Tuesday, May 03, 2016

Three Homeowners Who Successfully Warded Off Foreclosure In Court Get Kiboshed In Requests To Recover Their Attorney Fees When Their Law Firm Allowed Fee Motions To Get Stale Languishing On Court Dockets For 14 Months Or More

From a recent blog post from the law firm Fox Rothschild LLP:
  • HSBC Bank avoided a potential attorney’s fee judgment when the trial judge deemed abandoned a borrower’s post-dismissal motion for costs and attorneys’ fees.

    In an opinion released [last week], Florida’s Fourth District Court of Appeal affirmed that ruling in the case of Domenic Grosso a/k/a Domenic L. Grosso v. HSBC Bank USA, N.A., 4th DCA Case 4D14-3971 (Apr. 27, 2016).

    Deutsche Bank received the same treatment in Felice Berenson v. Deutsche Bank National Trust Company, 4th DCA Case No. 4D14-3985 (Apr. 27, 2016) (borrower’s motion “languished” for 14 months), and Ramon Ramos and Miriam Ramos v. Deutsche Bank National Trust Company, 4th DCA Case No. 4D14-3981 (Apr. 27, 2016) (borrowers’ motion “languished” for 22 months).(1)

    HSBC sued its borrower for foreclosure, but filed a voluntarily dismissal and the case was closed. The borrower filed a motion for costs and attorneys’ fees, but did not file supporting affidavits, set the motion for hearing, or take any other record activity for 18 months.

    After reviewing the docket, the trial judge, Judge Richard Oftedal, ordered that the case be administratively closed and that any post-trial motions that had not been set for hearing be deemed abandoned.

    The borrower argued on appeal that Judge Oftedal’s ruling constituted a dismissal for lack of prosecution, but without compliance with Florida Rule of Civil Procedure 1.420. The Fourth DCA disagreed, finding that Rule 1.420 applies only to “actions” and that the borrower’s motion was “simply a motion.”

    The appellate court went on to confirm that the trial court did, in fact, have the inherent authority to deem the borrower’s motion abandoned under the circumstances. The Fourth DCA concluded that Judge Oftedal’s presumption was “not erroneous” and that it is not an abuse of discretion to deem abandoned a motion that “was left to languish on the docket for eighteen months.”

    Having taken a voluntary dismissal, HSBC was not the prevailing party and very well may have been liable for costs and attorneys’ fees. However, the borrower’s inaction prevented him from having any chance of making HSBC reimburse him for the costs and attorneys’ fees he incurred in defending the case. So, time does mean something and it shouldn’t be that easy to forget about the fees. But, “even the losers get lucky sometimes.”
Source: Court’s Inherent Authority to Deem Motions Abandoned: Even the Non-Prevailing Party Gets Lucky Sometimes.
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(1) In each ruling, all issued on the same day, it was the same foreclosure defense law firm which got caught snoozing with its pants down.

Federal Appeals Court OKs $500K In Emotional Distress Damages Against Loan Servicer For “Extreme & Outrageous Conduct” For Harassing, Foreclosing On Borrower Over Late Charges & Associated Fees Based On Incorrectly-Calculated Mortgage Payment; Trial Court To Reconsider $3 Million In Punitive Damages

From a recent blog post from the law firm Balch & Bingham LLP:
  • Following the Eleventh Circuit’s decision last month in McGinnis v. American Home Mortgage Servicing, Inc., No. 14-13404, mortgage servicers should be aware that failing to recognize and correct miscalculations of a borrower’s payment may subject them to liability for extreme and outrageous conduct in certain circumstances.

    American Home Mortgage Servicing, Inc. took over the servicing of mortgages on several rental properties in Georgia owned by Jane McGinnis. American’s welcome letter to McGinnis stated that her monthly payment had risen over $200 from the amount she had been paying the previous servicer. Believing she did not owe this additional amount, McGinnis continued paying the original amount, and American charged her additional fees for the apparent deficiency. Eventually, American conceded that it had miscalculated the payment amount, but insisted that McGinnis pay the previously incurred late fees. American eventually foreclosed on one of McGinnis’s properties due to nonpayment of these late fees and related charges. McGinnis sued America for wrongful foreclosure, intentional infliction of emotional distress, and conversion, among others.

