New Government Report Warns of Antigovernment 'Sovereign Citizen' Scams

HUD’s Office of Inspector General just released a 7-page report advising contractors, property inspectors, Section 8 housing administrators and Realtors how to recognize antigovernment sovereign citizens occupying vacant properties or using false deeds to support leasing.

The FBI, which considers sovereigns a domestic terrorism threat, and HUD’s Inspector General both “have noticed a resurgence of sovereign citizen fraud” in federal housing programs, the report says.

In the last four years, HUD investigators have presented a number of cases to federal attorneys for prosecution, resulting in 20 convictions and criminal recoveries of more than $17 million, the report says. Sovereign citizens also have been investigated for not only illegally occupying HUD properties, but also improperly deeding HUD-owned properties to themselves, the report says in detailing various scams.

Frequently, when sovereign citizens occupy a vacant property, they post a warning notice or deed on the door or window. “It is often written in legal gibberish,” the government report says.

Sovereign citizens are antigovernment extremists who do not recognize the authority of the federal government. They believe they are separate or sovereign from the United States and therefore exempt from federal, state and local laws as well as taxing and licensing requirements.

In recent years, there have been several instances of violent encounters involving police and sovereign citizens.

“These groups take advantage of state laws that require county clerks to accept and file any quit claim deed presented to them as long as the forms are properly signed and fees are paid,” the report says. These sovereign citizen scams are often successful, it says, because no proof of ownership is required.

The report says HUD’s Inspector General recently has become aware of sovereigns participating in the HUD subsidized Section 8 Housing Choice Voucher program, posing as landlords, using properties that they do not own.

“They provide fraudulent deeds to housing authorities to establish ownership rights so they can participate as a landlord,” the report warns.

Sovereign citizens also have been active in “foreclosure-rescue schemes.” In these scams, sovereign citizens find homeowners who are in mortgage default “to quit claim their deeds to them with the promise of stopping the foreclosure.” Then, extremists collect monthly payments from the homeowners, promising to return the deeds in the future. Desperate homeowners frequently believe these lies, the report says.

“Eventually, banks evict the homeowners, and they have to contend with severely damaged credit histories,” the report adds.

The report also warns people dealing with HUD housing that they likely could have contact with sovereign citizens “who may unlawfully occupy houses you inspect or may fraudulently represent themselves as potential landlords for the Section 8 program.”

“Engaging in a verbal argument with these individuals could spiral into a violent confrontation,” the government report warns. “If you feel that you are in danger, contact local law enforcement immediately."

“Unlike other squatters, sovereign citizens may retaliate if you confront them,” the report warns. Sovereign citizens are known to often file frivolous liens, seeking huge for penalties.

“While in most instances, you can get these claims dismissed, it takes time and money to do so [and] the claims may affect your credit or delay financial transactions,” the report adds.