Saturday, May 30, 2015

Another Housing Discrimination Lawsuit Is Settled After Black Testers Allegedly Were Not Informed Or Shown Available Rental Apartments And/Or Steered To Dilapidated Units; Complaint Filed By White Woman Who Wanted To Live In Open, Racially Diverse Community Leaves Landlord, Agents $100K Poorer

In New York City, the Fair Housing Justice Center(1) recently announced:
  • On May 18, 2015, Federal Magistrate Ramon E. Reyes, Jr. approved a settlement resolving a rental discrimination case filed by the Fair Housing Justice Center (FHJC), a white woman, and three African American testers in November 2014. The lawsuit alleged that an Astoria real estate company and two licensed real estate brokers were discriminating against African American renters.

    The case resulted from a complaint received in August 2013 from a white woman who provided specific information about the rental practices of the defendants. The complainant objected to the alleged discriminatory conduct because she wanted to reside in a community that was open and racially diverse.

    After a two month investigation, the FHJC corroborated the allegations and found that the defendants were refusing to show many available rental units to African American renters. African American testers were discouraged, not informed about many available apartments, and/or only steered to an apartment that was in serious disrepair.

    In the settlement, Horizon Realty and the two individual defendants agree to comply with fair housing laws, adopt a policy statement of non-discrimination, include the non-discrimination policy in rental applications, publicly advertise available apartments, maintain rental records and permit the FHJC to inspect records for a period of three (3) years. The defendants will also receive training on fair housing laws. Finally, the defendants also agreed to pay a total of $100,000 to the plaintiffs in damages, costs, and attorneys’ fees. The plaintiffs were represented by Mariann Meier Wang and Alice G. Reiter with the law firm of Cuti Hecker Wang, LLP.
Source: Race Discrimination Case Settled ($100,000 and Injunctive Relief Ordered; Astoria Real Estate Firm Agrees to Comply with Fair Housing Laws).

(1) The Fair Housing Justice Center (FHJC) is a regional fair housing organization based in New York City. The FHJC provides a full-service fair housing program to New York City and the seven surrounding New York counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester. Its mission is to eliminate housing discrimination, promote open, accessible, and inclusive communities, and strengthen enforcement of fair housing laws.

City Housing Authority Accused Of Running Five Racially Segregated Rental Housing Complexes Agrees To Cough Up $175K To 19 Discrimination Victims To Settle Fair Housing Charges

The U.S. Department of Justice recently announced:
  • The Justice Department announced [] that the Housing Authority of the city of Ruston, Louisiana, has agreed to pay $175,000 and adopt comprehensive new policies to settle a race discrimination lawsuit filed by the department. The settlement must still be approved by U.S. District Court Judge Robert G. James of the Western District of Louisiana.

    The department’s lawsuit, filed in September 2013, alleged that the Ruston Housing Authority (RHA) had long segregated the 300 apartments in its five public housing developments by assigning vacancies to applicants based on their race, rather than on their place on the waiting list.

    Specifically, the department alleged that the RHA disproportionately assigned white applicants to its two developments that were located in the predominantly white neighborhoods of Ruston—Louise Homes and Maryland Plaza Homes. At the same time, the department alleged, RHA primarily assigned African-American applicants to the complexes located in predominantly African-American neighborhoods—Eastwood Homes, Greenwood Homes and Truman Homes. When it originally began developing housing in the 1950’s and early 1960’s, the RHA explicitly reserved Louise Homes and Maryland Plaza for “white” persons, while reserving Greenwood and Truman for what it termed “colored” persons.

    Although the RHA no longer maintained this de jure system, the department alleged that it had continued to segregate its complexes in practice. During the litigation, the former Ruston Housing Authority project manager from 2003 to 2013 admitted in her sworn deposition testimony that on numerous occasions she skipped over earlier applying African-American applicants in order to fill vacancies at Louise Drive Homes with later applying white applicants.

    She also testified that on multiple occasions she did not offer eligible white applicants available apartments in the nearly all-black Eastwood Homes, Greenwood Homes and Truman Homes, but instead offered those units to later-applying African American applicants.

    ***

    [Among other things], the RHA will pay $175,000 to compensate 19 individuals who suffered damages as a result of the RHA passing them over for available housing units because of their race. Additionally, for those 19 victims of the RHA’s discriminatory actions identified in the consent order, the RHA will allow those who are current tenants to request a transfer to another complex on a priority basis. It will also permit those identified individuals who are prior applicants and former tenants to reapply and, upon approval of their applications, give them priority for a unit at a complex of their choice.

    The federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin and disability. More information about the Civil Rights Division and the laws it enforces is available at www.usdoj.gov/crt. Individuals who believe that they have been victims of housing discrimination can call the division’s Housing Discrimination Tip Line at 1-800-896-7743, e-mail the Justice Department at fairhousing@usdoj.gov or contact HUD at 1-800-669-9777.

Friday, May 29, 2015

Federal Appeals Court Gives 'Thumbs-Down' To Two Fair Housing Groups' Effort To Apply Housing Discrimination Law To Internet-Based Outfit That Assists Those Seeking Out Roommates

In a 2012 ruling, the 9th Circuit Court of Appeals had the opportunity to address the attempts by two (arguably over-zealous, maybe???) Southern California fair housing groups to apply the Federal Fair Housing Act to an internet-based business that helps roommates find each other. More specifically, the fair housing groups "allege[d] that the website's questions requiring disclosure of sex, sexual orientation and familial status, and its sorting, steering and matching of users based on those characteristics, violate the Fair Housing Act ... ".

