Thursday, February 11, 2016

Real Estate Broker Cops Plea To Swiping $199K In Escrow/Purchase Deposits From Couple For Three Properties; Defendant Committed Fleecing While On Pre-Trial Release For Unrelated Mortgage Fraud Scheme For Which He Got 11+ Years In Prison

From the Office of the U.S. Attorney (Boston, Massachusetts):
  • A former real estate broker pleaded guilty [...], in connection a scheme to defraud a couple of the deposit they paid to purchase three properties in Randolph, Roxbury and Jamaica Plain.

    Michael David Scott, 51, of Mansfield, pleaded guilty to one count of wire fraud. U.S. District Court Judge Nathaniel M. Gorton scheduled sentencing for March 25, 2016.

    From February 2011 to October 2013, Scott fraudulently persuaded a couple to sign three Purchase & Sale Agreements to buy properties in Randolph, Roxbury and Jamaica Plain. The couple deposited $199,000 with Scott under the false promise that their funds would be held in escrow. However, Scott immediately spent the funds for his own use.

    Furthermore, Scott knew that the first property was taken off the market by the sellers, that the bank holding the mortgage had refused to approve the sale of the second property, and that he had sold the third property to someone else. Scott never informed the couple about the status of the properties, and when they tried to get a refund of their deposits, he falsely assured them their deals were still pending and refused to return their deposits.
    In a separate federal case, Scott was sentenced on November 12, 2015 to 135 months in prison in connection with a multi-year, multi-property mortgage fraud scheme in Boston. Scott was on pre-trial release in this earlier fraud case when he committed the aforementioned crimes.

Single Mom Shakes $19,500 Settlement Out Of Landlord Who Allegedly Twice Denied Her Opportunity To See Rental Apartment Because She Had Twin 4-Year Old Kids; Suspecting Discrimination, Victim Had Her Cousin Act As 'Tester' In Effort To Bag Accused Culprit

In New Britain, Connecticut, the New Britain Herald reports:
  • A city-based landlord, a property management company and a property manager agreed to pay $19,500 and advertise differently after a woman looking to rent an apartment filed a complaint with federal housing officials claiming she was discriminated against because she had children, officials with the federal Department of Housing and Urban Development said.

    The single mother of twin 4-year-old boys filed a complaint under HUD’s Fair Housing Initiatives Program after she was twice denied the opportunity to see a two-bedroom unit at Greenview Apartments at 123 Green St. last year. The woman’s identity was not revealed in HUD documents.

    The property is owned by Green New Britain, LLC, and managed by PBJ Management. The two companies and the on-site property manager Philip Mahler were named in the complaint. Attorney Charles Ryan who represented the landlords declined comment.

    In her complaint, the woman said that after learning she had children, Mahler told her she couldn’t look at the apartment for rent because it needed work and he would call her when it was ready, federal officials said.

    He never called back, the woman said. When the woman’s mother called Mahler to inquire about the unit again stating her daughter had two children, she was told that his wife was on vacation for two weeks and he needed to consult with her.

    The family had a cousin call Mahler the next day, the complaint stated. When the cousin told Mahler that the apartment was for herself and her husband, he allegedly agreed to show them the unit the next day, federal documents showed.

    Green New Britain, LLC; PBJ Management and Mahler agreed to settle the complaint [] before HUD began their investigation. According to the terms of the agreement the companies agreed to pay the woman $19,500 and change their advertising practices to include that the building is child-friendly.

For the HUD press release, see Connecticut Landlords Agree To Settle Fair Housing Complaint Alleging They Discriminated Against Families With Children.

Editor's Note: The Connecticut Fair Housing Center, which provides investigative and legal services to Connecticut residents who believe they have been the victims of housing discrimination, represented the tenant in her HUD complaint.

Wednesday, February 10, 2016

Nevada Woman Gets 1 To 4 Years In State Prison For Fleecing Five Homeowners Out Of Over $50K In Loan Modification Scam, Causing Each Victim To Lose Home To Foreclosure

From the Office of the Nevada Attorney General:
  • Nevada Attorney General Adam Paul Laxalt announced that Emily Suzanne Vasquez, 47, of Inglewood, CA, was sentenced to one count of attempted theft, a category “C” felony. Vasquez was sentenced as a result of a local, state and federal investigation of a complex mortgage fraud scheme.

    Vasquez and other defendants operated a scheme to defraud five homeowners struggling to pay their mortgages and in danger of losing their homes. The victims were lead to believe that Vasquez’ alleged company, California Sky, would perform one or more services, including preventing the foreclosure of their homes, lowering their mortgage payments and refinancing their mortgages and reduce the payment and principal. Vasquez failed to perform any of these services, and all five of her victims lost their homes after paying Vasquez and California Sky more than $50,000.

    “The consequences for vulnerable homeowners who fall victim to scams like this one are devastating,” said Laxalt. “My Office will continue to investigate and prosecute frauds like this one to deter future scams and ensure the safety of Nevada’s homeowners.”

    Second Judicial District Court Judge Elliott Sattler sentenced Vasquez to 12-48 months in prison, and had the defendant taken into custody. Vasquez was also ordered to pay nearly $53,000 in restitution to her five victims.

Debt Settlement Outfit Cops Guilty Plea For Ripping Off Consumers Seeking Credit Card Relief; First Six Monthly Payments Went Almost Entirely Towards Fees: Feds

From the U.S. Department of Justice (Washington, D.C.):
  • An Orange County, California, man pleaded guilty [] for his role in operating fraudulent debt relief firms that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service announced.

    Jeremy Nelson, 30, pleaded guilty to one count of an indictment alleging conspiracy to commit mail fraud and wire fraud in connection with companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).

    According to the indictment, Nelson and his employees portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors. Clients made monthly payments expecting the money to go toward settlements. Nelson and his co-conspirators instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees.

Chicago Feds Pinch Woman For Allegedly Posing As Federal Housing Representative, Then Using Foreclosure Threats To Illegally Squeeze Area Homeowners Out Of Cash

From the Office of the U.S. Attorney (Chicago, Illinois):
  • A Chicago woman has been charged with posing as a federal housing representative to scam homeowners out of cash, federal authorities announced [].

    CYNTHIA WALLACE, 45, of Chicago, is charged with one count of falsely assuming and pretending to be an officer of the United States.

    Last month Wallace posed as an official from the “Federal Housing Authority” and “H.U.D.” in numerous phone calls she placed to Chicago-area homeowners, according to a criminal complaint and affidavit filed in U.S. District Court in Chicago. During the calls, Wallace said the federal government would foreclose on the victims’ homes unless they wired money to a location determined by Wallace.

    One of Wallace’s intended targets was a 79-year-old woman from the West Side of Chicago, the complaint states. Two other targets – a husband and wife from south suburban Harvey – wired more than $3,500 to Wallace, according to the complaint.

Tuesday, February 09, 2016

Two More Atlanta-Area Real Estate Operators Find Themselves In Hot Water In Ongoing Federal Probe Into Foreclosure Sale Bid Rigging Rackets

From the U.S. Department of Justice (Washington, D.C.):
  • A federal grand jury in Atlanta charged in separate indictments two real estate investors with bid rigging and bank fraud related to public real estate foreclosure auctions in Georgia, the Justice Department announced [].

