Christopher, the trust accounts were supposed to hold other people's money. I was trying to keep closings alive when the shortest started stacking up. >> Once is a mistake. Twice is suspicious. [music] Christopher Derling did this hundreds of times over 2 years across five states and left a paper trail of bouncing checks and frozen closings that made denial impossible. >> The kyping only delayed the moment the escro gaps became visible. They were heard anyway when the structure failed. >> Inside that office, I told myself I was buying time, not stealing time from everyone else. What he didn't yet understand, [music] sitting in his corner office on a Tuesday morning in Sandy, Utah, was that the math had already broken. The check kiting cycle had run its last loop the previous Friday. 13 lenders were short. A dozen families were locked [music] out of homes they had already paid for, and the structure he had used to paper over 27 months of theft was about to collapse [music] in a single afternoon. This is the story of Christopher L. Derling, title company owner, father of three, a man trusted by buyers, sellers, lenders, and [music] notaries across five states to hold their money for the most important purchase of most of their lives. [music] He stole nearly $4 million of it. Before we go any further, I have to ask, when you bought your first home or your last one, did you ever stop and think about who was [music] actually holding your money during the closing? Drop a comment below and [music] let me know. And if you're new here, hit subscribe. This channel [music] covers the cases nobody else does, and we don't look away from them. Christopher Lee Derling was born in 1966 in Murray, Utah. His father worked 31 years as a claims adjuster for a regional insurance carrier on State Street. His mother kept the books for a small construction outfit in West Jordan. Derling grew up in a brick rambler off 47th South, the middle of three boys in a household where the word that mattered most was reliable. Bills were paid the day they arrived. The lawn was mowed Saturday morning. His father's filing cabinet kept in the den was organized alphabetically by claimment and colorcoded by year. Derling learned early that money was something other people gave you to hold. insurance, mortgages, taxes, escrow. His father explained the difference between possession and ownership at the kitchen table with the casual authority of a man who had handled other people's checks for three decades and had never lost a dollar of any of it. Derling graduated from Hillrest High School in 1984. His yearbook listed him as a member of the debate team, the chess club, and the National Honor Society. The senior superlative his classmates voted him was most likely to read the fine print. He enrolled at the University of Utah in the fall of 1984, majoring in business administration with a concentration in finance. He worked 30 hours a week at a check cashing storefront on Redwood Road, counting cash, verifying ID, learning to read a routing number before he learned to read a balance sheet. He graduated in 1989 with a B average and a job offer from an established title and escrow firm with offices in Salt Lake County. His first title closing was September of that year. A modest split entry in West Valley City sold for $62,500. Derling, 23 years old, sat across the table from a newlywed couple, walked them through the HUD one settlement statement line by line, watched them sign in the spaces he had highlighted in yellow. the night before and handed the wife the keys. She cried. He remembered that detail later when investigators asked him to describe the early years of his career. He stayed at that firm for 11 years. He worked his way from junior escrow assistant to escrow officer to branch manager. He took the required continuing education courses through the Utah Land Title Association. He earned his title insurance producer license. He learned every line of every settlement statement, every wire instruction format, every reconciliation procedure required under federal law for trust account handling. He learned the rules so thoroughly that when the time came, he knew exactly which ones could be bent without immediately tripping an alarm. In 2001, Derling left to start his own company. He called it Direct Title Insurance Agency, registered the LLC in Salt Lake County, and opened a single storefront on a commercial strip in Sandy, Utah with three employees and a 5-year lease he could barely afford. He chose the name because it suggested simplicity. No middlemen, no markups, just the title work done correctly by people who had been doing it for over a decade. The first three years were lean. Derling worked 60-hour weeks. He answered the phones himself. He took meetings with realtors in their offices, with lenders in their conference rooms, with mortgage brokers at chain restaurants off Interstate 15. He undercut his competition on closing fees, made up the margin on volume, and built a reputation for clean files and on-time funding. By 2004, he had 12 employees. By 2006, he had opened a second office in Las Vegas. By 2007, he had branches in Houston and Indianapolis. By the spring of 2008, he had a fifth office in Ontario, California, and his company was processing roughly 400 residential closings a month across five states. Derling by then was 42 years old. He lived in a six-bedroom house in a culde-sac off Bell Canyon Road, drove a black GX 470, and coached his older son's baseball team on the field behind Belleview Elementary. His name was on the program for the Utah Land Title Association's annual conference. He sat on the membership committee. Industry magazines quoted him on the secondary mortgage market and the future of digital closings. He was, by every visible measure, exactly what his father had taught him to be. a man who could be trusted to hold other people's money. Then the housing market collapsed. To understand what Derling did, you have to understand what escrow actually is. Because most of the people who use it never think about how it works. When you buy a home in the United States, you do not hand the seller your money