The court framed the overarching issue as follows:
  • There's no place like home. In the privacy of your own home, you can take off your coat, kick off your shoes, let your guard down and be completely yourself. While we usually share our homes only with friends and family, sometimes we need to take in a stranger to help pay the rent. When that happens, can the government limit whom we choose? Specifically, do the anti-discrimination provisions of the Fair Housing Act ("FHA") extend to the selection of roommates?
Because of what the court described as "substantial constitutional concerns" (personal privacy, autonomy, security, right to intimate association), the court answered in the negative.

Some of the court's observations and a portion of its rationale follow:
  • There's no indication that Congress intended to interfere with personal relationships inside (emphasis in the original) the home. Congress wanted to address the problem of landlords discriminating in the sale and rental of housing, which deprived protected classes of housing opportunities. But a business transaction between a tenant and landlord is quite different from an arrangement between two people sharing the same living space. We seriously doubt Congress meant the FHA to apply to the latter.

    ***

    To determine whether a particular relationship is protected by the right to intimate association we look to "size, purpose, selectivity, and whether others are excluded from critical aspects of the relationship." Bd. of Dirs. of Rotary Int'l, 481 U.S. at 546, 107 S.Ct. 1940. The roommate relationship easily qualifies: People generally have very few roommates; they are selective in choosing roommates; and non-roommates are excluded from the critical aspects of the relationship, such as using the living spaces. Aside from immediate family or a romantic partner, it's hard to imagine a relationship more intimate than that between roommates, who share living rooms, dining rooms, kitchens, bathrooms, even bedrooms.

    Because of a roommate's unfettered access to the home, choosing a roommate implicates significant privacy and safety considerations. The home is the center of our private lives. Roommates note our comings and goings, observe whom we bring back at night, hear what songs we sing in the shower, see us in various stages of undress and learn intimate details most of us prefer to keep private. Roommates also have access to our physical belongings and to our person. As the Supreme Court recognized, "[w]e are at our most vulnerable when we are asleep because we cannot monitor our own safety or the security of our belongings." Minnesota v. Olson, 495 U.S. 91, 99, 110 S.Ct. 1684, 109 L.Ed.2d 85 (1990). Taking on a roommate means giving him full access to the space where we are most vulnerable.

    Equally important, we are fully exposed to a roommate's belongings, activities, habits, proclivities and way of life. This could include matter we find offensive (pornography, religious materials, political propaganda); dangerous (tobacco, drugs, firearms); annoying (jazz, perfume, frequent overnight visitors, furry pets); habits that are incompatible with our lifestyle (early risers, messy cooks, bathroom hogs, clothing borrowers). When you invite others to share your living quarters, you risk becoming a suspect in whatever illegal activities they engage in.

    Government regulation of an individual's ability to pick a roommate thus intrudes into the home, which "is entitled to special protection as the center of the private lives of our people." Minnesota v. Carter, 525 U.S. 83, 99, 119 S.Ct. 469, 142 L.Ed.2d 373 (1998) (Kennedy, J., concurring). "Liberty protects the person from unwarranted government intrusions into a dwelling or other private places. In our tradition the State is not omnipresent in the home." Lawrence v. Texas, 539 U.S. 558, 562, 123 S.Ct. 2472, 156 L.Ed.2d 508 (2003). Holding that the FHA applies inside a home or apartment would allow the government to restrict our ability to choose roommates compatible with our lifestyles. This would be a serious invasion of privacy, autonomy and security.(1)

    ***

    Because the construction of "dwelling" to include shared living units raises substantial constitutional concerns, we adopt the narrower construction that excludes roommate selection from the reach of the FHA.
For the ruling, see Fair Housing Council v. Roommate. Com, LLC, 666 F. 3d 1216 (9th Cir. 2012).

See also, Fair Housing Defense blog: Are Individual Roommate Searches Covered by the FHA? No.

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(1) The court offered some examples illustrating the kind of problems that could arise if the Fair Housing Act applied to roommate selection:
  • For example, women will often look for female roommates because of modesty or security concerns. As roommates often share bathrooms and common areas, a girl may not want to walk around in her towel in front of a boy. She might also worry about unwanted sexual advances or becoming romantically involved with someone she must count on to pay the rent.

    An orthodox Jew may want a roommate with similar beliefs and dietary restrictions, so he won't have to worry about finding honey-baked ham in the refrigerator next to the potato latkes. Non-Jewish roommates may not understand or faithfully follow all of the culinary rules, like the use of different silverware for dairy and meat products, or the prohibition against warming non-kosher food in a kosher microwave. Taking away the ability to choose roommates with similar dietary restrictions and religious convictions will substantially burden the observant Jew's ability to live his life and practice his religion faithfully. The same is true of individuals of other faiths that call for dietary restrictions or rituals inside the home.

    The U.S. Department of Housing and Urban Development recently dismissed a complaint against a young woman for advertising, "I am looking for a female christian roommate," on her church bulletin board. In its Determination of No Reasonable Cause, HUD explained that "in light of the facts provided and after assessing the unique context of the advertisement and the roommate relationship involved . . . the Department defers to Constitutional considerations in reaching its conclusions." Fair Hous. Ctr. of W. Mich. v. Tricia, No. 05-10-1738-8 (Oct. 28, 2010) (Determination of No Reasonable Cause).

    [Editor's Note: See Feds Drop Case Against Woman Who Sought Christian Roommate for a media report about that case.]

Tennessee HOA Agrees To Pony Up $156K To Settle Disability Discrimination Allegations That It Failed To Permit Reasonable Accommodation To Homeowner/Couple By Preventing Them From Building Therapeutic Space Onto Home For Their Two Kids w/ Down Syndrome

In Franklin, Tennessee, The Tennessean reports:
  • A Franklin homeowners association has agreed to pay $156,000 to parents who said they were unfairly barred from building a therapeutic space for their two children with Down syndrome.

