UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

UNITED STATES OF AMERICA )

)

v. ) No. 03 CR 779

)

JACK L. HARGROVE ) Judge James B. Moran

GOVERNMENT’S RESPONSE TO FIDELITY NATIONAL TITLE INSURANCE

COMPANY OF NEW YORK'S PETITION FOR A HEARING TO ADJUDICATE ITS

INTEREST IN PROPERTY

I. INTRODUCTION

Fidelity National Title Insurance Company of New York ("Fidelity") has submitted a petition

for a hearing to adjudicate its interest in certain property that the United States of America has

sought to forfeit. The specific property at issue is the real property commonly known as the

Arrowhead Condominium Development Corporation ("Arrowhead") located in Mokena, Illinois and

the cash proceeds derived from the sale of certain portions of Arrowhead. After reviewing Fidelity's

petition and reviewing the relevant documents, the government has determined that no hearing is

necessary, and the government seeks entry of an order vacating those portions of the Preliminary

Order of Forfeiture relating to Arrowhead and the cash proceeds derived from the sale of certain

portions of Arrowhead, and leaving the remaining terms and conditions of the Preliminary Order of

Forfeiture in effect.

II. BACKGROUND

On or about August 12, 2003, a federal grand jury returned an indictment against Hargrove

for his participation in a scheme to defraud numerous individuals and entities out of millions of

dollars by looting the escrow accounts of Intercounty Title Company of Illinois and Intercounty Title

Case: 1:03-cr-00779 Document #: 346 Filed: 08/09/07 Page 1 of 6 PageID #:1592
2

Company, an Indiana corporation (Intercounty Title Company of Illinois and Intercounty Title

Company, an Indiana corporation, are collectively referred to as "Intercounty"). Fidelity was a

victim of the fraud, having sustained a loss of approximately $36 million. 

A. Fidelity's Interest in Arrowhead

Prior to the indictment in this matter, and prior to knowledge of Hargrove's fraud becoming

known, Fidelity learned that Intercounty's escrow account had a large negative balance. At the time,

Intercounty was the title agent for Intercounty National Title Insurance Company ("INTIC"), a title

insurance company. INTIC had very low title insurance policy limits, and, as such, contracted with

Fidelity for reinsurance. As a result, Fidelity was responsible for the vast majority of the insurance

coverage issued by INTIC through Intercounty. 

On or about March 17, 2000 – at or near the time Fidelity learned of the escrow shortage –

Hargrove assigned to Fidelity as collateral 100% of the beneficial interest in the land trust that

owned Arrowhead (the "Arrowhead Trust"). On or about March 29, 2000, Fidelity filed with the

Will County Recorder's office, a UCC financing statement covering the assignment to Fidelity of

100% of the beneficial interest in the Arrowhead Trust. For the 100% beneficial interest in the

Arrowhead Trust, Fidelity agreed to: (a) cover deficiencies in Intercounty's escrow account up to

the value of the collateral pledged by Hargrove; and (b) release Hargrove from any and all claims

and liabilities arising out of the escrow deficiency up to the value of the collateral. 

On or about May 23, 2000, Fidelity, Hargrove and ITI Enterprises entered into another

agreement related to Arrowhead, the Arrowhead Trust and Intercounty's escrow deficiency.

Specifically, pursuant to the May 23, 2000, agreement, Hargrove pledged to Fidelity 30% of the net

proceeds of the sales of Arrowhead property. Thus, due to the May 23, 2000, agreement, Fidelity's

Case: 1:03-cr-00779 Document #: 346 Filed: 08/09/07 Page 2 of 6 PageID #:1593
3

interest in Arrowhead was no longer a mere collateral interest. Rather, as of that date, Fidelity was

directly entitled to sales proceeds.

Based on the interests Fidelity acquired in the Arrowhead Trust, Fidelity has received

proceeds from Arrowhead. As of May 23, 2006, Fidelity had received approximately $779,426.40

from its interests in the Arrowhead Trust.

B. Hargrove's Bond

After the return of Hargrove's indictment, Hargrove posted with the Clerk of the Court as

security for his bond, the proceeds of two sales of Arrowhead properties totaling $865,682.59 plus

interest. Fidelity did not contest Hargrove's posting of those proceeds.

C. The Preliminary Order of Forfeiture

On June 29, 2006, this Court signed a Preliminary Order of Forfeiture that was entered on

the docket on July 10, 2006. Pursuant to the Preliminary Order of Forfeiture, this Court ordered that

the following property, among other property, was forfeit to the United States:

(b) Real property commonly known as the Arrowhead Condominium

Development Corporation: 11611 S. 197th Street, Mokena, Illinois; 11621 W.