    Real estate investor Douglas L. Purdy [indictment here] has been charged with one count of bid rigging and five counts of bank fraud for participating in the alleged conspiracy and scheme at Forsyth County, Georgia, foreclosure auctions from 2008 to 2012.

    Clifford Wayne Hill [indictment here] was charged with one count of bid rigging and seven counts of bank fraud related to public foreclosure auctions in Gwinnett County, Georgia, from 2007 to 2012. The defendants and their co-conspirators allegedly rigged bids at public foreclosure auctions and defrauded banks that owned the mortgage notes.

    Among other methods, the conspirators allegedly held secret “second auctions” of properties they had obtained through rigged bids, dividing the auction proceeds that should have gone to pay off debts against the properties and, in some cases, to homeowners who had defaulted.
    Including the indictments filed today in the Northern District of Georgia, 14 defendants have been charged in connection with the department’s ongoing investigation into bid rigging and fraudulent schemes involving real estate foreclosure auctions in the Atlanta area; 12 have pleaded guilty.
    Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 888-647-3258, or visit

Management Agent Faces Pinch For Allegedly Running Scheme That Fleeced Florida Condo HOA Of $275K

In Palm Bay, Florida, Florida Today reports:
  • The Florida Department of Law Enforcement says it has arrested and charged a Palm Bay man with setting up a scheme that defrauded customers of $275,000 between August 2010 and June 2014.

    Guillermo Alonso, 53, was the former head and property manager of the Palm Bay Clubs Condominiums Home Owners Association and the investigation began in February 2015 when the Palm Bay Police Department asked them to look into complaints from the current HOA president and treasurer about money that Alonso had spent.

    FDLE says an investigation shows that Alonso used HOA money for his benefit, including for renovations to his property and fast food purchases. They also say Alonso withdrew funds from the account to pay for projects that weren't completed.

    They also say that Alonso hired a company he owned, Klean Power Electric, Inc., to manage the property with multiple checks transferred from the business account to his personal one, with no work able to be verified.

    He also maintained control of the PBCC checkbook. They add that he had an ATM card issued to him and he changed the mailing address for statements to his home so that he would be the only one to see what he purchased or withdrew.

    Alonso was charged with scheme to defraud under false pretenses of greater than $50,000.

    He was booked into the Brevard County Jail on $250,000 bond.

Monday, February 08, 2016

California Appeals Court: Real Estate Foreclosure While Borrower's Loan Modification Application Is Under Review Violates State Unfair Competition Law

From the law firm Dorsey & Whitney LLP:
  • A recent decision by the California Court of Appeal held that the practice called “dual tracking” – when a lender forecloses on a property while the borrower’s application for a loan modification is under review – violates California’s Unfair Competition Law.

    The case, Majd v. Bank of America, N.A., 2015 WL 9304536 (Cal. Ct. App. Dec. 21, 2015), involves a borrower who obtained an interest-only, adjustable-rate mortgage to purchase a home in 2006. The borrower alleged that he eventually defaulted because he could not afford the monthly payments that had increased to over $5,000 due to interest rate adjustments. In 2012, the borrower submitted an application for a home loan modification. While the modification was still under review, the bank sold the property through a nonjudicial trustee sale. Shortly after the sale, the bank notified the borrower that it rejected his modification.

    The borrower filed a complaint claiming, among other things, that the foreclosure was invalid because the lender violated California’s Unfair Competition Law (UCL) when they foreclosed on his home before completing the review of his loan modification. The trial court dismissed the complaint for failure to state a claim. On appeal, the Court of Appeals reversed the dismissal, holding that the bank’s alleged conduct amounted to “unfair competition” in violation of the UCL. [more]

Improper Rush To Clear Crowded Foreclosure Dockets To Blame In Recent Florida Appeals Court Reversal Of Another Trial Judge Screw-Up

In West Palm Beach, Florida, the Daily Business Review reports:
  • The Fourth District Court of Appeal [] reversed a foreclosure judgment in a case that wasn't legally ready to be decided.

    No default judgment was in place for U.S. Bank N.A., and one of the homeowners hadn't been served with the lawsuit when Broward Circuit Senior Judge Barry Stone(1) issued final judgment for the lender.

    The appeals court ruled the case wasn't "at issue," or ready for disposition, when the trial court set the trial date or at the time of trial when Stone ruled against homeowner Frank Reilly.(2)

    "It's been quite a scramble to keep up with all those abruptly set trials," Reilly's attorney, Kenneth Trent of Fort Lauderdale, told the Daily Business Review.

    Foreclosure defense attorneys argued after the robo-signing scandal that Florida courts were improperly rushing to close foreclosure cases to clear crowded dockets.

    In the unsigned decision, the unanimous panel threw out the 2014 foreclosure judgment in the bank's favor and remanded the case for further action.

    "This will probably benefit a lot of people because Mr. Reilly is not the only one who's been in a position like this," Trent said. "It's a really good ruling and a good opinion for foreclosures because there has been a mad rush to set for trial all those cases that were hanging around on the dockets."

    Reilly signed a promissory note and mortgage with his former wife, Mynabel Roche, before they defaulted on the loan and U.S. Bank sued to foreclose.

    The bank served the foreclosure complaint on Roche but couldn't find Reilly. The lender claimed he was dodging process servers, so it served him by publication Dec. 3 and Dec. 10, 2013.

    Before the second notice was published, Roche—but not Reilly—answered the complaint. Stone set the case for trial after Roche's filing, prompting Trent to argue the trial court denied Reilly due process.

    On Jan. 2, 2014, in what would be his only filing in the case, Reilly requested an extension to respond to the complaint. Stone did not rule on that request but proceeded to trial Jan. 30, 2014.

    Neither Reilly nor Roche attended, and Stone entered final judgment in the lender's favor.
    That was reversible error, according to the appellate court.

    "U.S. Bank did not obtain a default against Mr. Reilly. Nor did Mr. Reilly file an answer," Judges Martha Warner, Matthew Stevenson and Alan Forst wrote. "The action was not at issue either when the trial court set the trial date or when the trial itself was held."

    The ruling did not impact Stone's final judgment against Roche. It also declined to rule on Reilly's challenge to the sufficiency of the bank's service by publication, saying the homeowner had not raised those issues before the trial court and could still argue them on remand.

    The decision is in line with a Third District Court of Appeal case decided in 2014. The court reversed a foreclosure order in favor of Bank of New York Mellon on the issue of whether the case was ready for trial.

    "The case was not at issue and therefore could not have been noticed for trial until 20 days after (BNY) filed its answer" to a defense counterclaim, Judge Edwin Scales wrote. "As we have previously held, failure to adhere strictly to the mandates of Rule 1.440 is reversible error."
Source: Appeals Court Reverses Premature Home Foreclosure (may require subscription; if no subscription, go here, then click appropriate link for the story).

For the court ruling, see Reilly v. U.S. Bank N.A., No. 4D14-867 (4th DCA, February 3, 2016).
(1) No "ham and egger" here; Judge Stone is a retired Florida appellate court judge who once sat on the 4th District Court of Appeal for over two decades, presiding as its chief judge from 1997-1999.