    The specially designed sun room would have been a place for Charles and Melanie Hollis' young kids to play and receive physical therapy, but the Chestnut Bend Homeowners Association denied their request to construct it based on concerns about the way the addition would look, a 2012 federal lawsuit alleged.

    That, the lawsuit said, constituted discrimination and a violation of the Fair Housing Act, which makes it illegal for agencies to turn down what are called "reasonable modifications" that make it possible for residents with disabilities to more fully enjoy their homes.

    "I think what this case signifies is that there are limits to (a homeowners association's) authority over the aesthetics of a reasonable modification," said Tracey McCartney, executive director of the Tennessee Fair Housing Council(1) and an attorney who represented the Hollises. "Their ability to veto something based on how it looks is somewhat abrogated when you're talking about the needs of a family with disabilities."

    The Hollises first applied to build the sun room in 2011, according to the complaint. For much of that year, the document says, the family went back and forth with the homeowners association's architectural review committee over proper materials and design.

    "Each time additional information was requested ... the Hollises complied with the request," the lawsuit says, "each time their plans were rejected and their application summarily denied."

    Frustrated, the family sold their house at a loss and moved out of the neighborhood, the complaint says.

    The homeowners association and the property management company that works with the subdivision's board have denied wrongdoing. And the settlement is not an admission that the Hollises' claims of discrimination were founded.

    However, as part of a deal that dropped Westwood Property Management from the lawsuit, the company agreed to provide its employees with fair housing training and develop a written fair housing policy to help guide its future homeowners association clients.

    McCartney said she hoped the agreement would shed light on the need for property managers — particularly ones hired to work with elected or volunteer homeowners association boards and committees — to clearly understand housing rights.

    "One thing (homeowners associations typically) have in common, unfortunately, is that the decision-makers are not professional real estate people — they're not required to have any sort of training," she said. "What I think is inexcusable is for a professional management company not to have fair housing training."
For more, see Franklin HOA settles suit after denying room for disabled kids.

-----------------------------------

(1)Tennessee Fair Housing Council is a private, non-profit advocacy organization whose mission is to eliminate housing discrimination throughout Tennessee. Its enforcement program is based in Nashville and concentrates on Davidson, Cheatham, Dickson, Rutherford, Sumner, Williamson and Wilson counties.

Thursday, May 28, 2015

Bay State Foreclosure Rescue Racket Ordered To Pay $1.9M+ In Victim Restitution, Penalties, Legal Fees For Ripping Off Financially Strapped Homeowners; Bogus Loan Mod Promises, Defective Bankruptcy-Related Services, Practicing Law Without License Among Bad Acts

From the Office of the Massachusetts Attorney General:
  • A Lawrence financial and legal services company and its owner have been ordered by a judge to pay more than $1.9 million for preying upon vulnerable consumers during the foreclosure crisis and engaging in the unauthorized practice of law, Attorney General Maura Healey announced today.

    Pinnacle Financial Consulting, LLC and its owner, Robert Burton, have also been permanently prohibited from marketing, soliciting, or receiving fees in relation to providing loan modification, bankruptcy petition preparation, legal document preparation, and financial advising services.

    ***

    According to the lawsuit, filed in Suffolk Superior Court in March 2013, the defendants misrepresented to consumers the services they could provide, exaggerated the benefits of their services, charged unlawful advance fees, practiced law without a license, often failed to take any action to provide the promised services after receiving payment, and refused to provide promised refunds upon request. The defendants targeted financially desperate consumers, particularly minority and non-native English speakers, and marketed themselves as low-cost alternatives to attorneys and traditional law firms.

    According to the judgment, [...], the defendants obtained at least $1.2 million from more than 600 Massachusetts consumers who fell victim to the defendants' predatory scheme. In addition to defrauding their victims of desperately needed funds, the defendants caused victims to fall further behind in their mortgages, lose their homes to foreclosure, commence ill-advised bankruptcy proceedings and lose their retirement savings to fraudulent investment opportunities.

    In November 2013, a judge ordered the defendants to pay more than $240,000 after persistently and willfully violating the terms of preliminary injunction orders obtained by the AG’s Office, including by continuing to solicit consumers and receive payments for loan modification, bankruptcy petition preparation, legal document preparation and investment services.

    Under the terms of final judgment, Pinnacle and Burton are ordered to pay the Commonwealth $1.9 million, including $1.2 million in restitution for affected consumers and $665,000 in civil penalties. The defendants are also ordered to pay the Commonwealth more than $55,000 in attorneys' fees and costs.
Source: AG Obtains $1.9 Million Judgment Against Lawrence Company Over Predatory Foreclosure Rescue and Legal Services (Pinnacle Financial Consulting, LLC and Owner Robert Burton Prohibited From Doing Business in Massachusetts; Commonwealth Previously Obtained Judgment Finding Defendants in Contempt for Violating Court Orders).

Judge Belts Loan Modification Scammer Who Used Faith-Based Approach To Target Religious Victims w/ 30-99 Years In Slammer; Scheme Fleeced About 100 Homeowners Out Of $300K+

In Pontiac, Michigan, the Detroit Free Press reports:
  • A Detroit man was sentenced to at least three decades in prison for conning about 100 people out of more than $300,000 using a faith-based scam that promised help keep their homes out of foreclosure, including a woman whose son was dying of a brain tumor.

    Anthony Carta, 53, pleaded guilty [] in Oakland County Circuit Court to seven felonies stemming from his fake mortgage assistance scheme.

    Freedom by Faith Ministries marketed its services through unsuspecting Christian channels, networks and ministries.