    The jury awarded McGinnis $6,000 in compensatory damages, $500,000 in emotional distress damages, and $3,000,000 in punitive damages. The trial court then granted American’s motion to reduce the punitive damages award to $250,000, holding that there was insufficient evidence that American acted with specific intent to cause harm as required to overcome Georgia’s $250,000 statutory cap on punitive damages. Both parties appealed to the Eleventh Circuit.

    The Court held that American’s acts could constitute “extreme and outrageous conduct” sufficient to support the jury’s award of emotional distress damages, because American agents frequently harassed McGinnis by phone and mail, American foreclosed in a fairly short amount of time for a relatively small amount of money, and American failed to correct McGinnis’s account despite McGinnis’s several attempts to seek relief from American’s miscalculated payment amount.

    The Court also reversed the trial court’s reduction of the punitive damages award. The Court held that American had failed to preserve a Rule 50(b) motion on the issue of American’s specific intent to harm because it had not specifically raised that issue in the trial court. The Court remanded the case to the trial court for further proceedings.(1)
Source: Eleventh Circuit Affirms Jury Verdict Against Mortgage Servicer for Extreme and Outrageous Conduct.

For the court ruling, see McGinnis v. American Home Mortgage Servicing, Inc., No. 14-13404 (11th Cir. March 22, 2016).
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(1) The appeals court remanded the case to the district court for consideration of the loan servicer's motion for a new trial on the issue of punitive damages.

Title Agent w/ Dubious Past Accepts Incarceration 'Buy-Down' Deal After Pleading Guilty To Forging Closing, Recording Documents In Real Estate Transactions, Failing To Record Mortgages; Judge Scraps Six-Month Jail Sentence, Gives Her 4-Month 'Weekend Warrior' Duty Instead After Fully Paying Off Restitution

In Ontario County, New York, WHEC-TV Channel 10 reports:
  • A Webster woman will spend each weekend over the next four months in the Ontario County Jail after being sentenced for her involvement in a mortgage fraud scheme that took place more than six years ago.

    As part of the sentence agreement, Ontario County Court Judge William Kocher mandated that defendant Janet Leigh Faticone, 51, of 705 Mackenzie Court, pay back the money she illegally obtained or receive a six-month jail sentence.

    Faticone paid the restitution in full, a total of $3,736.50, which resulted in the judge opting for the lesser penalty of four months in jail that will be served on weekends. The Webster woman was additionally given five years of probation.

    Faticone faced a slew of charges, including residential mortgage fraud, falsifying business records and grand larceny, after an investigation that included the work of the FBI, the New York State Department of Financial Services' Criminal Investigation Unit and Ontario County sheriff’s deputies.

    During the course of the year-long investigation, it was discovered that in November and December 2009, doing business as Liberty Title Agency New York, Faticone forged several documents using the alias Janet Bixby during the closing process of three mortgages on properties in the town of Phelps, Canandaigua and Canadice.

    Faticone failed to record two of the three mortgages with the Ontario County Clerk’s Office, deputies said.

    It was further discovered that Faticone, under Liberty Title Agency, forged the Ontario County clerk’s recording page and title insurance documents to produce to the banks funding the mortgages, according to deputies.

    It isn’t the first time Faticone has faced charges of fraud.

    In 2005, Faticone pleaded guilty to one count of mail fraud and was sentenced to 12 months and one day in prison by United State District Court Judge David G. Larimer, according to court records.

    A criminal complaint filed on Jan. 31, 2005, by Michelle Mann, in the Western District New York Court, states that Faticone, the owner of Pogal Title Agency Inc. located in Rochester, was arrested along with Denise A. Strollo, a mortgage broker, and Ronald DiPonzio, an employee at Pogal Title.

    In the complaint, Mann, a U.S. postal inspector, states the trio had executed a scheme to defraud approximately 100 customers of Strollo who were attempting to obtain mortgage loans as well as the various lenders who provided the loans.