(2) From the court ruling:
  • Florida Rule of Civil Procedure 1.440 provides that a case may be set for trial when it is “at issue.” First, however, “[a]n answer must be served by or a default entered against all defending parties before the action is at issue.” Ocean Bank v. Garcia-Villalta, 141 So. 3d 256, 258 (Fla. 3d DCA 2014) (quoting Bennett v. Cont’l Chems., Inc., 492 So. 2d 724, 727 n.1 (Fla. 1st DCA 1986)).

    Thus, where a defendant has not yet answered the complaint, and the plaintiff has failed to obtain a default, the action is not yet at issue. U.S. Bank Nat’l Ass’n v. Croteau, 40 Fla. L. Weekly D1237 (Fla. 4th DCA May 27, 2015).

    U.S. Bank did not obtain a default against Mr. Reilly. Nor did Mr. Reilly file an answer. Therefore, the action was not at issue, either when the trial court set the trial date or when the trial itself was held. This is reversible error. See Tucker v. Bank of N.Y. Mellon, 175 So. 3d 305, 306 (Fla. 3d DCA 2014).

    Accordingly, we reverse the final judgment of foreclosure as to Mr. Reilly and remand to the trial court for further proceedings consistent with the foregoing.

Sunday, February 07, 2016

Los Angeles Court Ruling OKs Landlord's Boot Of Rent-Controlled Tenant Who Peddled His Attic On 'Short Stay' Sublet Basis On Airbnb

From a client alert from the law firm Thompson Coburn LLP:
  • [T]he problems faced by Airbnb providers was recently illustrated in the case of Chen v. Kraft, decided [last] month by the Appellate Division of the Los Angeles County Superior Court.

    The defendant, Mr. Kraft, occupied a rent-controlled unit in the Venice area of Los Angeles, a very popular area near the Pacific Ocean thought by many as hip and Bohemian. Kraft decided to make some extra money on Airbnb by listing the attic of his rental unit, which he called a "loft."

    After Kraft got away with it for a while, his landlord, Ms. Chen, commenced an eviction proceeding. She alleged that renting out the unit was illegal because the premises was located in an R-1 zone (one-family dwelling) which did not permit hotels or apartments — a ground for eviction under the Los Angeles Municipal Code.

    Ms. Chen also submitted a City of Los Angeles Tax Registration Certificate demonstrating her payment of Los Angeles's "Transient Occupancy Tax" whereas Mr. Kraft, no surprise, could not demonstrate his own tax compliance. The trial court granted summary judgment in favor of Ms. Chen, and the Appellate Division agreed. Per the Appellate Division, the Airbnb agreement at issue constituted "an illegal contract in violation of existing regulations, and was therefore void and unenforceable."

    Thus, in Los Angeles, a court has decided you can't put your unit on Airbnb, and if you do, the arrangement will be adjudicated illegal. Other cities, including New York and San Francisco, have also enacted legislation addressing temporary rentals such as Airbnb, with attendant slings and arrows of outrageous fortune.

    The takeaway is this: If you're deciding to BNB or not BNB, you should perform some due diligence to make sure that your host municipality fosters a supportive environment. And just as importantly, you must satisfy yourself that your listing complies with applicable codes and regulations.
Source: Landlords And Tenants: To Airbnb Or Not Airbnb, That Is The Question.

For the court ruling, see Chen v. Kraft, No. BV 031047 (Super. Ct. App. Div. Los Angeles County, January 13, 2016).

New Landlord Begins Gentrification Campaign In 625-Unit Minneapolis-Area Apartment Complex By Giving Low-Income Tenants The Boot; Renters Respond w/ Fair Housing Class Action Lawsuit Alleging Disparate Impact On Renters Based On Race, Disability, Familial Status, Nat'l Origin

In Richlfield, Minnesota, the Sun Current reports:
  • Current and former tenants of Concierge Apartments in Richfield filed a class action lawsuit Feb. 1 alleging discrimination following the sale of the complex, formerly known as Crossroads at Penn.

    The suit, filed against Soderberg Apartment Specialists and MSP Crossroads Apartments LLC, names 35 plaintiffs who allege that Soderberg, the Brooklyn Park company that partnered with a Milwaukee investment firm to make the purchase in September, engaged in housing discrimination when instituting new policies. The rule changes meant a significant portion of residents would have to move out of the 698-unit complex.

    Concierge is undergoing a massive renovation project in which all the units are being remodeled while further amenities are added. The move toward a more upscale market position comes with rent increases in addition to the policy changes.

    The complex, consisting almost elusively of one-bedroom units, no longer allows more than two people per bedroom, meaning families with children must move. Also, the new management is no longer accepting Section 8 vouchers – there had been 35 vouchers being used at the complex before the transaction. Furthermore, Soderberg’s policy for another housing program, Group Residential Assistance, is becoming more strict, the plaintiffs add.

    When contacted by the Sun Current, Soderberg did not immediately provide a response to the lawsuit’s assertions.

    Of the residents who must find new housing, the plaintiffs estimate 130 relied on Section 8 or GRH. They add that since the sale, nearly 160 households have likely moved out. New policies such as social security number requirements and a prerequisite credit score of 625 contribute further to the displacement, the plaintiffs continue.

    Those plaintiffs are joined in the suit by statewide tenant advocacy group HOME Line, and are represented by the St. Paul-based Housing Justice Center.(1) The groups contend that the affected Concierge tenants belong to federal protected classes based on race, disability, familial status and national origin.

    “Just because we’re low-income does not mean we do not have human rights,” said Aurora Saenz, a former Concierge resident who said she moved out due to the new occupancy standards regarding families with children. “We may not be millionaires but we cared for our homes.”

    Tim Thompson, lead attorney for the plaintiffs, explained the goal of the suit.

    “The lawsuit seeks to stop and roll back the series of actions by the owner driving out current tenants, Thompson said.” This could include the exorbitant rent increases, the overly restrictive admission requirements and the refusal to participate in programs essential to low income and disabled tenants.”

    The impact goes beyond the tenants named in the suit, according to Eric Hauge, an organizer at HOME Line.

    “This is perhaps the largest source of unsubsidized affordable rental housing in the Twin Cities region,” Hauge said.

    “Its loss would be a tremendous blow to the region’s collective efforts to narrow the huge gap between demand and supply for affordable housing, and will exacerbate harmful gentrification trends if left unchallenged.”
Source: Apartment tenants file class action lawsuit after displacement in Richfield.

See also, Minneapolis Star-Tribune: Upmarket changes at Richfield complex spark federal lawsuit (Owners of Richfield complex pushed out low-income residents, federal case alleges).

For the lawsuit, see Crossroads Residences Organized for Stable and Secure ResiDencieS, et al. v. MSP Crossroads Aparments LLC, et ano.
(1) HOME Line is a nonprofit Minnesota tenant advocacy organization that provides free and low-cost legal, organizing, education, and advocacy services so that tenants throughout Minnesota.

The Housing Justice Center (HJC, formerly known as the Housing Preservation Project, or HPP) is a St.Paul, Minnesota-based nonprofit public interest advocacy and legal organization whose primary mission is to preserve and expand affordable housing for low income individuals and families in Minnseota.

HJC seeks to prevent the loss of affordable rental housing by conversion to market rate, demolition, foreclosure, and other causes.