    According to court documents, victims thought Carta and Southfield-based FBF would help the distressed homeowners keep, sell or resolve issues related to paying off their mortgages in lieu of foreclosure, but FBF and Carta kept the money and didn't do anything for the clients.

    Victims lost between $1,000 and $24,000 in the scam, which lasted from November 2009 to July 2013.

    FBF also must pay $674,001 in restitution and Carta himself has to pay $400,000 in restitution. Carta was sentenced to 30-99 years in the scheme.

    Using insider access to get to the heart of the religious community -- appearances on Christian TV shows, online videos and word-of-mouth -- Carta found his victims, among them Shelly Pesta, who risked losing her Commerce Township home after her young son was diagnosed with cancer and ran up huge medical bills.

    Close friends who were using FBF to help save another person's house put the 45-year-old biotech worker in touch with Carta, to whom she gave close to $110,000. He told her FBF would work with her bank, Wells Fargo, to salvage the home for a fraction of the price. The plan was that after she'd front the money, the home would be put in his ministry's name and then, he'd turn the title over to her.

    Pesta's first inkling that something was wrong came when she noticed her name was misspelled on some paperwork. When she began to confront him, he'd try to cover himself or dodge her.

    "I was begging him for some of the money back. My son diagnosed with a malignant brain tumor and I had to pay for medicine," Pesta said. "I was in extremely vulnerable place, very much leaning on my faith. My faith has been strong since I was a child. Absolutely, when he came forth and projected... 'I am a faith-based person and I can do right by you and through God, we help you,' I listened. I let him pray over my child."

    Pesta was able to save her home, but Carla Baskin, 47, and her father, Clarence Presley, 63, lost their houses in Ypsilanti and Detroit, respectively. She had forked over $7,600 and he, $11,000.

    "Of course, I blame him. There's a time factor. If I think this man is working on my behalf, I think, 'Cool,' but once it went beyond that time, you can't redeem the house," said Baskin, adding that she feels "really stupid and naive."

    Baskin, a nurse, turned to Carda, whom a friend had recommended, to help her with a short sale. When she repeatedly called her mortgage company only to be told that no one had contacted them, she got suspicious and wanted her money back, causing Carda to become belligerent.

    "I went to the office in Southfield and he gave me the run around. He told me, 'I contacted your mortgage company,' and he showed me a piece of paper that didn't even look legitimate," Baskin said. "It shook my trust in people and my trust in general, trusting their word. It didn't affect my faith in God. There are some evil people out there and you have to be careful of them."

    ***

    Oakland County Circuit Court, Judge Michael Warren convicted Anthony Carta and FBF on March 9 on one count of conducting a criminal enterprise, one count of false pretenses $20,000 or more but less than $50,000 and five counts of false pretenses $1,000 or more, but less than $20,000.
Source: Faith-based foreclosure scammer gets 30-99 years (Con artist who preyed on distressed homeowners must also pay restitution in fake mortgage assistance scheme).

For a related Michigan Attorney General press release, see Detroit Man Pleads Guilty to Swindling Thousands in Fake Mortgage Assistance Scheme.

Wednesday, May 27, 2015

Manhattan Feds Pinch Trio In Alleged Conspiracy That Dangled Phony Loan Mod, Sham Short Sale Lease/Buyback Promises To Dupe Foreclosure-Facing Homeowners Into Signing Over Titles To Their Homes; Attorney Who May Have Link To Prior Predatory Scheme Lawsuit Among Those Bagged

From the Office of the U.S. Attorney (New York City):
  • Preet Bharara, the United States Attorney for the Southern District of New York, [and two others] announced that MARIO ALVARENGA, RAJESH MADDIWAR, and AMIR MEIRI were arrested [] for participating in a scheme to fraudulently induce distressed homeowners to sell their homes to a company associated with the defendants.

    ***

    FBI Assistant Director Diego Rodriguez said: “The defendants took advantage of distressed home owners, mostly the poor and elderly, promising relief. In reality it was nothing more than a callous scheme that took advantage of the most desperate of victims. And in many cases, the owners were evicted from their homes after being tricked into selling their property to the defendants arrested [].”

    Special Inspector General for SIGTARP said: “The three individuals taken into custody [] stand charged with preying on struggling homeowners simply looking for a way to keep their homes from falling into foreclosure. These individuals are alleged to have dangled false promises of guaranteed mortgage modifications as a veil for secretly swindling homeowners out of their homes and forcing homeowners to vacate their properties.

    ***

    According to the allegations in the Complaint unsealed [] in Manhattan federal court[1]:

    Since at least 2013, ALVARENGA, MADDIWAR, and MEIRI have defrauded distressed homeowners throughout the Bronx, Brooklyn, and Queens. ALVARENGA, MADDIWAR, and MEIRI falsely represented to these homeowners – some of whom were elderly or in poor health – that they could assist them with a loan modification or similar relief from foreclosure that would allow the homeowners to save their homes. But rather than actually assisting these homeowners, the defendants deceived them into selling their homes to Launch Development LLC (“Launch Development”), a for-profit real estate company also affiliated with the defendants.

    ALVARENGA, MADDIWAR, and MEIRI lured victims through the Homeowners Assistance Service of New York (“HASNY”), which purported to provide assistance to homeowners who were seeking to avoid foreclosure of their homes. As part of the scheme, MEIRI directed employees of Launch Development, a company owned in part by MEIRI, to solicit owners of distressed properties and invite them to meet with HASNY representatives so that they could learn more about avoiding foreclosure and saving their homes.