    The scheme in 2004 involved charging Strollo’s customers with false and inflated expenses, which they did by falsifying settlement statements, Mann stated.

    Those statements are required to identify the actual costs and expenses associated with a mortgage loan. The trio would split fraudulently received proceeds after closing.
Source: Webster woman receives jail sentence for mortgage fraud scheme.

Thanks to Bill Collins at Frontier Abstract & Research Services in Rochester, NY for the heads-up on the story.

Monday, May 02, 2016

Pair Dodge Lengthy Prison Time, Get Less Than Two Years Each In Separate Flipping Scams Targeting Underwater Homes; Rackets Involved Fraudulent Lien Satisfactions, Bogus Short Sales Using Simultaneous 'Double Escrows' To Dupe Lenders Into Taking 'Haircuts' On Outstanding Loan Balances

From the Office of the U.S. Attorney (San Diego, California):
  • Brothers and former San Diego real estate brokers Adel Afkarian and Atef Afkarian were sentenced [] to prison for their role in a fraudulent “debt elimination” scheme that purported to eliminate the mortgages on several million-dollar homes in San Diego.

    U.S. District Judge John A. Houston sentenced Adel Afkarian to serve 18 months in custody and Atef Afkarian to serve 13 months. In addition to the time in custody, the brothers were both ordered to pay more than $5.5 million in restitution to the victims of the scheme.

    To implement the scheme, the Afkarians identified underwater homeowners—including themselves—and began a process to make it appear as though the homeowners’ debts had been satisfied. To do so, they recorded fraudulent deeds that purported to extinguish the large mortgage loans encumbering each property.

    They then sold the properties to innocent purchasers, deceiving the buyers into paying the full purchase price to the Afkarians or their co-conspirators. The mortgage lenders, unaware of the fraudulent documents recorded on title or unable to prevent the sale in time, were left unpaid.

    With regard to their own underwater home, the Afkarians pretended that $1.4 million in mortgage debt had vanished. They used the “debt elimination” method to successfully arrange the fraudulent sale of a total of four properties in and around San Diego, generating more than $4.3 million in proceeds which went directly into bank accounts owned by the brothers and their co-conspirators. In some cases, they sold this fraudulent “debt elimination” program to existing clients of their mortgage business.

    In addition to the “debt elimination” scheme, Adel and Atef Afkarian also conspired to arrange fraudulent short sales for underwater clients through a simultaneous “double escrow” scheme. Rather than selling an underwater home at a pre-approved short sale price, the defendants arranged two simultaneous sales of the same property at two different sale prices, using a straw buyer as the intermediary and purported seller in the second transaction. This way, the short sale lender would believe that the property was being sold for initial first-escrow price, rather than the higher second-escrow price (which was in fact the arms-length market sales prices). The defendants and their co-conspirators would then pocket the difference, diverting money from the lenders.
    ***
    The Afkarians each pleaded guilty in September 2013, admitting their participation in these schemes. As part of their guilty pleas, they also agreed to forfeit a home on Santa Fe Canyon Place, which they had purchased using approximately $715,000 in proceeds of the fraud, and an additional $388,000 recovered from bank accounts where they had transferred proceeds.

    One of the Afkarians’ clients, Mehran Abazary, was also charged in connection with this case, and pleaded guilty on December 15, 2015. Abazary admitted that he owed more than $2 million in mortgage debt when he hired the Afkarians and their co-conspirators to help him “eliminate” this debt and sell the property. When the sale closed, Abazary received $250,000 in proceeds of the sale. Abazary pleaded guilty to filing a false tax return omitting to disclose this income to the Internal Revenue Service. He is scheduled to be sentenced by Judge Houston on September 6, 2016, at 8:30 am.

Real Estate Developer Gets 12 Months Prison Time, 12 Months House Arrest For Filing Forged Lien Satisfaction On Existing Mortgage, Followed By $8.9 Million Refinancing Deal

From the Office of the U.S. Attorney (Fresno, California):
  • United States District Judge Anthony W. Ishii sentenced Aruna Kumari Chopra, 66, of Modesto, [] to one year and one day in prison, to be followed by a year of home confinement, for her mail fraud conviction in connection with a mortgage fraud scheme, United States Attorney Benjamin B. Wagner announced.