Aging Apartment Complexes Under Expiring Section 8, Other Housing Subsidy Contracts Have Salivating Developers "Circling Like Buzzards To Snatch Them Up," Leaving Long-Time Poor, Elderly Residents Fearing Skyrocketing Rents (Or Worse); Residents Consider Legal Action

In East Nashville, Tennessee, Nashville Public Radio reports:
  • Residents of an East Nashville apartment complex are considering their legal options in response to a potential doubling of their monthly rents.

    New ownership and renovations are expected at the 45-year-old Howe Gardens complex. But residents who met Thursday night say they were blindsided by the rent notifications posted on their doors.

    Tracey McCartney, a lawyer with Tennessee Fair Housing Council, said she worried about residents who live on government subsidies.(1)

    As housing that’s been subsidized for a period of time by the government gets out from under that arrangement then developers are circling like buzzards to snatch them up,” McCartney said.

    Residents want a meeting with the new owners, who have apologized for the abrupt rent letters.
Source: Rent Hike Has East Nashville Apartment Residents Considering Legal Action.
(1) The Tennessee Fair Housing Council ("TFHC") is a private, non-profit advocacy organization whose mission is to eliminate housing discrimination throughout Tennessee. Our enforcement program is based in Nashville and concentrates on Davidson, Cheatham, Dickson, Rutherford, Sumner, Williamson and Wilson counties.

Among other things, TFHC takes in dozens of complaints of housing discrimination each year. It investigates those complaints, counsels the clients, and, in some cases, represents them in administrative actions or lawsuits. It also assists complainants in filing administrative complaints even where it doesn't provide representation.

HUD Yanks Memphis Landlord's Section 8 Contracts Over Alleged Lies About Made Repairs, "Systemic Failure To Maintain" Premises, Forcing Mass Displacement Of Low Income Renters; Landlord's Response: We Intend To Find New Owner To "Perform Rehabilitation" (Gentrification?) On The Complexes

In Memphis, Tennessee, Fox13 reports:
  • HUD has had enough of the Global Ministries Foundation operating a number of Section 8 housing complexes in Memphis, and they have pulled the contract.

    The agency said the living conditions at the Warren and Tulane Apartments were “troubling,” and they found evidence that GMF failed to maintain the property in a decent, safe and sanitary manner for residents.

    In a letter, HUD even claimed GMF lied about making repairs.

    HUD decided to cut ties with the owners of Global Ministries Foundation. [...] According to a letter from HUD to the Global Ministries Foundation, inspectors found "systemic failure to maintain” the properties.
    HUD also accused Global Ministries Foundation of incomplete repairs and no plan to fund the work or timetable to complete it.

    GMF's owner was given a list of violations that required immediate car and response. The owner, according to a notice of abatement from HUD, advised all violations had been corrections.

    Upon further inspection, that was deemed untrue.

    HUD staff visited the properties in January and referred to the experience as "troubling" because of a collection of issues and violations. In addition, the HUD staff heard and saw evidence of crime and lack of control by the owner.

    Based on all of these factors, HUD decided to abate the contract with Global Ministries Foundation.

    Now, GMF is responsible for relocating residents while improvements are made. The announcement has some people, like Lisa Williams, worried. "I don't have any kids and I have income, but there are people out here that don't have income and have babies. Where are they people going to go?" Williams asked FOX13.

    The nonprofit, Global Ministries Foundation, also has HUD looking over its shoulder and into its ledger.

    The agency wants GMF to submit a full accounting of the finances at each of the properties, and money spent on repairs that HUD didn't find acceptable must be returned.

Editor's Note: Buried in the landlord's response to the HUD order (see Global Ministries Foundation responds to order to relocate residents) is a statement that it will seek out a new owner for the properties willing to rehab the apartments [ie. gentrification?]:
  • Despite the relocation of residents, GMF will seek opportunities to find a new owner of Warren and Tulane Apartments to perform rehabilitation of the properties.

Saturday, February 06, 2016

Novice Renter Goes For The Bait, Gets Reeled In By Rent Scammer After Seeing Craigslist Ad; Victim Now $580 Poorer

In Salina, Kansas, the Salina Journal reports:
  • A teen who paid a rent deposit on a house after seeing an ad on Craig's List realized she'd been scammed and didn't send more money for the first month's rent, a police department spokesman said.

    Capt. Mike Sweeney said the 19-year-old woman sent a Moneygram for $580 as a deposit for a house on Birch Street, but when no one met her at the house to show her the inside she became suspicious.

    Sweeney said she recontacted the people in Germansville, Pa., who said they were renting the house. When she was told to send more money, she instead reported the incident to police.

    Sweeney said the teen sent the money at 3 p.m. Jan. 9. She reported the scam Friday.

    Generally, Sweeney said, prospective renters can see the inside of a house or apartment before paying money to anyone. He said landlords do not typically require payment by Moneygram, but people conducting scams often do because Moneygrams can be picked up and cashed anywhere.

Bogus Pre-Rental 'Lead-Free' Certificates Peddled To Landlords By Unamed Inspector At Center Of Effort By State Officials Urging Nearly 400 Maryland Families To Have Their Kids Tested For Lead Poisoning

In Baltimore, Maryland, The Baltimore Sun reports:
  • State officials are urging nearly 400 families to find out whether their children may have lead poisoning after launching an investigation of a private inspector who they say improperly certified rental properties as lead-free.

    The Maryland Department of the Environment said it is partnering with the U.S. Environmental Protection Agency in the investigation of an unnamed individual involved in 384 inspections in Maryland, including Baltimore and its suburbs. The investigation was launched after officials determined that seven properties certified as lead-free actually had lead paint or weren't properly tested, the agency said.

    The remaining properties with certificates issued by the inspector are now under review.

    Flaking or peeling paint is a primary source of poisoning for children, who studies have found are more likely to struggle in school and to get in trouble, both as juveniles and adults. Under state law, properties built before 1978, when lead paint was banned nationally, must be inspected and certified as safe before they can be rented.

    Jay Apperson, a spokesman for the environment department, said officials didn't want to wait for the results of the investigation to inform the public.

    "We wanted people to be aware this is going on so they can take steps to protect the health of their families," Apperson said.

    The investigation began when state officials received a complaint concerning the validity of a lead-free certificate issued by the inspector, who performed work for American Homeowner Services LLC, based in Lusby in Southern Maryland. State officials said they determined the certificate was invalid — and then discovered six more of the inspector's certificates were also invalid.

    American Homeowner Services LLC paid a $5,000 fine to settle the matter, state officials said. The company did not respond to a request for comment.
    State officials are now sending letters to the residents and owners of the 384 properties certified lead-free from 2010 to 2014, when the inspector's accreditation expired. The largest number is in Prince George's County, but other affected jurisdictions include Baltimore City and Anne Arundel, Baltimore, Calvert, Charles, Howard, Montgomery and St. Mary's counties. Eighteen properties have a Baltimore address.

    The letter urges parents living at the properties to have their children visit a doctor, and report to the state how many children live in the house and whether there is flaking or chipping paint visible on the property.
    A Baltimore Sun investigation, published in December,(1) found that the inspection system Maryland has set up to protect youngsters from deteriorating lead-based paint is inadequately enforced and relies on data riddled with errors. While lead-poisoning cases have fallen significantly, at least 4,900 Maryland children have been poisoned in the past decade.

