Lavish life over, pair face prison
Title business misspent millions, authorities say.
By JEFF TESTERMAN, Times Staff Writer
Published September 14, 2007
John and Cheryl Wehlau are taken into custody by officers of the Department of Financial Services at a home at 11128 Oyster Bay Circle, in New Port Richey. The Wehlaus were arrested on 21 counts of theft of escrow funds, one count of grand theft and three counts of money laundering.
[Marty J. Solomon]
[Commonwealth Land Title Insurance Co.]
Investigators say John and Cheryl Wehlau masterminded a kind of Ponzi scheme at Gulf Coast Title Closings and Escrow Services, funneling funds held in escrow for real estate closings into a business operating account, then spent the cash on a lavish lifestyle.
PALM HARBOR - The whistle-blower's call came from within Gulf Coast Title, where elaborate flower arrangements accented marble-topped tables, and where staffers relaxed in rich leather chairs before heading out for a closing in one of the company Hummers or Escalades.
"The owners are stealing," the tipster said.
Attorneys and forensic accountants dispatched to the Gulf Coast offices on U.S. 19. discovered that a fortune was missing.
The investigators tracked the misappropriated cash to the purchase of a country club home, a condo for the owners' daughter and an expense account used to purchase jewelry, art, designer shoes, California wine and a $2,827.61 soiree at Ruth's Chris Steak House.
Gulf Coast, which handled hundreds of loan closings a month, was shut down. Civil court records pointed the finger of blame at Cheryl L. and John T. Wehlau, who weathered personal bankruptcies before striking it rich at their Palm Harbor title agency.
After the company's demise in January 2006, a questioned lingered: Would the Wehlaus have to account for the missing money?
Thursday, a statewide prosecutor provided the answer: The Wehlaus were arrested at their rented home in New Port Richey, each charged with 25 felonies - grand theft, money laundering and theft of escrowed funds.
The Wehlaus, both 41, were at the Pasco County Detention Center on $5-million bail. Their attorneys declined to comment.
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Investigators say the couple masterminded a kind of Ponzi scheme at Gulf Coast Title Closings and Escrow Services, funneling funds held in escrow for real estate closings into a business operating account, then spent the cash on a lavish lifestyle.
Since current closings could be funded from money coming into escrow from future real estate sales, the Wehlaus apparently figured no one would notice.
"It was a float scheme, where tomorrow's closings fund today's expenses," said Marty J. Solomon, an attorney for Commonwealth Land Title Insurance Co., the underwriter that wrote title policies for Gulf Coast and discovered the misappropriations.
"I guess maybe they thought they'd never get caught," said Solomon, "or that they'd be able to put all the money back."
They couldn't. According to Solomon, $7.99-million was stolen from escrow accounts at Gulf Coast, leaving Commonwealth to pick up the pieces and make good on hundreds of checks that started bouncing all over Florida.
Among the victims: Jordan and Elipidea Pongase, who sold their Hillsborough County home in December 2005, walked out of a Gulf Coast closing and deposited a $138,884.11 proceeds check into their checking account.
A few days later, Mrs. Pongase discovered that the title company's check was no good.
"My husband couldn't sleep, his blood pressure went up," said Mrs. Pongase, a 44-year-old postal worker. "That's big money for us. We needed it to buy our new home."
The Pongases panicked when they tried to reach Gulf Coast and found the title company shuttered. Three weeks after their closing, the couple received full reimbursement from Commonwealth, the underwriter legally required to cover the Gulf Coast losses.
Hundreds of people and companies filed claims on bad checks disbursed at Gulf Coast closings. The Best Tech Pest Service had a bounced check for $100. The Volusia County Tax Collector had one for $222.38. Realtors, surveyors, appraisers, lenders and sellers like the Pongases - all had been issued worthless checks.
In January 2006, after the tipster called, Commonwealth sent investigators to the title agency at 32815 U.S. 19 N, discovered improper disbursements and obtained an injunction to take control of the agency.
A court-appointed receiver changed the locks, posted security guards and began poring over the books. What investigators found, according to a Commonwealth civil suit, was "above-market salaries" that amounted to $482,006 to the Wehlaus in 2005, money illegally channeled into their side businesses and escrow funds spent for their personal benefit.
According to Solomon:
- About $400,000 was misappropriated from escrowed funds for the $1.32-million purchase of the Wehlaus' 6,295-square-foot home at the Wentworth Golf Club in Tarpon Springs.
- A $300,000 check sent from a bank to Gulf Coast for a loan closing was used to buy a Lansbrook Village condominium in Palm Harbor for the couple's daughter, Victoria Lynn Wehlau. The bank asked that the $300,000 check be returned so that a corrected check for a smaller amount could be sent. Instead, records show that Cheryl Wehlau kept both checks and used a dummy ledger entry to convert the $300,000 to her own use.
- The Wehlaus set up a business for the same daughter in Ridgemoor Commons shopping center called Just Originals Flowers and More, then funneled thousands of dollars from Gulf Coast to the shop for flower arrangements at the title agency. The flower bill for a single day: $2,761.71.
- Using improperly transferred funds, Gulf Coast purchased a fleet of luxury vehicles - Hummers, Cadillac Escalades and Ford Expeditions -- used by the title agency and the Wehlaus' side businesses.
- Escrowed funds were transferred into the Gulf Coast operating account and used to pay for an American Express expense account. Business expenses for the title agency included $3,713 for women's designer shoes, $2,308 for Disney World tickets, $5,139 for jewelry and $1,125 for wine from a California vintner.
So long as manyloan closings were scheduled at Gulf Coast, there was money to cover the misappropriations. And because of a close relationship with a real estate marketing service called Buy Owner, cash flowed freely.
But when the Buy Owner franchise changed hands, referrals dropped.
After the tipster alerted Commonwealth, Gulf Coast's business stopped. With no more closings to cover the misappropriations, Gulf Coast checks were no good.
Lloyd's of London paid a claim to cover a portion of Commonwealth's multimillion-dollar loss, Solomon said, and the two companies have shared losses and worked to salvage what they could. But the Wehlaus' real estate belongs to the banks after foreclosures, and a search for other assets hasn't turned up much.
"A staggering amount was spent on lifestyle," said Solomon. "It seems they simply spent the money, just burned it all up."
Times researcher John Martin contributed to this report. Jeff Testerman can be reached at 813 226-3422 or firstname.lastname@example.org
[Last modified September 14, 2007, 00:07:47]
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