directly. You hand it to a third party, usually a title and escrow company like Durlings, and that company holds the money in a dedicated trust account while every party to the deal completes their obligations. The lender wires the loan proceeds. The buyer wires the down payment and closing costs. The seller signs the deed. The title insurer issues the policy. The county recorder accepts the filing. And only when every box is checked does the escrow agent release the funds, paying the seller, paying the existing mortgage, paying the real estate commissions, paying the property taxes and recording fees and transfer taxes in the exact order federal law requires. Trust account. The phrase is literal. The money in that account does not belong to the title company. It belongs to the buyers and the sellers and the lenders all at once in legally distinct slices. for the brief window between the moment the wires arrive and the moment the deed is recorded. The title company is a custodian, nothing more. Federal regulation treats escrow funds as untouchable. Title companies are required to keep client trust funds segregated from operating funds, to reconcile the trust account on a three-way schedule every single month, and to maintain a positive balance in each individual escrow file at all times. The accounts are audited by state insurance departments, by title insurance underwriters, and in many states by independent certified public accountants annually. The system depends on one thing, honesty. There is no live realtime third-party verification of every individual escrow file balance. The state regulators audit on a schedule. The underwriters audit the macro numbers. The accountants sample the files. But between audits, the man who controls the trust account controls the trust account. If he moves money from one file to another, no one in the lender's office, no one in the realtor's office, no one in the buyer's living room will ever know it happened. Unless the music stops and a deal cannot close because the money is not where it is supposed to be. Derling owned five offices, processed 400 closings a month, and signed every reconciliation report personally. He was the man who controlled the trust account. By 2009, the volume of money flowing through direct titled Insurance Agency's master escrow account was roughly $30 million a month. No one was watching it the way he was. The first diversion took place on a Wednesday morning in March of 2009. Derling's company was bleeding. The housing collapse had cut residential closings in half across all five states. His Las Vegas office, which had been his most profitable branch in 2007, had lost three of its four largest lender clients to consolidation. His Indianapolis office was operating at a loss. He had personally guaranteed leases on all five locations. He had a second mortgage on his Sandy home. His operating account balance on the morning of March 11th, 2009 was $4,217. His payroll the following Friday was $38,000. That morning, he sat at his desk, opened the master trust account ledger, and identified a closing file scheduled to fund the following Tuesday. The buyer's wire had arrived the previous afternoon. The seller would not be paid until Tuesday. There were five business days in which roughly $41,000 would sit in the trust account attached to that file untouched. He moved $35,000 of it into the operating account. He made payroll. The file funded on Tuesday from a different file's incoming wire that had landed Monday afternoon. No one noticed. No one checked. That is the moment the scheme began. For the first few months, Derling told himself it was temporary. The market would recover. Volume would come back. He would refill the trust account from operating cash within the quarter. He kept a handwritten ledger in the upper right drawer of his desk, listing each diversion by date, file number, and amount with a running total in red ballpoint pen. By the end of June 2009, the running total was $147,000. The market did not recover. Volume did not come back and Derling instead of stopping began to scale. By the end of 2009, the running total was 680,000. By June of 2010, 1.4 million. He used the money to cover payroll, to cover rent on the Houston office, to cover his own mortgage, to cover his wife's credit cards, to cover the lease on a second vehicle, and on at least two occasions to cover gambling losses from weekends at a Las Vegas casino where he had begun spending Friday nights when his Nevada branch needed his attention. To conceal the diversions, he developed a check kiting scheme. A kite in banking is the deliberate use of the float. The brief window between when a check is deposited and when it actually clears. The exploitation of that delay to make an account appear to hold more money than it does. Derling opened additional operating accounts at three different banks. He wrote checks from account A to account B for amounts larger than account A's actual balance. He deposited the check at account B. Before account A's check could clear and overdraft, he wrote a check from account C to account A, depositing it to cover the original draw. He cycled checks between the three accounts day after day, week after week, creating the appearance of substantial balances that in reality did not exist. He used the kited balances to artificially inflate the office trust accounts during the monthly reconciliations. When the three-way reconciliation report was generated, the trust account showed a positive balance matching the sum of the open file balances. The math worked. The auditors who reviewed the reports saw a healthy company. Derling signed the reconciliation report every month, and every month it was a lie. By the end of 2010, he was kiting roughly $2 million in checks every week to keep the trust account balances reconciled. He had 13 employees who worked in the same offices and never noticed. He had two outside accountants who reviewed annual filings and never noticed. He had a state insurance department that audited his Nevada operation in October of 2010 and never noticed. He kept the ledger updated every night. The running total by January of 2011 