    State auditors have repeatedly criticized the environment department's oversight of its registry of rental properties, finding that, over the years, thousands of properties have dropped off the list without explanation.

    The Public Justice Center, in a recent survey of renters facing eviction, showed 41 percent reported flaking or peeling paint at their homes. The survey showed many of the properties were not registered with the state and, if registered, had not passed safety inspections.

    The Maryland Department of the Environment has fewer than a dozen inspectors to cover as many as 400,000 rental units statewide.

Home Depot Subsidiary To Cough Up $37K To Settle Allegations It Violated Lead-Based Paint Rules In Connection w/ Home Renovation Project

From the U.S. Environmental Protection Agency (Denver, Colorado):
  • The U.S. Environmental Protection Agency has reached a $37,065 settlement with Atlanta, Georgia-based THD At-Home Services following a June 2015 compliance inspection that revealed alleged violations of the lead-based paint Renovation, Repair, and Painting (RRP) Rule at a project site in Arvada, Colorado.

    THD At-Home Services, a subsidiary of The Home Depot, was the general contractor for the Colorado home renovation project, where prior testing confirmed the presence of lead-based paint. The settlement alleges that the company failed to ensure that waste debris and dust at the project site were properly contained and that the work area was fully cleaned of dust, debris, and residue in accordance with RRP Rule requirements.

    EPA’s Renovation, Repair, and Painting rule provides important, front-line protection for children and others vulnerable to exposure to lead dust that can cause lead poisoning,” said Suzanne Bohan, director of EPA’s enforcement program in Denver. “EPA will continue to take steps to ensure that contractors comply with the rule’s requirements to contain waste, control dust, and prevent exposure.”

    The RRP Rule, issued under the authority of the Toxic Substances Control Act, requires that contractors that work on pre-1978 dwellings and child-occupied facilities are trained and certified in lead-safe work practices and that those work practices are used on jobsites. This ensures that renovation and repair activities that disturb surfaces with lead paint, like sanding or cutting walls or replacing windows, minimize the creation and spread of dangerous lead dust. The rule took effect on June 23, 2008.

    The U.S. banned lead-based paint from housing in 1978, however EPA estimates that it is still present in more than 30 million homes across the nation. Lead exposure can cause a range of adverse health effects, from behavioral disorders and learning disabilities to seizures and death, with young children at the greatest risk due to their developing nervous systems.

    [Go here f]or more information on the RRP requirements.

Friday, February 05, 2016

237 Jacksonville-Area Homeowners Slammed w/ $1.1 Million In Property Tax Liens In Last Six Months Arising From Improper Homestead Exemption Claims; County Official: "We Haven't Seen Any Willing Cases [Of Fraud] ... There's Nothing We See To Turn Over To The State Attorney's Office"

In Jacksonville, Florida, WJXT-TV Channel 4 reports:
  • Duval County property appraiser Jerry Holland continues his crackdown on homeowners who file more than one homestead exemption.

    The practice, perpetrated by hundreds of Jacksonville property owners, costs the city thousands of dollars. It happens when homeowners, who are eligible for a property tax break on a home they own and live in, claim a second exemption for a property they own but don't reside in.

    The homestead exemption can not be claimed on a rental property or a secondary residence.

    But within the last six months, Holland and his staff have found 237 people with bogus claims, and he there are a lot more out there.

    Some of the perpetrators are actually unsuspecting.

    William Richardson inherited a house from his father, but it came with a problem he was not aware of: a homestead exemption in his father's name. Richardson never changed the paperwork and the property appraiser found out about the false claim and placed a $36,000 lien on the house.

    “That blows you away. It's hard to sleep at night ever since I learned that,” Richardson said. “I have no choice but to take care of it.”

    Holland hired two new staff members and their job, along with others, is to track down those who are not paying their fair share.

    I do believe there are many people who did not intend to commit fraud,” Holland said. “So in those cases we believe that. We haven't seen any willing cases where there was an attempt to do this. There's nothing we see to turn over to the State Attorney's Office.”

    In the last six months, Holland's office has uncovered $1.1 million in money that will eventually end up paying for city services. In all, 237 liens have been filed against property owners in that time.

    Compare that to the same time a year ago when $445,000 was billed with only 68 liens.

    Holland said this is just a start.

    “We are also looking to contract an outside firm that can do more data research for us,” Holland said. “They can check more out of state records for us. Do things our department can't do within their own confines.”

    Many homeowners said they just did not know and were just made aware that they were not in compliance.

    Officials advise double-checking all exemptions, particularly for homeowners who live in a house once owned by their parents. They said it's important to switch all the paperwork into your name if you're the owner.
Source: Crackdown on property tax fraud continues (Property appraiser places liens on 237 homes for false exemption claims).

NYC Officials: Real Estate Title Hijacking Racket Has Become Such A Thriving Industry That Deed Snatchers Now Have Their Own Corps Of Lawyers, Banksters, Notaries, & Real Estate Brokers

In New York City, the New York Post reports:
  • Property fraud — involving crooks who steal homes from people using fake deeds and other trickery — has become such a thriving industry that the hucksters now have their own corps of lawyers, mortgage bankers, notaries and real estate brokers, city officials said Monday.(1)

    “Perpetrators operate as an organized gang,’’ Finance Commissioner Jacques Jiha told a City Council panel.(2)

    The hearing also drew city Sheriff Joseph Fucito and victims’ advocates, including the Legal Aid Society, which called for a crackdown.

    The sheriff ’s office has a total of 671 open investigations into allegations of deed fraud, with the most, 326, in Brooklyn.

    There have been only 17 arrests so far, at least partly because of the complexity of the cases, authorities said. “It’s a form of organized crime . . . [with] a very complicated type of prosecution,’’ Fucito said.
Source: Property fraud alert.
(1) See The City’s Efforts to Combat Real Property Deed Fraud, Testimony of Jacques Jiha, Ph.D., New York City Commissioner of Finance (February 1, 2016).

(2) Ibid.

Lawsuit: Rich Hubby Who Secretly Divorced His Wife Months After Marrying Her Over 20 Years Ago Now Seeks To Sell Their $1+ Million Midtown Condo Out From Under Her

In New York City, the New York Post reports:
  • They were married for 20 years, raising a son and living the good life jetting between homes in New York and France.

    It was all perfect, except for one thing: He had secretly divorced her just months after their wedding, in an apparent attempt to shield his assets.

    Now Cristina Carta Villa, 59, is suing her 90-year-old “husband,” Gabriel Villa, to nullify the divorce she never knew about — and keep him from selling an apartment they shared.
    Even though the couple didn’t live in the Dominican Republic, Gabriel launched the legal dissolution there. He hired lawyers to represent each spouse and cited “incompatibility of temperaments” as the reason for the split, Cristina claims in a Manhattan Supreme Court lawsuit.

    Cristina found out about it only in November when a tax bill arrived for their Manhattan home and her name wasn’t on it. She hired a lawyer to investigate, only to learn that Gabriel had tried to remove her name from the deed, using the Dominican Republic proceeding as proof she was not an owner, she charges. [...] She believes her husband wants to sell the apartment to his adult daughter, Marina Villa, who lives in Rome. One-bedroom condos in the Midtown building sell for roughly $1.4 million, records show.

