrower is lawfully seized of the estate hereby conveyed and has the right to mortgage, grant and convey the Property and that the Property is unencumbered, except for encumbrances of record. Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record.

THIS SECURITY INSTRUMENT combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property.

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WARRANTY DEED

DOCUMENT NO. 2057172

This Deed, made between _ ____Jackson Custom Homes and Construction, Inc._____________________

__A Wisconsin Corporation____________________________________

Grantor and __________________________________________________________

___________George R. Chapman and Susan M. Chapman___________________________

___________husband and wife, Grantees. ___

)

) SS

Witnesseth, That the said Grantor, for a valuable consideration conveys to Grantees the following described real estate in Dare County, State of Wisconsin:

Lot 10, (10) Park Ridge Heights, in the city of Madison, Dare County, Wisconsin

TRANSFER

$372.00

FEE

This______is not_______homestead property

(is) (is not)

Dated this ____1st ____________________________day of _____December__________________________________________,2016___________.

(SEAL) Jackson Custom Homes and Construction (SEAL)

Mary Lou Kay_____________________

___________________________________(SEAL) ____Thomas W. Weber, President___ ____(SEAL)

___________________________________ _____ Thomas W. Weber_____________

AUTHENTICATION ACKNOWLEDGEMENT

Signature(s)__Phil Blaine___________ ______Dare________Country,

____________________________________ Personally came before me this __1st __ day of_December

__________________________authenticated ____, 20_16____the above named______________

This___1st __day of __December___,2016__ Thomas W. Weber and Mary Lou Kay__________

____________________________________ _________________________________________

Attorney Phil Blaine_______________ _________________________________________

TITLE: MEMBER STATE BAR OF WISCONSIN _________________________________________ (If not,______________________________)

REGISTER'S OFFICE )

Dare COUNTY, WI, ) ss

RECORDED AT Madison, WI. )

RETURN TO:

December 1 .2016

DOCUMENT NO 2057172

TAX PARCEL NO: __________________

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DOCUMENT NO. 2057173

D-MORTGAGE

REGISTER'S OFFICE

DARE COUNTY, WI. SS

RECORDED ON

Dec 3 l 53 PM 1116

Vol 10882 PAGE 26

MORTGAGE

THIS MORTGAGE ("Security Instrument") is given on December 1 2016. The mortgagor is George R. Chapman and Susan M. Chapman, _______________________________________

________ ("Borrower"). This Security Instrument is given to First Federal

Savings and Loan Association_________which is organized and existing under the laws of United States of America ___________and whose address is 202 Major Street, Madison, WI 53703_________

("Lender"). Borrower owes Lender the principal sum of Two hundred Forty Four Thousand and no/100 Dollars (U.S. $ 244,000--------------------).This debt is evidenced by Borrower's note dated the same date as this Security Instrument ("Note") which provides for monthly payments, with the full debt, if not paid earlier, due and payable according to its terms. This Security Instrument secures to Lender: (a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modifications; (b) the payment of all other sums, with interest, advanced under paragraph 7 to protect the security of this Security Instrument; and (c) the performance of Borrower's covenants and agreements under this Security Instrument and the Note. For this purpose, Borrower does hereby mortgage grant and convey to Lender, with power of sale, the following described property located in

Dare County, Wisconsin:

Parcel A: Lot ten (10), Park Ridge Heights, in the city of Madison.

Parcel B: Lot two (2), West Martin Hills, in the city of Madison

Which has the address of (Lot 2) 2300 Warren Road and 2000 Jay's Place, Madison, Wisconsin 53713

TOGETHER WITH all the improvements now or hereafter erected on the property, and all easements, rights, appurtenances, rents, royalties, mineral, oil and gas rights and profits, water rights and stock and all fixtures now or hereafter a part of the property. All replacements and additions shall also be covered by this Security Instrument. All of the foregoing is referred to in this Security Instrument as the "Property."

BORROWER COVENANTS that Borrower is lawfully seized of the estate hereby conveyed and has the right to mortgage, grant and convey the Property and that the Property is unencumbered, except for encumbrances of record. Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to any encumbrances of record.

THIS SECURITY INSTRUMENT combines uniform covenants for national use and non-uniform covenants with limited variations by jurisdiction to constitute a uniform security instrument covering real property.

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Document No. 2057174 Proposal Page No.

of Pages

BARTON, INC.