    When a homeowner arrived at the HASNY office, he or she met with ALVARENGA, who typically advised the homeowner that HASNY could assist him or her with a loan modification. In still other cases, ALVARENGA advised the homeowner that a loan modification could not be completed, but that the homeowner could engage in a type of short sale in which the homeowner would sell the property to a third party, Launch Development, and then within approximately 90 days arrange for a relative of the homeowner to repurchase the property from Launch Development. ALVARENGA typically explained that the homeowner could remain in his or her home throughout the entire process. ALVARENGA then typically scheduled a closing at which the homeowner would meet with MADDIWAR, who was described as the homeowner’s attorney for the transaction.(1)

    At the closing, a homeowner who had been led to believe that he or she was about to receive a loan modification or transfer his or her property to a trusted relative was encouraged to sign documents presented by MADDIWAR, which in some cases were blank. Unbeknownst to the homeowners, by signing the documents, they were selling to Launch Development the homes they had hoped to save. Homeowners often were then forced to vacate their homes soon thereafter.

    ***

    If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney's Office for the Southern District of New York, at (866) 874-8900, or Wendy.Olsen@usdoj.govEmail links icon. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
Source: Three Men Charged In Manhattan Federal Court In Multimillion-Dollar Scheme To Deceive Homeowners Into Selling Their Homes (Complaint Charges That Defendants Acting Through An Organization That Advertised Help To Those Seeking Loan Modifications To Avoid Foreclosure, Obtained Millions Of Dollars By Deceiving Homeowners Into Selling Their Homes).

For the formal charges, see USA v. Alvarenga, et al.

-----------------------

(1) It appears that a New York City-area attorney named Rajesh Maddiwar was named in a 2004 civil lawsuit as a defendant in a civil lawsuit involving a real estate transaction in which he and other co-defendants were accused of playing roles in a predatory real estate scheme. Similar to this case, the Maddiwar in the 2004 case was alleged to have been by selected by one or more of his co-defendants to purportedly represent an ostensibly unwitting buyer in a real estate transaction that ultimately "went south" and became the subject of that suit. See Coveal v. Consumer Home Mortgage, Inc., No. 04-CV-4755 (ILG) (E.D.N.Y. 2005). I wonder if the NY-based attorney Rajesh Maddiwar in that case is the same NY-based attorney Rajesh Maddiwar named in this case?

Michigan AG Slams Attorney w/ 30 Felony False Pretenses, Racketeering Counts For Allegedly Clipping 100+ Foreclosure-Facing Homeowners Out Of Thousand$ For Loan Mod Promises; Cash/Surety Bond For Lawyer Set At $1M

From the Office of the Michigan Attorney General:
  • Michigan Attorney General Bill Schuette [] announced that his Homeowner Protection Unit has filed thirty felony charges including Racketeering against attorney Steven Barry Ruza, 52, of Orchard Lake and his company, Home Legal Group, Inc., for stealing hundreds of thousands of dollars from Michigan victims that were facing mortgage foreclosures. The charges were filed following an Attorney General investigation.

    ***

    Ruza and Home Legal Group allegedly promised victims that they could obtain mortgage modifications and save their homes from foreclosure but then did nothing, or very little, to obtain mortgage modifications for the victims. The victims never received a modification through Ruza and Home Legal Group and most lost their homes to foreclosure.

    Schuette filed the following charges on May 22, 2015 against Ruza and Home Legal Group PLLC in Oakland County’s 48th District Court:

    .... Twenty-six counts of obtaining money through false pretenses (making false statements to consumers), a felony punishable by up to five years in prison and/or a $10,000 fine;
    .... Two counts of attempted false pretenses over $20,000 but less than $50,000, a felony punishable by five years’ imprisonment;
    .... One count of attempted false pretenses of $1,000 or more but less than $20,000, punishable by up to five years in prison, and;
    .... One count of Racketeering, a felony punishable by 20 years in prison and/or a $100,000 fine.

    The Racketeering count includes an additional 114 victims for whom Schuette alleges were defrauded.

    Ruza and his company were arraigned [...] on Friday, May 22. Bond was set at $1 million cash/surety for Ruza and $500,000 cash/surety for Home Legal Group. Ruza’s next court appearances include a conference on June 4, 2015 and the preliminary examination set for June 11, 2015. Both appearance will be before Judge Marc Barron.

    Foreclosure Rescue Scam Victim Restitution Fund

    In August 2013 Schuette announced the launch of a $7.5 million Foreclosure Rescue Scam Victim Restitution fund as a part of the Homeowner Protection Fund monies received by the State of Michigan to resolve the National Mortgage Settlement. This program is intended to provide restitution payments for victims of foreclosure scams who would otherwise never see a penny of court-ordered restitution. To date over $2.2 million has been paid to Michigan victims of mortgage related crimes.

Tuesday, May 26, 2015

Tampa Feds Pinch Foreclosure Rescue Operator For Allegedly Duping Unwitting Financially Distressed Homeowners Into Signing Over Their Homes, Filing Fraudulent Bankruptcy Petitions For Them & Without Their Knowledge To Stall Foreclosures, Evictions As Part Of Rent Skimming, Sale Leaseback Racket

From the Office of the U.S. Attorney (Tampa, Florida):
  • United States Attorney A. Lee Bentley, III announces the return of an indictment charging David W. Griffin (44, Lutz) with one count of mail fraud, nine counts of bankruptcy fraud, two counts of making a false statement under oath during a bankruptcy proceeding, and one count of aggravated identity theft. If convicted, he faces up to 20 years in federal prison for the mail fraud charge, and up to five years on each of the bankruptcy fraud and false statement charges.