Thursday, February 04, 2016

Indiana AG: Out-Of State Foreclosure Sale Surplus Snatchers Duped Dozens Of Homeowners Out Of Million$; Defendants Allegedly Paid Approx. $13K For Rights To Over $3.2 Million In "Overage" Claims

In Indianapolis, Indiana, The Indianapolis Star reports:
  • Three out-of-state business owners attempted to swindle financially strapped Hoosier property owners out of more than $3 million, according to a lawsuit filed [this week] by Indiana Attorney General Greg Zoeller.

    The lawsuit filed in Marion Superior Court seeks more than $9 million in damages, fines and penalties. It alleges the companies based in Florida, Oklahoma and Nevada "took advantage of vulnerable Hoosiers who had fallen behind in their real-estate taxes and who did not understand the tax sale process."

    In the complicated scam, the alleged unscrupulous predators would swoop in after a property was sold for delinquent taxes — but before it was redeemed by the tax-sale buyer — and pay the owner a few hundred dollars to turn over their remaining legal rights to the property.

    At least 48 property owners in Marion, Allen, Johnson and Lake counties were caught up in the scheme, which focused on properties that had sold at tax sales for significantly more than the amount of delinquent taxes owed.

    In such cases, the property owner can collect the "overage" paid in the tax sale — the amount above the taxes due, plus interest and other fees owed to the county and new buyer.

    What's left over basically amounts to the owner's "equity" in the home and belongs to the owner if there are no other liens, such as mortgages, on the property.

    In one instance, the lawsuit alleges, one of the defendants paid a property owner $450 for a quitclaim deed, which transferred the ownership to the defendant. Along with that ownership came the right to collect the "overage" of $900,000 that was paid by the new buyer above the amount of delinquent taxes due.

    That money had been due to the original owner but, according to the lawsuit, the defendant "used misrepresentations" about the owner's legal rights. That helped the defendant persuade the owner to sell and allowed the defendant to claim the windfall, which the owner did not know about.

    A statement from the attorney general's office said "it is estimated that the defendants paid the 48 original owners a combined total of $13,640 for signing the quitclaim deeds, and after defrauding the owners out of their legal rights to the tax-sale surplus amounts, the defendants were eligible to submit claims for $3,265,204 in tax-sale surplus payments."

    That amounts to more than a 23,800 percent return on their modest investments.

    “Rarely have we seen a scam that so brazenly exploited desperate property owners and took advantage of their lack of understanding of a complicated legal process," Zoeller said in the statement. "Victims not only lost their property but money that was rightfully owed to them.”

    Zoeller said he suspects there are other victims in Indiana and that the scam was perpetrated in other states as well.

    “My office will use every legal tool available to halt this fraud, hold the defendants accountable and assist the victims,” he said.

    The lawsuit names FLRC LLC, and Coastal Title Inc. of Florida, and Oak Tree Title Inc. of Stillwater, Okla. Also named in the case are Diana Castro, David Fuqua and Craig Talkington, who are identified in the attorney general's statement as owners of the three businesses.
For more, see Indiana Attorney General Greg Zoeller files suit in tax-sale scam (Attorney General Greg Zoeller: Complicated scam "took advantage of vulnerable Hoosiers who had fallen behind in their real-estate taxes and who did not understand the tax sale process.")

Foreclosure Surplus Snatchers Begin Making Their Return

From a following op-ed article in The Denver Post by Debra Johnson, the city of Denver's elected clerk and recorder:
  • As Denver's clerk and recorder, I returned more than $2 million in excess funds in 2015 to people who lost their homes in foreclosure.

    But "finders" try to take some of that money from the people who need it most. These people tell those whose homes sold at a foreclosure auction that the only way to get the excess funds is to pay the finder to get it for them.

    Properties that sell in a foreclosure auction are selling at higher and higher prices. Often that means the property sells for more than was owed. The difference in the selling price and what is owed is called excess funds.

    Excess funds belong to the people who went through foreclosure, and my office gladly gets those funds back to them free of charge.

    Finders tell people that we're sending the money out of state. Finders tell people that we don't want to give them the money. Finders contact people before their home is even sold and persuade them to give the finder money to use their services — unnecessary services.
    We don't have any illusion that this money will fix [foreclosed homeowners] lives and make it whole again. But it can help. [...] You might know someone on the excess funds list. We currently have more than $2.1 million in excess funds we're holding for people.

    There is no cost to these people to get their money.

    Please check the list at Click on "Foreclosure & Auction Information," then "Did Your House Sell?" The current list of properties with excess funds is there, along with the claim form and instructions.

Sleazy Ex-Judge Reverses Course On 'No Contest' Plea, Goes To Trial & Is Convicted Of Defrauding Couple By Selling Them Home Using Contract For Deed & Failing To Pay Existing Mortgage; Gets 9-Year Suspended Sentence, Promises To Pay Restitution

In Las Cruces, New Mexico, the Las Cruces Sun-News reports:
  • Former El Paso County Judge Anthony Cobos received a nine-year suspended sentence, five years’ probation and was ordered to pay restitution after defrauding a couple in a Chaparral, New Mexico, property deal.

    Cobos will begin the probation after he completes his four-year sentence on a 2013 federal corruption charge for accepting bribes while he was the El Paso county judge.

    He could be released on that charge as early as October, depending on credit for good time served, defense attorney Joshua Boone said.

    Cobos faced a maximum of nine years in prison in the Chaparral embezzlement case. He was found guilty of one count of embezzlement over $20,000 earlier this month.

    During the sentencing in Las Cruces District Court on Friday, Judge Marci Beyer agreed to defer the sentence so Cobos could begin paying restitution to the victims earlier.

    Cobos was accused of failing to use payments he received from a couple in a land and home deal in Chaparral to pay the mortgage on the property.

    Maribel Samaniego and Jesus "Mike" Zamora testified earlier this year that they paid Cobos monthly payments of $506 from September 2009 to May 2013 for the property, located in the 300 block of Oasis Drive in Chaparral. They also paid a lump sum of $20,000 in several payments as part of another contract between them and Cobos involving the property.

    The couple said they believed Cobos would sign the property's deed over to them and that the money was being used to pay the mortgage.

    They said they stopped paying in June 2013 when the bank holding the mortgage said the property was subject to foreclosure and that no payment had been made on the mortgage since December 2012.

    The restitution Cobos must pay depends on whether the couple can acquire the property, which is in foreclosure.

    If they don't acquire it, Cobos must pay them $28,675.60, the amount the couple had paid him.

    If they do acquire it, either before the foreclosure process ends or at auction, Cobos must pay them the fair market value of the property — estimated at $90,000 – minus the $28,765.60 they have paid him, minus what they paid to get the property.

    Boone said he hopes Cobos will be able to find a job and be able to start paying restitution after he gets out of prison. He called the sentence “fair.”

    Doña Ana County District Attorney Mark D’Antonio attended the sentencing, at one point arguing for prison time for Cobos.

