In California criminal law, a "straw buyer" refers to an individual who purchases goods or services on behalf of another person. This is often done to hide the identity of the actual buyer, who may not be able to make the purchase legally themselves.
While acting as a straw buyer is not inherently illegal, it becomes a criminal act when deception is used to facilitate the transaction, particularly in the purchase of regulated items, such as firearms, or in financial dealings, like real estate.
For instance, buying a gun for someone who is not allowed to own one or purchasing a house for someone who cannot get a mortgage themselves would be considered straw buying.
Participating in a straw purchase under fraudulent circumstances can lead to severe legal consequences, the severity of which is determined by the nature of the transaction and the laws that were violated. These consequences can be significant, including substantial fines, restitution to victims, and lengthy prison sentences.
A conviction for straw buying can lead to significant penalties, including substantial fines, restitution to victims, and lengthy prison sentences. These severe consequences underscore the importance of understanding and abiding by the laws surrounding straw buying.
Several California statutes address the fraudulent activities associated with straw buying. These offenses often involve misrepresentation and deceit, which form the basis for criminal charges.
Key Takeaways
- Being a straw buyer is a serious offense, especially when it involves fraud or purchasing for someone who isn't legally permitted to make the purchase. The potential consequences, including criminal charges under federal or state law, should serve as a stark warning.
- Straw buyers engaging in illegal purchase of goods or participating in unlawful transactions can be subject to criminal charges under federal or state law.
- Straw buyers are not just pawns in a game. They often play a key role in several serious crimes, including mortgage fraud, foreclosure fraud, rent skimming, mail fraud, wire fraud, and forgery.
- Engaging in illegal straw buying can result in either misdemeanor or felony charges, with penalties that may include significant fines and/or jail or prison time.
- The term "straw" is used to describe these purchases because it relates to a scarecrow, a false figure made of straw. Likewise, a "straw" buyer is seen as a fake individual, pretending to be the actual user of the product or service being purchased.
- Straw purchasers are also called "dummy buyers," similar to a ventriloquist and their dummy. Just like a dummy, a straw buyer seems to be the actual person making decisions and speaking.
Below are some of the most common crimes where straw buyers play a key role.
Mortgage Fraud
Mortgage fraud occurs when a person intentionally makes false statements or misrepresentations during the mortgage lending process to secure a loan under false pretenses. The term "straw mortgage" refers to a situation where a straw person enters into a real estate transaction on behalf of another person.
Under California Penal Code 532f, it is a crime to knowingly make a deliberate misrepresentation or omission on a mortgage loan application with the intent to defraud.
Straw buyers are often used in these schemes; for instance, someone with poor credit or other disqualifying factors may recruit a straw buyer, who then submits a loan application in their own name.
The straw buyer typically has no intention of occupying the property or repaying the loan, and instead facilitates a transaction designed to benefit the true party in interest.
PC 532f outlines several specific prohibited acts, including knowingly preparing, executing, or presenting false documents related to a mortgage loan, as well as falsely representing material facts in support of a loan application. The law applies to any person involved in the mortgage lending process, including buyers, sellers, brokers, and straw buyers.
Each violation of PC 532f is considered a separate offense. This crime is typically charged as a felony with significant prison time and restitution requirements upon conviction.
Grand Theft
Grand theft, as defined under Penal Code 487 PC, is a broad offense that often encompasses the actions of a straw buyer. The crime occurs when property valued at over $950 is taken by false pretense, trick, or embezzlement.
In a typical straw buyer scenario, the individual makes a false representation example, that they are the true purchaser of a vehicle or the intended resident of a property induce a seller or lender to part with property or money.
Because the value of items in these transactions, such as cars or real estate loans, almost always exceeds the $950 threshold, the conduct qualifies as grand theft.
Depending on the specifics of the case and the value of the property stolen, a grand theft conviction can result in either misdemeanor or felony penalties.
Filing a Forged Document
Penal Code 115 PC criminalizes the act of knowingly filing, registering, or recording a false or forged document with a public office in California. Straw buyer schemes frequently rely on the creation and submission of falsified documents.
For instance, a straw buyer in a real estate transaction might sign a deed of trust or loan application containing false information about their income, employment, or intention to occupy the property.
When these fraudulent documents are filed with the county recorder's office, it constitutes a violation of PC 115.
This is a felony offense, and each forged document filed can be treated as a separate criminal count, potentially leading to multiple convictions and a longer prison sentence.
Foreclosure Fraud
Foreclosure fraud is a deceptive practice that preys on homeowners in financial distress, often exploiting their vulnerability to strip them of their property and equity. Under California Civil Code 2945.4, it is illegal for foreclosure consultants to engage in fraudulent or deceptive practices.
This statute specifically prohibits actions such as misrepresenting the terms of a foreclosure rescue plan, charging excessive fees, or failing to deliver promised services. Violations of this law can result in severe penalties, including criminal charges, fines, and imprisonment.
Straw buyers often play a central role in foreclosure fraud schemes. In a common scenario, a foreclosure consultant convinces a struggling homeowner to transfer the deed of their property to a straw buyer under the guise of a temporary solution.
The consultant may promise that the homeowner can continue living in the property as a tenant and eventually repurchase it.
However, the straw buyer, acting on behalf of the consultant, refinances the property, extracts its equity, and allows it to fall into foreclosure. This leaves the original homeowner evicted, without their property, and often with no legal recourse.
What are the Penalties?
Illegal straw purchases can result in criminal charges under federal or state laws. Convictions under these laws could result in either misdemeanor or felony charges, which carry substantial fines and/or prison or jail time.
For instance, a conviction for wire fraud under federal law can result in a penalty of up to 20 years in prison and/or a fine. This is just one example of the severe penalties that can be imposed for engaging in illegal straw purchases.
A person convicted of mail fraud under federal law will face a fine of up to $250K, imprisonment for up to 20 years, restitution, and/or probation.
What are the Defenses?
Our California Criminal defense attorneys can use several legal strategies to help clients defend against criminal charges involving illegal straw purchases. Perhaps we can contend there was no intent to defraud.
Usually, a person is only guilty of an illegal straw-buying scheme if they intentionally aim to deceive or trick someone.
Police can only conduct a lawful search or seize an item if they possess a valid search warrant. Without a warrant, they must have a legal reason for not possessing one.
Therefore, a defendant can consistently argue that the authorities performed a search or seizure without a warrant and lacked a valid reason for not obtaining one.
Entrapment serves as a robust defense when authorities arrest someone following an undercover sting. It claims that police enticed or persuaded the accused to commit the crime. For more information, contact our criminal defense law firm, Eisner Gorin LLP, located in Los Angeles, CA.
Related Content:
If you have one phone call from jail, call us! If you are facing criminal charges,