071: We’ve Got Your (Account) Number, Chump

Stella Case No. 071, Originally Published: 17 March 2004

Robert and Suzanne Korinke faced the New American Nightmare: they were the victim of identity theft. In April 2001, the Korinkes went to refinance their mortgage and discovered someone had tapped into their homeowner’s line of credit with Homecomings Financial in Texas. They had paid off their loan balance the year before, and thought they had closed the account, but their line of credit had been run back up to $142,000. They had no idea the account was active again until they saw their credit report during the refinance procedure.

After spending countless hours to straighten out the mess, Homecomings Financial, a subsidiary of GMAC Financial Services, which is a division of General Motors, admitted in writing that the debt was fraudulent and the Korinkes, relieved, put the issue out of their minds.

Two years later, the Korinkes are facing the other American Nightmare: they’re being sued. As they sat down for Christmas dinner last year, a messenger arrived with an “urgent package”: notice of a lawsuit filed against them by Homecomings Financial.

The suit claimed the Korinkes were negligent in not informing the finance company of the fraud sooner and that “caused the injury to Homecomings,” the lawsuit claimed. “As such, Korinke is liable for any and all sums attributed to his negligence.” It demanded about $74,000 plus attorney’s fees.

Naturally, the Korinkes didn’t notify Homecomings about the fraud right away because they didn’t know about it themselves — the company had accepted a change of address form from the crooks so the Korinkes wouldn’t get the bills from the company, and sent a new checkbook to the new address by overnight mail.

The fraudulent address change was, indeed, part of what they had cleared up in 2001 — the company admitted it hadn’t sent any notice to the old address, which would have allowed the couple to detect the fraud earlier. But the company did send a notice to the fraudsters to inform them that the address was changed back.

“I was outraged when I heard about this,” says attorney Mari J. Frank, an identify theft expert who is defending the couple. In a remarkable example of stopping a frivolous suit in its tracks, Frank was able to get the company to drop the suit in January, just a month after it was filed. Homecomings even announced it “regrets the inconvenience this incident has caused the Korinkes.” It also noted “We are actively working to resolve this issue fairly.” As if it were “fair” in the first place to sue the victims of a crime it helped occur?

On the other hand, the suit was dropped “without prejudice,” meaning the company has the right to file it again. Homecoming’s attorney, J. Allan Smith, refused to discuss the suit or why it wasn’t dropped “with prejudice.” Afraid to put the matter out of their minds — since that hadn’t worked before — the couple is understandably nervous that they’re still not in the clear. Meanwhile, they’ve spent about $5,000 in legal bills to clear up the matter.

“How does Joe Consumer fight a big bank?” asks Linda Foley, the founder of the Identity Theft Resource Center in San Diego, Calif. “If you come out whole, you should consider yourself really lucky.”

Despite “The Identity Theft and Assumption Deterrence Act of 1998,” which made identity theft a federal crime, it’s a huge and growing criminal activity with an estimated 7 million U.S. victims in 2002. Financial institutions must be more proactive to ensure it doesn’t happen — prevention is much better than after-the-fact law enforcement. Instead, and as this case illustrates, financial institutions can, and sometimes do, take outrageous actions against innocent customers, claiming that the victims of crimes are responsible for losses that are out of their control, making them victims all over again.

The Korinkes are indeed “really lucky” that they were able to find an attorney who specializes in the exact sort of case they were involved in and was able to get the suit dropped quickly. But even then, it was at a substantial cost of time and money. Stress, hours of work, and thousands of dollars is “lucky”? In the world of frivolous lawsuits, it very sadly is.

Sources

• “ID Theft Victims Face Tough Bank Fights,” MSNBC, 18 February 2004.
• “Loan Firm’s Customers Sing Chorus of Gripes,” San Jose Mercury News, 7 March 2004.

Case Status

As noted in the case report, the Korinkes’ lawyer convinced the company to drop the action. The case neglected to note the Korinkes live in California.

This was the #2 case in the 2004 Stella Awards.

For Help with Identify Theft check out the non-profit Identity Theft Resource Center, and the Federal Trade Commission’s Identity Theft site.

My 2021 Thoughts on the Case

In my opinion, the Korinkes had cause to countersue: they had actual damages, plus (perhaps) Needless Infliction of Emotional Distress, considering GMAC/Homecomings had been negligent in allowing the identity thieves to access the line of credit and hiding their activities from the Korinkes. Too, the suit cost the company a lot more in bad publicity than the amount they had allowed to be lost. This was a truly stupid action.