    According to court documents, in 2008, Chopra purchased property on Dale Road in Modesto that she intended to develop into a shopping center to be called “The Plaza at Dale.” She defrauded lenders by filing documents with the Stanislaus County Recorder's Office that contained forged signatures in an attempt to conceal liens on the property from her lenders. The loans made by the defrauded lenders on the property totaled approximately $8.9 million. Chopra pleaded guilty on November 30, 2015.

Sunday, May 01, 2016

NYC Non-Profit Law Firm Helps Illegally Booted Tenant Recover Possession Of Rented Apartment Due To New Landlord's Failure To Give Proper Notice After Purchasing Foreclosed Property

In Flushing, Queens, the New York Law Journal reports:
  • A Queens judge said a tenant who was evicted without proper notice can return to her apartment.

    Housing Court Judge Jose Rodriguez said in his April 15 decision, Sun v. Capies, 73891/15, that Brittany Capies could be restored to possession forthwith.

    Yun Zhong Sun became the owner of the Flushing building in July 2015, after the previous owner had been foreclosed upon.

    In August, Sun served Capies with a 10-day notice to terminate the lease and then served her with a holdover petition the following month. According to the petition, Capies was a tenant subject to an oral agreement.

    Capies failed to appear and Sun was awarded a judgment of possession. The eviction warrant was stayed twice before she was evicted.

    Capies then found representation through Queens Legal Services.(1)

    Moving to vacate or modify the decisions, Capies, through counsel, said Sun did not serve a 90-day notice after the foreclosure, as required by Real Property Actions and Proceedings Law (RPAPL) §1305.

    Sun did not dispute failing to provide the written 90-day notice but argued that Capies' failure to appear and submit an answer made it too late for her to assert a notice defense.

    Rodriguez was not swayed. "In the instant proceeding respondents meet the definition of tenants as defined by RPAPL §1305," he said. "It is clear and undisputed that petitioner failed to comply with the notice requirements contained in RPAPL §1305."

    Leah Pappas of Pappas & Pappas in Queens represented Sun.

    Robert Sanderman, a staff attorney in the housing rights unit at Queens Legal Services, represented Capies.
Source: Absence of Notice Cited in Eviction Reversal Ruling (may require paid subscription; if no subscription, TRY HERE, then click the appropriate link).

For the ruling, see  Sun v. Capies, Index No. 73891/15 (NYC Civ. Ct. Queens County, April 15, 2016).
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(1) Queens Legal Services is a non-profit law firm in Jamaica, New York providing civil legal services, social work support and advocacy to low-income communities throughout Queens County, NY.

Harassment Of Nearly-Impossible-To-Evict, Rent-Stabilized Tenants Remains Unabated In One NYC Landlord's Properties; Careless Renovations In Aging Buildings Create Blizzard Of Highly Toxic Lead Dust

In the East Village section of New York City, The Villager reports:
  • When renovation work started on an empty apartment in her building last month, Holly Slayton was annoyed that she would likely have to deal with nonstop construction noise for a few weeks.

    But as the work at 514 E. 12th St., a five-story walk-up near Tompkins Square Park, progressed, a more serious problem soon surfaced — lead dust, the highly toxic and potentially fatal substance that is often found in the paint inside old buildings, began to seep through every crevice.

    The dust is coming underneath my floorboards, in my walls. The hallway is coated in it,” said Slayton, who has lived in the building for 11 years and said that she, along with her seven-year-old daughter, began to experience the physical effects of the fine powder around the same time the renovation started.

    I have a sore throat and I’ve had migraines for two months,” she said. “My daughter just had an upper-respiratory infection. I can’t even be in my apartment half the time.”(1)

    After suffering for more than a month, she made a trip to the doctor last week, who prescribed she wear a facemask.