    ***

    According to the indictment, Griffin operated a foreclosure rescue scheme through his companies, Bay2Bay Area Holding, LLC and Business Development Consultants, LLC. The purpose of the scheme was to obtain quitclaim or warranty deeds from distressed homeowners facing foreclosure in return for false promises to rescue their homes from foreclosure by negotiating with creditors, renting the property back to the homeowner to obtain rental income, and falsely promising that the homeowner could repurchase the property from Griffin.

    To maximize his rental income, it was also a purpose of the scheme to prevent creditors and guarantors, including the Federal National Mortgage Association (“Fannie Mae”) and the Federal Housing Administration, from pursuing lawful foreclosure and eviction actions against homeowners who had defaulted on their mortgages. This was accomplished by filing, or causing to be filed, fraudulent bankruptcies in the names of the homeowners without their knowledge or consent. These fraudulent bankruptcies generated mailings sent from the bankruptcy court to the victim homeowner via the U.S. Postal Service.(1)

    The indictment also alleges that Griffin lied under oath in sworn testimony before the Office of the United States Trustee and the bankruptcy trustee. Under penalty of perjury, Griffin stated that he had no knowledge of a bankruptcy petition filed in the name of his company, Bay2Bay Area Holding Group, when in fact, he prepared the petition and directed an individual to sign his name and file the petition with the United States Bankruptcy Court for the Middle District of Florida.
Source: Hillsborough County Resident Indicted On Bankruptcy Fraud, Mail Fraud, And Aggravated Identity Theft Charges.

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a report describing the various foreclosure scams that involve the abuse of the bankruptcy court system.

Monday, May 25, 2015

Ex-Title Agent Gets 66 Months For Role In Closing Escrow On Seven Fraudulently Obtained Mortgages On Two Properties She Or Hubby Owned; Lying On Loan Docs, Failing To Record Dirty Deeds & Mortgages On Sham Sales Or Pay Off Existing Liens Among Bad Acts: Feds

From the Office of the U.S. Attorney (Newark, New Jersey):
  • A former real estate title agent was sentenced today to 66 months in prison for carrying out a mortgage fraud scheme in which she obtained seven loans, totaling more than $3.7 million, on two properties located in Wood-Ridge, New Jersey and Belvidere, New Jersey, U.S Attorney Paul J. Fishman announced.

    Ania Nowak, 48, of Belvidere, previously pleaded guilty [...] to Count One of the superseding indictment charging her with conspiracy to commit wire fraud.

    ***

    According to documents filed in this case and statements made in court:

    Ania Nowak was the owner and operator of A.N. Title Agency LLC and was an agent for Stewart Title Guaranty Company. Nowak had a duty to review a property’s title to determine ownership and the existence of any prior liens and truthfully disclose them in the title insurance documents. She also had a duty to issue title insurance policies to lenders guaranteeing there were no other liens so that they would be first in line to have the property sold if the borrower stopped making mortgage payments.

    Nowak also acted as a settlement agent and was required to disburse loan money in accordance with lender instructions, pay off any existing liens and record loan documents in the appropriate county clerk’s office.

    Nowak admitted her role in obtaining seven mortgage loans through fraudulent means, including: an April 2005 loan for her sham sale of the Wood-Ridge property to her husband, Zbigniew Cichy, 46, of Belvidere; a November 2005 refinancing loan for the Wood-Ridge property; a 2005 construction loan to build a house on the Belvidere property owned by Cichy; an August 2006 loan on the Belvidere property; May 2007 loans for a sham sale of the Belvidere property to another conspirator in the scheme, Kim Salvemini, 60, of Wallington, New Jersey ; Salvemini’s May 2007 refinancing loan on the Belvidere property; and Cichy’s November 2007 refinancing loan on the Belvidere property. Nowak admitted that, for each of the seven loans, she lied on loan documents, failed to pay off prior mortgages at closing, failed to record the mortgages and any deeds and that most of the loans went into default for non-payment.

    In addition to the prison term, Judge Chesler sentenced Nowak to serve three years of supervised release and ordered her to pay restitution of $2,050,975.34.

    Salvemini previously pleaded guilty to her role and was sentenced to one year of probation and ordered to pay restitution of $881,324.00 on May 6, 2015. Cichy also pleaded guilty to his role in the scheme and was sentenced to four months in prison and ordered to pay $2,050,975.34 in restitution on May 5, 2015.

Real Estate Closing Agency Owner Admits Looting Cash From Escrow Account, Using Kiting Scheme To Hide His Handiwork; Title Insurance Underwriters Left Holding The Bag On $4M In Losses

From the Office of the U.S. Attorney (Las Vegas, Nevada):
  • A Utah man who owned a title and escrow company that operated in Nevada, has pleaded guilty to wire fraud for embezzling almost $4 million from company escrow accounts for his own personal use, announced U.S. Attorney Daniel G. Bogden for the District of Nevada. Christopher L. Durling, 49, of Sandy, Utah, pleaded guilty [...] to one count of wire fraud[.] Durling faces up to 20 years in prison and a $250,000 fine.

    ***

    Durling owned and operated Direct Title Insurance Agency, a title and escrow company which had offices in Nevada, Utah, Texas, Indiana, California, and elsewhere. From about March 2009 through June 2011, Durling devised a scheme to defraud various persons and entities of money and property by diverting funds from escrow accounts for his own personal use. Durling used a kiting scheme to artificially inflate the balances of office trust accounts in order to cover up the shortages that were caused by his diversion of the escrow funds.

    In late 2010, the volume of the diversions from the escrow accounts reached such a level that the kiting scheme could no longer conceal the fraud, and insurance companies had to reimburse 13 lenders approximately $4 million.