30 S. Martin St. Madison, WI 53703

We hereby submit specifications and cost for building construction as follows:

SPECIFICATIONS INCLUDED

THIS CONTRACT IS CONTINGENT ON SALE OF 2300 WARREN RESIDENCE Office of Register of Deeds

Dare County, Wisconsin

Received for recording July 19, 2006 at 1:53 o'clock p.m. and

recorded in Vol. 10882 of records on page 26

Harold K. Hill, Register

We hereby propose to furnish labor and materials complete in accordance with the above specifications for the sum of:

Two hundred ninety-eight thousand----------------dollars (298,000.00--------------)____________________

with payment to be made as follows:

1/3 on acceptance, 1/3 on completion of dry wall, 1/3 on completion

All material is guaranteed to be as specified. All work to be completed in a workmanlike manner according to standard practices.

My alteration or deviation from above specifications involving extra costs, will be executed only upon written orders, and will become an extra charge over and above the estimate. All agreements contingent upon strikes, accidents or delays beyond our control. Owner to carry fire, tornado and other necessary insurance. Our workers are fully covered by Workman's Compensation Insurance.

Authorized Signature J. P. Vernon

Note: This proposal may be withdrawn by us if not accepted within 60 days.

Acceptance of Proposal

The above prices, specifications and conditions are satisfactory and are hereby accepted. You are authorized to do the work as specified. Payment will be made as outlined above.

Accepted: Signature: George Chapman

Date: 12/1/16 Signature: Susan M. Chapman

PROPOSAL SUBMITTED TO:

Phone: 834-4211

Date: 8/20/16

Name:George and Susan Chapman

Job Name:

Street: 2300 Warren Road

Street: Jay's Place LOT # 10 Park Ridge Heights

City: Madison

City: Madison

State: WI

State: WI

Architect: Jim Vernon

Date of Plans:

8/3/16

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WARRANTY DEED

DOCUMENT NO. 2068393

This Deed, made between George R. Chapman and Susan M. Chapman, husband and wife, Grantor and James P. Keene and Jenny Lee Keene, husband and wife, survivorship marital property, Grantees.

Witnesseth, That the said Grantor, for a valuable consideration, conveys to Grantees the following described real estate in Dare County, State of Wisconsin:

Lot Two (2), West Martin Hills, in the city of Madison, Dare County, Wisconsin.

TRANSFER

$876.00

FEE

This______is _______homestead property

(is) (is not)

Together with all and singular hereditaments and appurtenances thereunto belonging:

And________________________________________________________________________________________________warrants that the title is good, indefeasible in fee simple and free and clear of encumbrances except_____________________________________________________________________

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________and will warrant and defend the same.

Dated this ____26th___________________________day of____February______________________________________,2017___________.

George R. Chapman _____ (SEAL) Susan M. Chapman (SEAL)

George R. Chapman _ Susan M. Chapman

______________________ ________(SEAL) ______________________________(SEAL)

___________________________________ ____________________________________

AUTHENTICATION ACKNOWLEDGEMENT

Signature(s)__Harold Langston ________ _______________________Country, )

________________________________________ Personally came before me this ____ day of_____

__________________________authenticated ____, 20_____the above named________________

This___26th _day of __February__,2017__ ___________________________________________ ___________________________________ ___________________________________________

Harold Langston, Attorney_______________ __________________________________________

TITLE: MEMBER STATE BAR OF WISCONSIN ___________________________________________ (If not,______________________________)

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George and Susan Chapman

2000 Jay's Place

Madison, WI 53717

Document No. 2071138 G-Satisfaction of Mortgage

STATE OF WISCONSIN DEPARTMENT OF VETERANS AFFAIRS P.O. BOX 7843

MADISON, WISCONSIN 53707

2071138

SATISFACTION OF MORTGAGE

VOL 11200page 88

RETURN TO

_________________________________________________________________________________

J-001-28275 114890

T3J215:2

I hereby certify, that the mortgage executed by George R. Chapman

Chapman , his/her spouse and in his/her own right

and Susan M.

to State of Wisconsin, Department of Veterans Affairs, Madison, Dare County, Wisconsin, dated the _

18th day of July , 2006 , and recorded in the office of the Register of Deeds of _ Dare County, State of Wisconsin, on this 19th day of July , 2006_, at 1 :53 o'clock P .M., in Volume 10882 of Records on Page 26 , Document No. 1528538

, is fully paid and satisfied.

In Witness Whereof, I have hereunto set my hand and seal this _7th_ day of March ,2017

Witness

Dorothy Owen by

Dorothy Owen

State of Wisconsin

John J. Morris, Secretary (Seal)

Dennis Smith

State of Wisconsin

Personally came before me, this 7th day of March , 2017 ., the above named John J. Morris , Secretary of the State of Wisconsin, Department of Veterans Affairs to me known to be the person who executed the foregoing instrument and acknowledged the same, as such officer, as the

deed of such State Department, by its authority.

Dennis Smith

Notary Public Dare County, WI

My commission expires June 24, 2019