    But by that time, she already knew of the potential dangers: In mid-March, after multiple complaints to the city, a team from the Department of Health stopped by the building, as well as two others on E. Fifth St. that are owned by the same landlord.

    The results of the inspectors’ probes: Up to 16 times the safe amount of lead was found in some common areas, according to federal standards.

    “And that was a week later, after the renovation was done,” said Sandra Mayer, who lives with her husband at 233 E. Fifth St., the worst offender in the group. “It’s not a healthy environment to be living in.”

    Last week, tenants from the three buildings — which also include 235 E. Fifth — rallied outside the offices of their landlord, Raphael “Raffi” Toledano, whose property fund Brookhill Properties manages the buildings.

    It’s not the first time that Toledano — a 25-year-old real estate mogul, who added more than a dozen East Village buildings to his real estate portfolio last year — has been accused of wrongdoing.

    He is currently the subject of a state investigation into tenant harassment, and residents at 444 E. 13th St. have taken him to court over alleged attempts to drive them out of their rent-stabilized homes through illegal construction and persistent threats and buyout offers.

    In January, The Villager revealed that the young landlord also has a past assault conviction for beating up a group of teenagers in New Jersey four years ago — news that only ratcheted up the worries of many of his already concerned tenants.

    Some of them have organized under the banner of the Toledano Tenants Coalition to fight against eviction efforts and other problems at their buildings. They gathered in front of the Brookhill offices at 298 Fifth Ave. on Tues., April 12.

    “Basically, we’re holding him hostage,” said SaMi Chester, an organizer with the Cooper Square Committee, a housing preservation group that is supporting the tenants.

    Dressed in hazmat suits and wearing dust masks to illustrate their plight, the group was trying to deliver a letter to Toledano personally. The message asked him to implement a proper lead-mitigation plan, using an E.P.A.-certified abatement contractor, and urged him to follow the guidelines from the city’s Childhood Lead Poisoning Prevention Act of 2003. That law mandates that contractors use safe work practices and trained workers, and perform tests to ensure proper cleanup.

    “We’re trying to deliver our demands, but he won’t even accept it,” said Chester, as he returned from a futile trip to the landlord’s offices upstairs.

    According to the city, dust from lead paint — which was banned here in 1960, but is still found in older buildings — is the most common cause of childhood lead poisoning, which can adversely affect a child’s health, learning and behavior.

    Lead exposure occurs when lead dust or fumes are inhaled, or when lead is ingested via contaminated hands, food, water, cigarettes or clothing.

    Lead entering the respiratory and digestive systems is released into the blood and distributed throughout the body. According to the New York State Department of Health, more than 90 percent of the total body burden of lead is accumulated in the bones, where it is stored. The lead may then be released from the bones into the blood later, re-exposing organ systems long after the original exposure.

    Toledano was not available for a comment last week. But a Brookhill spokesperson told The Villager that, after the company was notified of an issue by the Department of Health, it dispatched “a professional remediation crew [that] quickly rectified the situation and brought the property into full compliance.”

    “We continue with constant monitoring of the property to ensure the health and safety of all of our tenants, which is our primary concern,” the spokesperson said in an e-mail.

    But Slayton reports that the work is continuing unabated, and without the proper equipment to contain the dust that is spreading throughout the building.

    “Yesterday, everything was coated in dust,” she said, speaking on April 12. “Even the sitter is sneezing and coughing when she comes over.”

    Slayton said the landlord should supply the tenants with air purifiers. She said that Brookhill representatives have been cordial when contacted. But rather than actually doing something to solve the situation, they usually offer to move her to a different apartment instead, she said.

    The catch, however, is that she would lose her rent-stabilized rights. Most of the units in her building, like in other Toledano-owned properties, are not market rate.

    “Plus, I don’t want to move to Murray Hill,” Slayton said. “I’m part of the neighborhood.”
For the story, see Heavy metal Toledano; Tenements’ lead levels are through the roof.
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(1) Go here for links to examples of landlords getting hammered by the U.S. Environmental Protection Agency ("EPA") for violating the federal Lead Renovation, Repair and Painting Rule, and here to file a complaint reporting violations with EPA.