Sunday, May 24, 2015

Kansas City Jury Hits Zombie Debt Buyer w/ $82M In Punitive Damages; 15-Month Harrassment Campaign Of Local Resident Over $1,100 Debt Belonging To Someone Else Created Fear Of Home Seizure, Arrest; Judge: Outfit Acted In Bad Faith, Abused Discovery Process & Repeatedly Violated Related Court Orders

In Kansas City Missouri, The Kansas City Star reports (via Public Citizen's Consumer Law & Policy Blog):
  • Two years ago, a Kansas City woman learned she was being sued for not paying a credit card debt of $1,130.14. The debt was not hers, she said. Yet the debt collection firm kept demanding that she pay.

    A Kansas City law firm filed a counterclaim on the woman’s behalf, alleging malicious prosecution and violation of a federal fair debt collection act by the national debt collection firm.

    This week, a Jackson County jury awarded $251,000 in damages to Maria Guadalupe Mejia Alcantara and assessed $82 million in punitive damages against the debt collection firm, Portfolio Recovery Associates LLC.

    “I am so thankful to the jury for giving me and my family justice,” Alcantara said in a written statement.

    The punitive damages assessment was intended to send a message not only to Portfolio Recovery Associates but others like it that often attempt to collect debts without supporting documentation, said Gina Chiala, Alcantara’s attorney.

    Such debt collection companies purchase debt accounts, like those generated with credit cards, but do not always acquire the paperwork showing how the debt was generated, she said. “The jury issued a verdict that it thought would get this company’s attention,” Chiala said.

    ***

    Many individuals sued by debt collection firms don’t have the resources to find a lawyer, Chiala said. The day after being served notice of this lawsuit, Alcantara went to a Kansas City Legal Aid office.

    A Legal Aid lawyer attempted to convince Portfolio Recovery that it was acting on bad information, Chiala said. The person who generated the debt was a man living in Kansas City, Kan., and not Alcantara, who has lived in Kansas City for 20 years.

    But Portfolio Recovery continued to pursue Alcantara for about 15 months, said Chiala, whose law firm, Slough Connealy Irwin & Madden, took on the case just before the initial court date in March 2013.

    A Jackson County judge ruled in favor of Alcantara last October, saying that Portfolio Recovery had “acted in bad faith, abused the discovery process and repeatedly violated this court’s discovery orders.”

    The jury trial that ended Monday took place to determine damages.

    If the assessment or damage amounts are upheld by the judge and the Missouri Court of Appeals, or if there is no settlement, half of the $82 million will go to the Missouri attorney general’s office, which will deposit the money in a victims compensation fund.

    The other half will go to Alcantara and her lawyers.

    “Those punitive damages are expressly designed to both punish and deter not only the defendant but the entire industry,” Chiala said.

    “In this case, Portfolio Recovery didn’t know that our client had a different name than the account holder because they didn’t have the account documents. During the trial, Portfolio did not say it was at fault or express any remorse.”

    From 2006 through 2014, there were 88 similar complaints submitted to the Missouri attorney general’s office from individuals saying that Portfolio Recovery was asking them for payments on debt they didn’t generate, Chiala said.

    In her statement, Alcantara remembered the fear she felt when she learned of the lawsuit in February 2013.

    “They wanted me to pay them over $1,000,” she said. “I did not owe this company any money. My husband and I were already struggling just to keep our children fed and the lights on. The lawsuit terrified me.”

    Alcantara, who worked in a northeast Kansas City dry cleaners for 15 years before it closed and is looking for a new job, said she feared her home would be seized and she would be arrested.

    “I am so thankful to the jury for giving me and my family justice. This should not happen to anyone, and I hope the jury’s verdict will stop Portfolio from doing this to others.”

Saturday, May 23, 2015

Antitrust Feds Continue Racking Up Guilty Pleas In Northern California & Atlanta-Area Foreclosure Sale Bid-Rigging Probes; Public Urged To Come Forward With Any Information Regarding Real Estate Public Auction Hanky Panky

The following excerpts are from two separate recent news releases from the U.S. Department of Justice:

#1 - Northern California:
  • A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

    Felony charges were filed [] in the U.S. District Court for the Northern District of California in Oakland against Wayne Lippman of Walnut Creek, California. To date, as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California, 55 individuals have agreed to plead or have pleaded guilty.

    According to court documents, between August 2008 and January 2011, Lippman conspired with others not to bid against one another and instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda and Contra Costa counties. Lippman made and received payoffs for the agreements not to bid, diverting money that would have otherwise gone to mortgage holders and other beneficiaries.

    ***

    [These] charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Alameda and Contra Costa counties, California. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300, or call the FBI tip line at 415-553-7400.
For more, see Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions.

For the formal charges, see USA v. Lippman.

------------------------------------------------

#2 - Atlanta, Georgia
  • A Georgia real estate investor pleaded guilty [] for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.

    Felony charges against Eric Hulsman were filed [] in the U.S. District Court of the Northern District of Georgia in Atlanta. According to court documents, from at least as early March 6, 2007, and continuing at least until Dec. 6, 2011, in Fulton County, Georgia, and from at least as early as Jan. 2, 2007, and continuing at least until Jan. 1, 2008, in DeKalb County, Georgia, Hulsman conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions.

    Hulsman was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Fulton and DeKalb properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions.

    ***

    The primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Fulton and DeKalb county public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and in some cases, the defaulting homeowner.

    ***

    A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either amount is greater than the statutory maximum fine. A count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime or twice the gross loss caused to the victims of the crime by the conspirators.

    Including Hulsman, eight cases have been filed as a result of the ongoing investigation being conducted by Antitrust Division’s Washington Criminal II Section and the FBI’s Atlanta Division, and the U.S. Attorney’s Office of the Northern District of Georgia. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Georgia should contact Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.htm.
For the formal charges, see USA v. Hulsman.