was $3.1 million. We are heading into the moment it all came apart. If you have stuck with the story this far, you already know this channel covers the details nobody else does. Subscribe if you have not yet and share this video with someone who is about to buy a home. They deserve to know what can happen on the other side of that closing table. A check kite only works if the float never runs out. If the deposits keep arriving faster than the withdrawals clear, if the volume never grows so large that one of the cycling checks misses its window. In the spring of 2011, the cycle missed its window. The first sign was small. On a Thursday afternoon in early May, a check Derling had written from one of his operating accounts to inflate the Houston trust balance was returned by the bank for insufficient funds. He covered it the next morning with a deposit from a fourth account he had opened the previous month, but the bank flagged the bounced check. A fraud examiner at the bank's commercial division opened a routine file. Two weeks later, on a Tuesday in late May, a residential closing in the Indianapolis office could not fund. The buyer's wire had arrived. The seller was waiting at the closing table. The escrow officer, a 31-year-old woman named Karen Lindström, who had worked for Derling for 4 years, pulled up the trust account balance and found it short by $9,600. She assumed it was a timing issue. She called the Sandy headquarters. She was told to delay the closing one day and that the wire would be in by morning. The closing did not fund the next day or the day after. Lindstöm called again. She was told to delay it another 48 hours. On June 2nd, 2011, three closings could not fund. By June 7th, 7 by June 9th, 12. The Indianapolis office stopped accepting new files. The Houston office stopped accepting new files. The Las Vegas escrow officers began refusing to schedule funding dates. Realtors began calling Derling's personal cell phone. Lenders began calling the title insurance underwriter that backed Derling's policies. The underwriter, a national company that had insured direct titles bond, opened an emergency audit on June 10th. The auditor arrived in Sandy on the morning of June 13th. He was a forensic accountant from the underwriter Chicago office, 54 years old, with a Navy briefcase and a stack of preprinted reconciliation request forms. He sat in Derling's conference room for 9 hours that day. He asked for the master trust account statement. He asked for the operating account statements. He asked for the supporting documents for the previous three monthly reconciliations. Derling produced the documents one set at a time. He explained the discrepancies as software conversion errors. He explained that a new accounting platform had been brought online in March and that some balances had transferred incorrectly. He produced a memorandum from his bookkeeper signed 2 days earlier and backdated to April describing the conversion issues in detail. The forensic accountant nodded politely. He took the documents. He left at 6:00 in the evening. He drove to his hotel in Cottonwood Heights, ate dinner at a steakhouse on Highland Drive, and called the FBI field office in Salt Lake City the next morning. The federal investigation opened on June 15th, 2011. Two agents from the FBI's Salt Lake City field office, working with a forensic accountant from the United States Attorney's Office for the District of Utah, began assembling the evidence. They served grand jury subpoenas on six banks across three states. They obtained complete statements for every operating account, trust account, and personal account Derling had touched in the previous 30 months. They pulled the wire transfer records from the Federal Reserve. They subpoenaed Direct Title's internal accounting software and recovered every reconciliation report, every adjusting journal entry, every deleted ledger line. The numbers came together in stages. The first stage was the kite itself. Investigators mapped every check cycled between Derling's operating accounts. They identified the daily float, the volume of kited paper at the scheme's peak, and the exact dates the cycle began to fail. A single page of their analysis, later filed as exhibit 14 in the federal case, showed a calendar of 2010 with a colored bar over every day on which a kiting cycle had been initiated. 341 bars, 11 months, $2 million a week in cycling paper at the peak. The second stage was the diversion itself. Investigators traced funds from individual escrow files into the operating account and from the operating account into vendors, payroll, personal credit card payments, mortgage payments on the Sandy home, lease payments on two vehicles, and roughly $140,000 in cash withdrawn from two Las Vegas casinos between 2009 and 2011. The third stage was the ledger. On the morning of the search warrant executed July 20th, 2011 on Derling Sandy office, his Sandy home, and his vehicle, agents recovered the handwritten notebook from the upper right drawer of his office desk. 63 pages. Every diversion logged by date, file number, amount, and running total. The final entry dated June 1st, 2011 read 3,940,612 underlined twice. The fourth stage was the testimony. Karen Lindström, the Indianapolis escrow officer, cooperated fully. She produced emails she had archived from the previous 2 years showing requests from the Sandy headquarters to delay funding on specific files to backdate certain reconciliation entries and to route incoming wires through unusual paths. Two other employees in the Houston office did the same. The bookkeeper who had signed the conversion error memorandum admitted under profer that the memorandum had been written at Derling's direction the day before the auditor arrived. The 13 affected lenders submitted their claims to the title insurance underwriter. Total reimbursement paid by the underwriter to make those lenders whole came to roughly $4 million. The 12 families whose closings collapsed, buyers and sellers in five states, locked out of homes they had already partially paid for, were left to unwind the deals through their lenders and their realtors and in some cases their