Brooklyn Landlord Who Operated Flophouses For Recovering Addicts Gets Bagged For Allegedly Bilking Medicaid By Pocketing Over $2 Million In Kickbacks From Providers Of Support Groups That He Forced His Tenants To Attend

In Brooklyn, New York, The New York Times reports:
  • An operator of flophouses catering to addicts, who was the subject of an investigation last year by The New York Times, was arrested [...] on money laundering and Medicaid fraud charges.

    Investigators from the New York State attorney general’s office took the landlord, Yury Baumblit, and his wife, Rimma, who helped him run his business, into custody [...] at their Brooklyn home, a block from Brighton Beach. The couple were arraigned [...] in Kings County Criminal Court on felony charges of second-degree grand larceny, second-degree money laundering and violations of a law prohibiting Medicaid kickbacks.

    The charges center on allegations that Mr. Baumblit forced tenants of his flophouses to attend support groups at multiple substance-abuse treatment providers. In return for getting those tenants as clients, the providers paid companies run by the Baumblits more than $2 million in Medicaid kickbacks, Megan Friedland, an assistant attorney general, told the courtroom. If convicted, the Baumblits face up to 15 years in prison. The providers were not named at the hearing.
    ***
    Officials have long known about Mr. Baumblit’s homes. In December 2010, MFY Legal Services, a nonprofit that has represented three-quarter-house tenants, filed a class-action lawsuit against the Baumblits and their companies over an alleged kickback scheme. The public radio station WNYC wrote about the lawsuit and the Baumblits’ network of homes about the same time. ProPublica, a nonprofit investigative news organization, also wrote about the Baumblits several years later, looking into their connection to the New York Service Network.

    Canarsie Aware, NRI and the New York Service Network, all regulated by the state Office of Alcoholism and Substance Abuse Services, remain open. Narco Freedom, which was accused last year by federal and state prosecutors of bilking Medicaid, has since been shut down.

    It’s been so long that tenants have been complaining,” said Matthew Main, a lawyer with MFY. “Everyone knew this was happening. But Yury just kept opening new houses and opening new houses. The big thing that comes to mind is the tenants saw this as Mr. Baumblit being able to operate with impunity. This action by the attorney general’s office sends the message that their lives matter. The lives of poor people matter.”

Ex-Housing Authority Employee Cops Guilty Plea To Pocketing Bribes While Peddling Eligibility For Section 8 Rent Subsidy Vouchers; Will Dodge Jail Time In Exchange For Agreement To Squeal On Co-Defendants

In Hagåtña, Guam, the Pacific Daily News reports:
  • A woman accused of accepting bribes from Section 8 applicants in exchange for certifying or promising to certify those applicants for Section 8 eligibility pleaded guilty [] after taking a plea agreement.

    Antonia Mayo-San Nicolas initially faced a maximum three-year sentence and up to $55,000 in fines if her case went to trial. As part of the agreement, she will not face any prison time.(1)

    Mayo-San Nicolas is a former Guam Housing and Urban Renewal Authority employee.

    She pleaded guilty to three counts of accepting bribes as a third-degree felony with a special allegation of crimes against the community.

    Under the plea agreement Mayo-San Nicolas reached with the government, she agreed to cooperate with the Office of the Attorney General, including meeting with the office, talking with them about the case and possibly testifying at a trial against codefendants, Section 8 tenant Mattos Johnson and a landlord, Albert Buendicho.(2)
For more, see Former GHURA employee pleads guilty to accepting bribes.
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(1) As has been observed by at least one learned federal judge, referring to the 'race to the prosecutor's office' that frequently breaks out among co-defendants in an uncovered criminal conspiracy:
  • "When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring).
(2) Ibid.

Rent Payment-Delinquent Section 8 Tenant Temporarily Dodges Boot As Landlord Fails To Comply w/ HUD Rules Governing Evictions Of Those Receiving Housing Subsidies

In Nassau County, Long Island, the New York Law Journal reports:
  • A Nassau County judge dismissed a holdover proceeding filed against a Section 8 tenant because the landlord did not advise her that she could fight the action in court.