197th Street, Mokena, Illinois, 11619 Seminole, Mokena, Illinois, and 11609

Seminole, Mokena, Illinois, all legally described as follows:

LOTS 1, 2, 3, 4, 5, 6, 7, 11, 12, 13, 14, 15, 16 AND OUT-LOT B AND THE

EAST 33 FEET OF THE NORTH 5.00 FEET OF OUT-LOT A, IN

BLACKHAWK VILLAGE, BEING A PART OF THE SOUTHEAST 1/4

OF THE SOUTHWEST 1/4 OF SECTION 7 AND THE NORTHEAST 1/4

OF THE NORTHWEST 1/4 OF SECTION 18, TOWNSHIP 35 NORTH,

RANGE 12, EAST OF THE THIRD PRINCIPAL MERIDIAN,

ACCORDING TO THE PLAT THEREOF RECORDED SEPTEMBER 14,

1977 AS DOCUMENT NUMBER R-7734846 AND RECORDED

OCTOBER 7, 1977 AS DOCUMENT NUMBER R77-38916, IN WILL

COUNTY, ILLINOIS.

Case: 1:03-cr-00779 Document #: 346 Filed: 08/09/07 Page 3 of 6 PageID #:1594
4

Permanent Index Numbers: 

19-09-07-303-012;

19-09-07-303-013;

19-09-07-303-048; and

19-09-07-303-049.

* * *

(d) Funds in the amount of $431,120.73, plus interest, currently held with the

Clerk of the Court as security for defendant’s release on bond, which funds

represent the proceeds of the sale of real property commonly known as 11629

West Seminole Court, Mokena, Illinois; [and]

(e) Funds in the amount of $434,561.86, plus interest, currently held with the

Clerk of the Court as security for defendant’s release on bond, which funds

represent the proceeds of the sale of real property commonly known as 11631

W. 197th Street, Mokena, Illinois;

All of the property described above relates to Arrowhead.

III. ANALYSIS

Based on the facts presented above, the government has determined that Fidelity has a

secured interest in 100% of the beneficial interest of the Arrowhead Trust and had that interest at

the time of the sales that resulted in the proceeds that Hargrove posted as part of his bond. That

beneficial interest accords Fidelity the following powers: "(1) to possess, manage and physically

control the real estate; (2) to receive all income generated by the propert[y]; (3) to direct the trustee

in dealing with title to the real estate; and (4) to receive the proceeds of any sale of the property

made pursuant to the power of direction." In re Estate of Crooks, 638 N.E.2d 729, 733 (1st Dist.

1994). As such, the government no longer seeks to forfeit Arrowhead.

In taking this position, the government notes that it acted in good faith in seeking to forfeit

Arrowhead as set forth in the Preliminary Order of Forfeiture. Hargrove posted the proceeds of the

Case: 1:03-cr-00779 Document #: 346 Filed: 08/09/07 Page 4 of 6 PageID #:1595
5

sales of two Arrowhead properties as security for his bond. Yet, Fidelity did not contest that action

or seek to immediately take control of those proceeds. 

Further, the government's failure to uncover Fidelity's security interest in Arrowhead and to

notify Fidelity of the Preliminary Order of Forfeiture was inadvertent. At no time did the

government seek to acquire through forfeiture property to which it did not believe it was entitled.

IV. CONCLUSION

The government seeks entry of an order vacating that portion of the Preliminary Order of

Forfeiture relating to Arrowhead and the cash proceeds derived from the sale of certain portions of

Arrowhead, i.e., an order vacating paragraphs 2(b), (d) and (e) of the Preliminary Order of

Forfeiture. All remaining terms and conditions of the Preliminary Order of Forfeiture should remain

in effect.

Dated: August 9, 2007

Respectfully submitted,

PATRICK J. FITZGERALD

By: Scott R. Drury/s 

MARSHA A. McCLELLAN

SCOTT R. DRURY

Assistant United States Attorneys

219 South Dearborn, 3rd Floor

Chicago, Illinois 60604

(312) 353-1416

Case: 1:03-cr-00779 Document #: 346 Filed: 08/09/07 Page 5 of 6 PageID #:1596
CERTIFICATE OF SERVICE

The undersigned Assistant United States Attorney hereby certifies that the following

document:

GOVERNMENT’S RESPONSE TO FIDELITY NATIONAL TITLE INSURANCE

COMPANY OF NEW YORK'S PETITION FOR A HEARING TO ADJUDICATE

ITS INTEREST IN PROPERTY

was served on August 9, 2007, in accordance with FED. R. CRIM. P. 49, FED. R. CIV. P. 5, LR 5.5,

and the General Order on Electronic Case Filing (ECF) pursuant to the district court’s system as to

ECF filers.

By: Scott R. Drury/s 

SCOTT R. DRURY

Assistant United States Attorney

219 South Dearborn, 3rd Floor

Chicago, Illinois 60604

(312) 353-1416

Case: 1:03-cr-00779 Document #: 346 Filed: 08/09/07 Page 6 of 6 PageID #:1597