Comments and Letters

My comments from this issue in March 2004:

I’ve been working very hard on the True Stella Awards, and I can now finally reveal what I was working on. For the past two months I’ve been working with a New York literary agent to write (and write and WRITE and edit!) a book proposal for the True Stella Awards. It ended up at 47 single-spaced Times Roman pages (!).

I’m very happy to report it created quite a stir among the big publishers — five different large publishers wanted it! I settled on Dutton, since they’ve proven that they can effectively market books “based on” online efforts. My main interest: that they DO market it effectively. The deal is set up in such a way that virtually guarantees that they will (as far as such things can be guaranteed). To me, such interest is a vote of confidence that I’m doing a good job in raising the issue of ridiculous lawsuits in the public arena. I’ve been working on formulating my suggestions for improving the system, and I’m finding it’s taking a lot of space — far too much for a short email newsletter. But a book? Ah! That will give me the space I need. It’s due out in 2005.

Alas, but I felt like the publisher hardly promoted it at all. I even passed along an inquiry from freaking Reader’s Digest and they didn’t even report back on what happened …if they bothered to contact the magazine at all. Sigh.

Case #70 dealt with a burglar who, when confronted police, made a sudden move and was shot. He pleaded guilty to burglary …and then sued the police for shooting him. The letters about that case:

Allan, an attorney in Michigan: “You say that there should be a barrier to filing suit where the police have been ‘completely exonerated’. A prosecutor’s decision not to file charges is not an exoneration as the law understands it — that is not a judicial process, but an inquisitorial (and political) process. Perhaps the prosecutor participated in a coverup of wrongdoing; perhaps the prosecutor misjudged the credibility of conflicting versions of what occurred. In our system, the civil plaintiff is entitled to have a jury decide the fact questions; he is not bound by an ex parte determination by a person (the prosecutor) predisposed to rule against him (in the prosecutor’s investigation, the burglar had no right to present witnesses, to cross-examine witnesses, or even to offer his own testimony, still less to the benefits of civil discovery — perhaps the police officer has a history of shooting unarmed suspects, or perhaps the officer simply did not tell the truth — it would not be the first time such a thing occurred in American history). The number of such suits that have been won over the years tells me that an artificial rule barring such suits from being heard would be grossly unjust, and more importantly would leave all the rest of us much less secure in our persons and liberties when dealing with the government and its agents.”

Clearly, safeguards do have to be in place, but it’s certainly possible to do it. In fact, it’s been done —

John in Texas: “Texas is a trend setter in this respect. If an individual is injured (or shot, etc.) during commission of a crime for which they are convicted, they are barred from any civil suit over the injury.”

Another reader even disagrees with my contention that criminals should not be able to sue for anything that happens during their crime “unless they can first prove that a crime has been committed against them, such as the use of unreasonable force.”

Ken in California: “I am sorry to say that I disagree with you: criminals make the choice to be where they did not belong doing what they should not be doing and therefore should have NO civil recourse, regardless of whether or not a crime is committed against them. Had they not been committing the crime the action against them would not have occurred. Anyone committing a criminal act, police or otherwise, should be charged, but the criminal should not gain from it. Personally I think we need a law regarding this (and we tend to have too many laws, especially those that are not enforced), which would be that anyone committing a criminal act would lose the right for civil action in regards to anything which occurs because of that act.”

A different Ken in California agreed: “Perhaps we should re-instate the old English common law definition of an ‘Outlaw’: ‘Outside the protection of the King’s law’.”

Jeffrey, a second-year law student in New York: “You noted that ‘Felons lose their civil rights when they commit their crimes.’ I understand the point you’re trying to make in this story, but that statement is an awfully dangerous way to try to make it. A reader unfamiliar with your overall opinion of criminal procedure or unfamiliar with this area of law could very easily think you mean that criminals lose their due process civil rights when they commit their crimes when, in reality, that’s when their due process civil rights are most implicated and most needed.

Maybe felons lose their right to complain of the natural results of their actions when they commit their crimes, but that’s a far cry from losing their civil rights. As far as I’m aware, the right to vote and the ‘right to freedom’ are the only ones that *convicted* felons lose. The biggest irony of exactly the way you worded your statement is that some civil rights aren’t even implicated *until* there’s been a crime committed. Your Sixth Amendment right to counsel, for instance, generally doesn’t attach until you’ve been charged with a crime.”

A good point: my shorthand led to inaccuracy at best. Obviously I wasn’t arguing that criminals should lose all civil rights, such as those guaranteed by the Constitution (fair, speedy trial, etc.) They do lose some rights; perhaps the ability to sue, at least in some instances, might be added to the list.

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