    According to court papers, landlord Valley Dream Housing alleges that Mary Albano owes $5,778 in rent arrears for her residence in Valley Stream and is attempting to remove her for nonpayment.

    The landlord gave Albano a notice of termination but in a motion to dismiss, she argues that the notice was defective because it did not advise her she has the right to fight the termination in court.

    In a ruling Wednesday, Nassau County District Judge Scott Fairgrieve found for Albano, writing in Valley Dream Housing v. Albano, LT-000441-16, that all notices to terminate must comply with both the U.S. Department of Housing and Urban Development Model Lease for Subsidized Programs and with federal regulations regarding the eviction of subsidized tenants.

    Both the model lease and 24 C.F.R. §247.4(a) require that landlords inform subsidized tenants that they may present a defense if they are targeted for eviction, and that Valley Dream Housing's failure to do so warrants dismissal of the holdover proceeding.

    Jane Reinhardt, a senior staff attorney with Nassau/Suffolk Law Services represented Albano.(1)
Source: Tenant Proves Faulty Notice in Holdover Proceeding (may require paid subscription; if no subscription, GO HERE, then click appropriate link for the story).

For the court ruling, see  Valley Dream Housing v. Albano, 2016 NY Slip Op 26116 (Dist. Ct. Nassau County, April 13, 2016).
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(1) Nassau/Suffolk Law Services is a non-profit public interest law firm providing free civil legal assistance to low income, disabled and disadvantaged individuals throughout Nassau & Suffolk Counties in New York, as well as providing legal support to church, agency and grass roots organizations that work with the poor. The staff is comprised of attorneys, paralegals, social workers and support staff.

Saturday, April 30, 2016

Series Of Recent Suits By S. California Fair Housing Outfit Targets Apartment Complexes That Allegedly Prohibited Kids From Playing Outdoors; One Local Landlord Says Effort Is Nothing More Than A Shakedown To Bleed Cash From Housing Industry, Noting It Filed More Suits In Last Two Years Than It Had In Last Two Decades

In Palm Springs, California, The Desert Sun reports:
  • A candy-colored playground, surrounded by freshly-cut grass, sits in the center courtyard of Sunnyview Villas, an apartment cluster in Palm Springs. At first glance, this looks like the perfect spot for a rousing game of hide-and-seek or freeze tag.

    But don't start the kids games just yet. If the tenants are to be believed, this is not a place for children.

    They put a note on my door and all the apartments and it said none of the children could go outside and play,” said Patricia Alvarado, a mother of three who was kicked out of Sunnyview in 2014.

    “It said if they wanted to play, they could go to the park over by the school,” the Palm Springs resident said, speaking in Spanish. “I felt it was unjust. I thought it was discrimination.”

    Alvarado is not alone. And neither is Sunnyview.

    The villas are one of four Coachella Valley apartment complexes that have been recently sued on claims they discriminated against children. Three of the four lawsuits are backed by the Riverside County Fair Housing Council,(1) a nonprofit group that says these cases are indicative of a larger problem in the desert.
    ***
    Most of the apartment complexes have declined to discuss the lawsuits. One landlord called the cases a "shakedown," designed to bleed money out of the housing industry.

    More than 160 discrimination complaints have come from Palm Springs over the past two fiscal years, giving the city the highest per-capita complaint rate in all of Riverside County, according to council data. Fourteen of these complaints dealt with discrimination against children, which is also the highest rate in the county.
    ***
    While the city investigates, lawsuits continue.

    At Sunnyview, Alvarado and two other mothers claim their children were forbidden from playing outside without supervision, and eventually barred from playing outside altogether. [for the lawsuit, see Alvarado, et al. v. Sunnyview Villa]

    At Tahquitz Court Apartments, also in Palm Springs, managers enforced similar supervision rules and set a curfew that applied only to children, a lawsuit says. [for the lawsuit, see Moyotl, et ano. v. Tahquitz Court Apartments, et ano.]