    “I thought it was important for the district attorney to be involved in a white color crime and demonstrate we take these cases very seriously,” D’Antonio, who is running for re-election this year, said after the hearing. “White collar crime is not a victimless crime. It has severe consequences.”

    Beyer argued against prison time if the victims primarily want to “be made whole” through restitution, noting prison time would prevent Cobos from paying restitution.

    Beyer asked Samaniego about her preference.

    “We want to be made whole, and, if that’s not possible, then incarceration is what we want to do,” Samaniego told the judge.

    Samaniego declined to speak with reporters after the sentencing.

    “The loss of money by corrupt individuals has a devastating effect,” D’Antonio said. “Our victim in this case was severely — and her family — damaged.”
Source: Ex-El Paso judge gets 9-year suspended sentence.

For an earlier post on this story, see Already Serving Four Years In Federal Pen For Pocketing Palm Grease, Ex-Judge To Now Take 'No Contest' Plea (Unloaded Home Belonging To Deceased Stepmom, Using Contract For Deed To Collect Monthly Payments While Failing To Pay Existing Mortgage, Leaving Unwitting Buyer-Couple Facing Foreclosure After Having Made At Least $20K In Payments).

Wednesday, February 03, 2016

Illinois AG Scores Court Order Directing Notorious Chicago Businessman To Compensate Five Homeowners & Pay $340K Fine In Connection w/ Equity Stripping, Home Improvement Racket That Used Victims' Reverse Mortgage Proceeds To Pay For Shoddy Repairs (If Any Were Done At All)

In Chicago, Illinois, The Chicago Defender reports:
  • A Cook County judge has ordered a Chicago businessman behind a reverse mortgage scam targeting elderly African-Americans to compensate five of his victims and quit operating his business while his case winds through the courts.

    Mark Diamond, who may have defrauded more than 100 homeowners in a mortgage and home repair scheme, was also ordered to pay a fine of $340,000 by Cook County Circuit Court Judge David B. Atkins last week.

    Illinois Attorney General Lisa Madigan sought the injunction against Diamond; testimony from the five people who will receive restitution was included in her office’s request for the injunction.

    “This is a significant victory for people whose lives were destroyed by Mark Diamond,” Madigan said in an email. “Diamond’s equity-stripping schemes financially devastated too many older African Americans and their families. This win will prevent him from conning people out of their life savings and homes in Illinois.”

    Diamond could not be reached for comment.

    Reverse mortgages are a tool for senior citizens to convert a portion of their home’s value into cash. The loan doesn’t have to be repaid until the person moves out of the house or dies. If family members want to keep the house, they have to pay off the debt.

    Last January, The Chicago Reporter wrote about how Diamond has been accused in many federal cases of swindling elderly black homeowners on the city’s South and West sides and sued dozens of times in Circuit Court. Diamond would convince the homeowner to take out the mortgage by saying the money would pay for home repairs, maneuver to get most or all of the money from the transaction, and perform shoddy work, if anything was done at all, according to several of the lawsuits.

    Madigan said she filed the injunction request in October 2014 after an uptick in the number of complaints against Diamond.

    The goal of the injunction was to stop Diamond from conducting business while a 2009 case she filed on behalf of dozens of elderly black homeowners is adjudicated, she said. The 2009 lawsuit alleged that Diamond and other mortgage and home repair companies had stripped nearly $1.3 million in equity from the homeowners, many of whom lost their houses in foreclosure.

Notorious Motown-Area Real Estate Operator Who Targeted Naive Homebuyers By Using Worthless Land Contracts To Sell Them Dilapidated Homes In Some Stage Of Foreclosure Gets 15 Months To Five Years On Multiple False Pretenses Charges

In Detroit, Michigan, WXYZ-TV Channel 7 reports:
  • A man who was the subject of several 7 Investigators reports for selling properties he didn't own will be spending the next 15 months to 5 years in prison.

    Leonard Bale was sentenced by Judge Timothy Kenny today. He was found guilty of 6 counts of false pretenses earlier this month.

    Bale was selling properties to people on land contract, despite there being mortgages on them. Many times the mortgages were in default and the homes were in foreclosure.

    Bale was tried in a bench trial, along with Jerald Payton. Payton was acquitted on all counts.

    In sentencing Bale, the court said he took advantage of people who were vulnerable and he was motivated by greed. He was remanded into custody.

Florida Supremes Discipline Four Attorneys For Conduct Related To Mishandling Or Misappropriating Cash In Clients' Trust Account

The latest edition of The Florida Bar's gossip sheet is out, in which the state's guardian for the integrity of the legal profession, announced that the Florida Supreme Court has disciplined 15 attorneys – disbarring two, revoking the license of one, suspending seven attorneys and publicly reprimanding five.

Of the 15 lawyers, the following four were variously disciplined for, at a minimum, playing fast & loose with money entrusted to them by their clients and/or others (two getting the boot; one getting an indefinite suspension, and the fourth suspended for 90 days for apparently taking his eye off the ball in getting carelessly but unwittingly caught up in a bad situation):
  • John Charles Archer, Englewood. The Supreme Court granted Archer’s request for a disciplinary revocation, effective 30 days from a Nov. 12, 2015, court order, with leave to seek readmission after five years. (Admitted to practice: 1991) Disciplinary revocation is equivalent to disbarment. Disciplinary charges pending against Archer included allegations of failing to properly supervise non-lawyer employees, sharing fees with a non-lawyer employee, false advertising, mishandling of client funds, failure to properly maintain trust account records, and accepting prohibited up-front legal fees for out-of-state clients seeking modification of their home loans. (Case No. SC15-1661)

    William Thomas Edy, Cape Coral, permanently disbarred effective 30 days from a Dec. 10, 2015, court order. (Admitted to practice: 1977) In several instances, Edy was paid thousands of dollars to handle cases and he failed to provide services. Edy also misappropriated and commingled client funds, he failed to properly supervise non-lawyer employees, and he fraudulently used the credit card of a deceased person. Edy was subsequently arrested for Second Degree Grand Theft related to the misappropriated funds. (Case No. SC15-1196)

    Charles Francis McKinnon, Homestead, suspended until further order, following a Dec. 3, 2015, court order. (Admitted to practice: 1996) According to a petition for emergency suspension order, McKinnon appeared to be causing great public harm by misappropriating and/or diverting funds entrusted to him, and by his failure to respond to official Bar inquiries and subpoenas. (Case No. SC15-2147)

    Michael Lynn Moore, Orlando, suspended for 90 days, effective 30 days from a Nov. 12, 2015, court order. (Admitted to practice: 1990) Moore was hired to receive and remit investment funds through his trust account. Ultimately, the investment scheme proved to be a scam. While Moore had no involvement in it and did not draft documents regarding the investment scheme, he was negligent in not closely scrutinizing the one-sided investment agreements and strategies. Moore's trust account was not fully compliant with the rules. While Moore was on vacation, an employee, who was also a client, withdrew her settlement funds while there were liens against those funds. The employee was prosecuted and ordered to pay restitution. No clients lost funds resulting from her actions. There was no misappropriation by Moore. (Case No. SC15-1888)
Source: Supreme Court Disciplines 15 Attorneys.

Editor's Note: To view discipline documents, follow these steps. Additional information on the discipline system and how to file a complaint are available here.

