Publisher Mike Szczechura, City Editor Jesse Chadderdon and reporter Antonio Prado sat down with Attorney General Beau Biden to discuss how the state’s chief law enforcement officer is investigating mortgage bank fraud, on guard against predators of children and the elderly and protecting the public assets of Delawareans in the proposed Blue Cross Blue Shield of Delaware merger.


Publisher Mike Szczechura, City Editor Jesse Chadderdon and reporter Antonio Prado sat down with Attorney General Beau Biden to discuss how the state’s chief law enforcement officer is investigating mortgage bank fraud, on guard against predators of children and the elderly and protecting the public assets of Delawareans in the proposed Blue Cross Blue Shield of Delaware merger.


Q What’s on your front burner these days?

A We’re very involved at the national and local level on the mortgage foreclosure issue. It’s a massive crisis in America — over 6,000 foreclosures in Delaware alone last year. We anticipate we’ll have that or more this year. … These are middle class folks who, based on the economy, job loss or a reduction in hours, are just having trouble between a $1,000 mortgage and $950. … The day after you bought your house, that note in mortgage is sold by M&T or WSFS. And then it’s sold again and bundled together with a bunch of other mortgages and securitized, made into a mortgage-backed security. Then, special purpose entities in Delaware or New York are created where they then bundle them all together and sell them to investors – pension funds, hedge funds, FANNIE, FREDDIE and to others. So, the connection between the borrower and the mortgagee is six steps removed. In the middle sits Bank of America, Citi, J.P. Morgan Chase, Ally (which GMAC) and Wells Fargo. They don’t actually own the mortgage. So, the deal they made to facilitate the move of the money from here to here is now, from their perspective, a bad deal. It costs more than it’s worth. When they agree to service this debt for the investor, they get certain rights to actually initiate foreclosing processes. So, that’s why you see this rapid rate of foreclosure. … So, we’re investigating the banks. People come in and tell us stories where false affidavits are filed by banks in foreclosure, where they just sign a document attesting to the fact that they own the mortgage being foreclosed on without ever checking to see if they own the mortgage. That’s fraudulent.

Q Why aren’t the feds investigating this?

A The federal government is our partner in this. It’s been one of the first time that all 50 AGs and the federal government are working together on a collaborative investigation on the servicing side. … Do they actually own the mortgage and the note they’re purporting to securitize?

Q How do you unwind all that?

A A lot of folks out there are of the view – not me – that this is too big to investigate. Do you really want to get to the bottom of this? If you unwind it, it could truly unwind the whole system. My view on that is my job is to investigate and take the facts where they take me.

Q Times are tough. Anecdotally, it seems like there are more and more phishing scams and people trying to prey on seniors and the most vulnerable populations. Are you seeing more of that?

A Typically, the sociologists and criminology people say that in bad times crime goes up. The data shows crime has gone down even though the economy has been in a tough spot. With regard to fraud, we’re very focused on going after the fraudsters – whether it be home improvement scams or scams surrounding some of the natural disasters. We have seen for sure, in the context of mortgage foreclosure fraud, an uptick in that. … The second piece is these is scam artists who say, if you’re in trouble come to us before the bank and we’ll figure this out for you. Bad people prey on weak people. They prey on the most vulnerable among us. … Child predators, in my opinion, would rather go after a 4-year-old than a 10-year-olld because they know the 10-year-old is more likely to tell on them than a 4-year-old.

Q Your office has questioned the proposed merger of Blue Cross Blue Shield of Delaware with Pittsburgh insurer Highmark Inc. to see if any of the $181 million put into BCBS by Delawareans would be used for other purposes, such as a bonus for the Highmark CEO. How is your office monitoring that?

A Over the last 75 years, Delawareans have subsidized Blue Cross Blue Shield, which is a not-for-profit that provides my healthcare. We haven’t subsidized them just because we think they’re good guys. We subsidized them because they’re a not-for-profit and that they do things beyond taking care of their policyholders. They have duties and obligations [also] to under-insured and uninsured Delawareans. Blue Cross Blue Shield has done a pretty good job of meeting that obligation. But when they want to sell themselves or affiliate with a multi-billion dollar not-for-profit in Pennsylvania, they’ll be controlled by a boardroom in Pittsburgh. So, I have real questions about a boardroom in Pittsburgh who will use $181 million of Delaware taxpayers’ money and whether or not they’ll use it for the benefit of Delawareans. It’s a massive, massive tax break. So, I don’t want to run the risk of $181 million being taken and used for Pennsylvanians or by this multi-billion company for everything from raises to taking care of uninsured in Pennsylvania. What I’ve requested is that at least $45 million of these assets be set aside in black box, if you will, that stays in Delaware and is controlled by a board of stakeholders in this state.