attorneys. By the end of August, the case was ready for indictment. The confrontation took place on a Wednesday morning in the conference room of Direct Title Insurance Agency's Sandy office. Two FBI agents accompanied by an assistant United States attorney named Daniel Hollings, sat across from Derling and his attorney, a Salt Lake City defense lawyer named Bruce Stennett. Derling wore a charcoal suit, a pale blue shirt, and a gray tie. He had not slept the night before. His attorney had told him what to expect. He had been told to listen, to say nothing without prompting, and to defer all substantive answers to council. The senior agent, a 21-year veteran named Robert Manuso, opened the folder on the table. Mr. Derling, do you recognize this notebook? Derling looked at the notebook. The cover was visible. He had bought it at an office supply store in Sandy in March of 2009. He had written his initials inside the front cover. I'd like to consult with my attorney. Stenet leaned in. He whispered for 30 seconds. Derling nodded once. That's my notebook. Did you write the entries inside? I'd like to consult with my attorney. Another whisper. Another nod. Yes. Does the notebook reflect amounts you removed from client trust accounts at Direct Title Insurance Agency between March of 2009 and June of 2011? The room was silent for 14 seconds. Derling looked at the table. He looked at the agents. He looked at Hollings, the prosecutor, who had not spoken. I don't know what those numbers represent. Manuso closed the folder. Mr. Derling, we have your bank records. We have the file level reconciliations. We have testimony from three of your employees. We have the underwriters audit. We have the wire records. The notebook matches all of it line by line. The question is not whether you took the money. The question is whether you would like to explain in your own words how it happened or whether you would prefer to read about it for the first time in the indictment. Derling looked at his attorney. Stennet shook his head once. I'd like to end this interview. The agent stood. Hauling stood. The meeting was over in less than 30 minutes. 3 weeks later, on October 11th, 2011, a federal grand jury in the District of Utah returned a sealed indictment. The indictment was unsealed on October 14th, 2011. Christopher Lee Derling was charged with wire fraud under title 18 of the United States Code, section 1343, along with companion counts tied to the check kiting scheme. For nearly 4 years, the case worked its way through the federal docket in the District of Utah. There were motions to suppress the notebook. There were motions to suppress the search warrant. There were status conferences and continuences and competing expert reports from accounting consultants the defense hired to dispute the underwriter's loss calculation. In the end, the evidence was overwhelming. The notebook was Derlings. The handwriting was Derlings. The bank records corroborated every line. The cooperating employees stood ready to testify. The title insurance underwriter had already paid the $4 million loss and was prepared to walk a jury through it line by line. On a Tuesday in 2015, Christopher L. Derling entered the federal courthouse in Salt Lake City and pleaded guilty before senior United States District Judge Kent J. Dawson to one count of wire fraud. Under the terms of the plea agreement, the government recommended a sentence within the applicable guidelines range and full restitution to the title insurance underwriter that had absorbed the losses. The sentencing hearing was held later that year. The courtroom was full. Two of the affected lenders sent representatives. One of the families whose closing had collapsed, a couple from Indianapolis, then in their early 30s, who had been days away from moving into a three-bedroom on the city's north side when the funding failed, sat in the third row. The husband had taken a day off from his job at a regional logistics company. The wife had brought a folder of bank statements, mortgage applications, and emails to the realtor in case she was asked to speak. She was. Her statement was three pages long. She read it slowly. We saved for 6 years. We were 3 days from moving in. We had given notice to our landlord, packed our apartment, told our families. The day before the closing, our realtor called and said the title company could not fund. We did not understand what that meant. We thought it was a paperwork issue. We were told it would be resolved in 24 hours. It was not resolved. We slept on my sister's living room floor for 11 nights. We lost the rate lock on our mortgage. We lost the house. We never got that house. We bought a different one 6 months later in a different neighborhood for $42,000 more. We are still paying for what this man did every month in our mortgage payment. Judge Dawson listened without expression. When he spoke, he addressed Derling directly. Mr. Derling, you held money that did not belong to you. You held it under a federal license. You held it under a state license. You held it under contractual obligations to 13 lenders, to your insurance underwriter, and to every family whose closing passed through your offices. You did not lose that money in an investment that turned. You did not lose it in a market collapse. You took it. You took it deliberately. You concealed it deliberately. You maintained the concealment for 27 months. And you maintained it through a check kiting scheme that you designed yourself and operated yourself. When the kite failed, 12 families lost their homes. They lost them on the same day. They lost them because of you. The sentence, 33 months in federal prison, $3,960,000 in restitution, three years of supervised release, a permanent bar from any role involving the fiduciary handling of client funds. Derling was remanded to the custody of the Bureau of Prisons. He served his sentence at a low security federal facility. He was released in late 2017. The notebook is still in the federal evidence locker in Salt Lake City. 63 pages, 3,940,612, underlined twice. That case was hard to sit with, but the case on the right hand side is somehow worse. Click it now.