Tuesday, February 02, 2016

S. California Jury Convicts Ponzi Scheme Operator Who Used "Hard Money Real Estate Lending" Cover As Conduit To Funnel Cash From Unwitting Mortgage Investors Into His Own Pocket, Failing To Make Promised Loans; Suspect Recorded Fraudulent, Forged Lien Documents, Made Lulling Payments To Delay Victims' Discovery Of $3+ Million Ripoff

From the Office of the Orange County, California District Attorney:
  • A “hard money” lender was convicted [] of embezzling over $3 million from investors in a Ponzi real estate-mortgage investment fraud scheme.

    Thomas Franklin Tarbutton, 56, Newport Beach, was found guilty by a jury of 18 felony counts of grand theft, nine felony counts of forgery, 11 felony counts of using an untrue statement in the purchase or sale of a security, and one felony count of the use of a device or scheme to defraud. Sentencing enhancements for loss of over $100,000, property loss over $3.2 million, and aggravated white collar crime of over $500,000 were found true.

    Tarbutton faces a maximum sentence of 34 years and four months in state prison at his sentencing on March 4, 2016, at 9:00 a.m. in Department W-9, West Justice Center, Westminster.

    Between 2004 and 2010, Tarbutton operated Villa Capital Inc. as a “hard money” lender who solicited money from private investors for borrowers looking for funds from non-bank lenders. The defendant defrauded eleven people in a Ponzi real estate mortgage investment fraud scheme. A “Ponzi” scheme is a fraudulent scheme that offers investors high, short-term returns on investments. Instead of using the money to generate actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors.

    Tarbutton embezzled money from his private investors by keeping the money they lent for borrowers and not funding the loans as promised. He gave his victims fraudulent and forged real estate documents from both the Orange County Clerk-Recorder and the Los Angeles County Registrar-Recorder /County Clerk Departments showing that they were lien holders on property deeds, and supplied investors with false and forged mortgage payments and fraudulent documents of investment of the mortgage payments.

    The defendant supplied his investors with small interest payments using funds from their investments [ie. "lulling payments"] to prevent them from discovering that the loans were either no longer preforming or, in several instances, that the loans had never been funded in the first place. Tarbutton then stopped making any and all payments in the summer of 2010, after the real estate market had completely collapsed.

    The fraud was reported by four victims to the Federal Bureau of Investigation (FBI) in October 2010. The FBI, with assistance from Orange County District Attorney’s Office (OCDA) Investigators, investigated this case.

    In October 2011, charges were filed against Tarbutton and a $2 million warrant was issued for his arrest. The defendant fled the country, ultimately living in Brazil.

    In December 2013, Tarbutton flew from Brazil to Panama. He was detained by Panamanian authorities on the Orange County warrant on Dec. 14, 2013, for attempting to cross the border from Panama to Costa Rica. Panamanian officials returned Tarbutton to Los Angeles International Airport to the custody of the FBI and OCDA on Dec. 17, 2013.
Thanks to Deontos for the heads-up on this story.

New Haven Feds Pinch Seven California Residents In Alleged Loan Modification Racket That Screwed Homeowners Nationwide Out Of Thousand$ In Upfront Fees

From the Office of the U.S. Attorney (New Haven, Connecticut):
  • A federal grand jury in New Haven has returned an indictment charging seven California residents with conspiracy and fraud offenses stemming from an alleged scheme to defraud homeowners across the United States who were seeking mortgage loan modifications. The 14-count indictment was returned under seal on January 21 and all seven defendants were arrested this morning.

    Charged in the indictment are:

    ARIA MALEKI, 33, of Santa Ana, Calif.
    MEHDI MOAREFIAN, a.k.a. “Michael Miller,” 36, of Irvine, Calif.
    KOWIT YUKTANON, a.k.a. “Eric Cannon,” 31, of Huntington Beach, Calif.
    CUONG HUY KING, a.k.a. “James Nolan” and “Jimmy, 32, of Westminster, Calif.
    DANIEL SHIAU, a.k.a. “Scott Decker,” 30, of Irvine, Calif.
    SERJ GEUTTSOYAN, a.k.a. “Anthony Kirk,” 33, of Santa Ana, Calif.
    MICHELLE LEFAOSEU, a.k.a. “Michelle Bennett,” 41, of Huntington Beach, Calif.
    The indictment alleges that, acting as representatives of these entities, the defendants and their co-conspirators cold-called homeowners and offered to provide mortgage loan modification services to those who were having difficulty repaying their home mortgage loans. The defendants charged homeowners fees that typically ranged from approximately $2,500 to $4,300 for their services.

    To induce homeowners to pay these fees, the defendants falsely represented that the homeowners already had been approved for mortgage loan modifications on extremely favorable terms; the mortgage loan modifications already had been negotiated with the homeowners’ lenders; the homeowners qualified for and would receive financial assistance under various government mortgage relief programs, including the Troubled Asset Relief Program and the Home Affordable Modification Program; and if for some reason the mortgage loan modifications fell through, the homeowners would be entitled to a full refund of their fees.

    The indictment alleges that the homeowners had not been preapproved for mortgage loan modifications with lenders, mortgage loan modifications had not been negotiated with the lenders, homeowners did not qualify for and did not receive any financial assistance through government mortgage relief programs, and homeowners did not receive a refund of their fees upon request. Few homeowners ever received any type of mortgage loan modification through the defendants’ companies, and few homeowners received refunds of their fees.

    The indictment further alleges that the defendants used pseudonyms and periodically changed their business and operating names to evade detection. The defendants also directed homeowners to mail their checks to addresses and mail boxes that the defendants and their co-conspirators had set up in states other than California.

    According to the indictment, the defendants routinely ignored cease and desist orders directed at them, including a December 17, 2013, order from the State of Connecticut Department of Banking to cease and desist from charging advance fees to Connecticut residents for mortgage modification services.

Real Estate Broker, Firm Lose Licenses For Playing Fast & Loose With Customers' Cash Held In Company's Trust Account

In Oromcto, New Brunswick, CBC News reports:
  • Oromocto realtor K. Walter Moore and his Town & Country Market Realty Ltd. have had their licences to operate in New Brunswick cancelled by the director of consumer affairs for the province's Financial and Consumer Services Commission.(1)

    Walter Moore, owner and manager of Town & Country Market Realty Ltd. K. Walter Moore is the owner and manager of of Town & Country Market Realty Ltd. in Oromocto. Both have had their licences to operate in New Brunswick cancelled.

    Moore is the owner and manager of Town & Country Market Realty in Oromocto.

    A news release from the commission states the licences were cancelled after breaches of the Real Estate Agents Act were identified during a recent review of Moore's business.

    The breaches identified include improper use of a trust account by failing to deposit money directly into trust and withdrawing money from trust funds to pay operating expenses.

    "The Real Estate Agents Act is very clear on the obligations surrounding trust funds, and the commission's role is to protect consumers by ensuring compliance with the act," said the commission's chief executive officer Rick Hancox in a news release.
For more, see Oromocto real estate agent, firm lose licences (K. Walter Moore, Town & Country Market Realty have licences cancelled by consumer services commission).
(1) For the ruling of the director of consumer affairs, see In re K. Walter Moore, et ano.