Non-Profit Exec Cops Plea For Role In Bid-Rigging, Kickback Racket Designed To Rip Off Medicaid Program Of Money Earmarked To Help The Elderly & Infirm Transition Out Of Nursing, Rehab Institutions Back To Their Own Homes

From the Office of the New York Attorney General:
  • Attorney General Eric T. Schneiderman [] announced that Darlington Odidika, executive director of Yonkers-based nonprofit Systems and Abilities, Inc., pleaded guilty to his role in a bid-rigging and kickback scheme to defraud the Medicaid system of monies earmarked to allow the elderly and infirm to live in the community, rather than in an institutional setting. As a condition of [the] plea, Odidika, 47, of Poughkeepsie, will be sentenced to three months in jail and five years of probation. Odidika and the corporation are also required to repay the full amount that was stolen from Medicaid as a result of this scheme.

    “This defendant and his company stole funds from a program intended to assist the elderly and disabled to live in their own home surrounded by loved ones rather than a facility,” said Attorney General Schneiderman. “Every dollar stolen by perpetrators like Mr. Odidka impacts our state’s ability to support its neediest citizens. My office will do everything possible to ensure those monies are not sacrificed to their greed.”

    Systems and Abilities, Inc. was an enrolled provider in the Nursing Home Transition and Diversion Program (NHTD Program), a New York State Department of Health program that provides senior citizens and those suffering from physical disabilities alternatives to institutional living. Operating in Westchester and surrounding counties, Systems and Abilities arranged for contractors to provide modifications to the existing homes of qualified Medicaid recipients through a required bid process and then billed Medicaid based upon the alleged final costs of the projects. Systems and Abilities also billed Medicaid for moving expenses and basic home furnishings for individuals transitioning from a nursing home or rehabilitation center back into their homes.

    In [the] guilty plea, Odidika admitted to falsifying bids for these modifications and submitting them to agents of the Department of Health between August 31, 2009 and November 30, 2011. By falsifying these bids, Odidika was able to control which contractor won the bid and inflate the amount of payment that Systems and Abilities received as its share of the project. Odidika also admitted to submitting Final Cost Reports, and Medicaid claims based upon these reports, which falsely stated the actual costs of the projects. Similarly, he admitted to falsifying Final Cost Reports in the transition program for moving expenses, which were either never provided or significantly inflated over the actual costs, and submitting Medicaid claims based upon these false reports.

    Odidika and Systems and Abilities each pleaded guilty to one count of Grand Larceny in the Third Degree today before the Honorable Barry E. Warhit in Westchester County Court. Odidika is to receive a sentence of 90 days in the Westchester County Jail and five years of probation. The nonprofit Systems and Abilities was sentenced to pay a fine of $5,000. Sentencing for Odidika is scheduled for July 29. Odidika and the corporation are also required to pay restitution of $21,690, most of which has already been reimbursed to the Medicaid program.
Source: A.G. Schneiderman Announces Guilty Plea Of Westchester Nonprofit Executive For Stealing From State Program Assisting Seniors And Disabled (Darlington Odidika Falsified Bids For Construction Work, Inflated Costs Of Services Provided And Took Kickbacks On Behalf Of Nonprofit Systems And Abilities, Inc.; Schneiderman: Every Dollar Stolen By Perpetrators Like Mr. Odidka Impacts Our State’s Ability To Support Its Neediest Citizens).

Scheme Resulting In Rigging Periodic Inspection Process Of Federally Funded Housing Rental Units By Tipping Off City Housing Authority Of Secret Information Ends In Convictions For Housing Authority Exec, HUD Building Inspector

From the Office of the U.S. Attorney (Boston, Massachusetts):
  • A former executive of the Chelsea Housing Authority (CHA) and a former public housing inspector were convicted on Wednesday, April 1, 2015, for their roles in rigging the inspection process of federally funded housing units.

    James Fitzpatrick, 63, of Acton, Mass., and Bernard Morosco, 50, of Utica, NY, were convicted of conspiring to defraud the United States and the U.S. Department of Housing and Urban Development (HUD) by impairing, impeding, and defeating the proper operation of HUD’s physical condition assessment.

    ***

    [H]UD’s Real Estate Assessment Center (REAC) is required to “provide for an independent physical inspection of a public housing authority’s property or properties that includes, at a minimum, a statistically valid sample of the units in the CHA’s public housing portfolio to determine the extent of compliance with the standard.” REAC inspections are conducted by independent contractors who have received training from REAC on the inspection protocol and applicable regulations, and have been certified by HUD.

    ***

    Before the REAC inspections of the CHA in 2007, 2009, and 2011, Morosco gave Fitzpatrick, the Assistant Director of the CHA, an advance list that revealed which units at the CHA would be inspected. During those years, Morosco, who was a REAC-certified inspector, worked for the CHA as a consultant, advising the CHA about how to get better scores on its REAC inspections.

    One or two months before each REAC inspection, using information provided by Fitzpatrick, Morosco accessed HUD’s secure database and downloaded information to which he was not entitled. That information enabled him to use his REAC software to generate, in advance, the random sample that would later be generated by the assigned REAC inspector. Morosco then gave the samples to Fitzpatrick who, in turn, provided it to the CHA’s Executive Director, Michael McLaughlin.

    McLaughlin divided CHA employees into pairs, calling each pair a SWAT team, and sent them to inspect the units identified by Morosco. For the month before each inspection, the SWAT teams visited several apartments a day, inspecting and re-inspecting them as maintenance crews visited the units to make repairs, fumigate, and exterminate. When the REAC inspectors conducted the inspections, the units that were selected were the same as the ones provided in advance by Morosco.