    At El Jardin Apartments in Coachella, parents claim that children were not even allowed to play on their own patio – a private space – because they "might leave a mess.” [for the lawsuit, see Casteneda, et al. v. Coachella Housing Investors, LP, et al.]

    And finally, Arabia Palms, an apartment complex in Indio, settled a lawsuit earlier this year filed by 26 tenants for $337,500. The suit focused on atrocious living conditions, but also included the claims of five families who said apartment management would not let their children play outdoors.

    The common thread in all of these cases is that children were told they couldn’t play outside without supervision, and that’s a violation of the Fair Housing Act,” [housing attorney Margaret] Elder said. “It’s not up to property managers to make these decisions.
    ***
    [Landlord Roger] Evershed [] accused the Fair Housing Council of "shaking down" businesses, noting that the nonprofit has filed more lawsuits in the past two years than in the prior two decades.
For more, see Kids forbidden to go outside, housing lawsuits claim (Four lawsuits have accused local apartment complexes of discriminating against children and families).
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(1) The Fair Housing Council of Riverside County, Inc. is a non-profit fair housing organization, approved by the Department of Housing and Urban Development (HUD), serving residents in Riverside County, California who have been targeted by unlawful housing practices and discrimination.

Judge Nixes Low-Income Tenants' Preliminary Request To Force Gentrifying Landlord Of Recently-Purchased 698-Unit Complex To Continue Accepting Section 8 Housing Subsidies While Fair Housing Lawsuit Plays Out; Housing Advocates Say New Rental Policy Leaves Minority & Disabled Tenants Disproportionately Affected

In Richfield, Minnesota, Minnesota Lawyer reports:
  • The Richfield landlord accused of discriminating against low-income tenants scored a victory [] when a federal judge decided not to require the property owner to continue accepting rent subsidies.

    Several dozen residents of the Crossroads at Penn complex, now known as Concierge Apartments, urged a federal judge to force Brooklyn Center-based Soderberg Apartment Specialists to honor Section 8 vouchers while they resolve a lawsuit over rent hikes and policy changes at the 698-unit property.

    But U.S. District Judge Ann Montgomery ruled Soderberg gave residents enough notice — several months ahead of time — that it planned to discontinue Section 8 at the property, purchased for $41 million in August. At that point, roughly three dozen households relied on the subsidies to cover their rent.

    “The court recognizes that these are difficult options for plaintiffs, many of whom are low-income or disabled,” the judge wrote. “However, eight months is significantly more notice than plaintiffs were entitled to under their leases.”

    In addition, Montgomery pointed to several Section 8 residents that have already moved out, suggesting there is other housing within reach of the remaining subsidy-reliant tenants. Several current and former residents — including one now living in a homeless shelter — said earlier this month they were frustrated by a lack of options.

    Soderberg plans to start phasing out Section 8 next month, severing its ties to the voluntary government program. The landlord has contended that requiring it to participate would impinge on its freedom to conduct business the way it wants and add an administrative burden.

    “We believe that had we, as new owners, been compelled to sign on and participate in a program that the federal government, and the state of Minnesota, has recognized as voluntary, it would have had a significant chilling effect on new investment and renewal efforts for Minnesota residential real estate, affecting everyone from large management companies to owners of small single-family rental homes or fixer-upper duplexes,” Soderberg said in an email statement on Monday.

    After Soderberg unveiled its planned changes last year, the Richfield Housing and Redevelopment Authority — which administers the Section 8 program in the city — agreed to help tenants temporarily bridge the gap between what they could afford and rising rents.

    Montgomery zeroed in on the agency as a key player in the dispute because any Section 8 extension would require its continued involvement. But she noted, as Soderberg had in an earlier filing, that the authority is not named in the suit, placing it out of the court’s reach.

    The judge also questioned whether, even if the court forced Section 8, Soderberg could work around the ruling by simply raising rents again.

    A court-ordered Section 8 requirement would have served as a warning shot for the growing number of investors scooping up aging multifamily properties in the bustling Twin Cities market. As with Soderberg, those deals often come with high-end upgrades and pumped-up rents — frequent drivers of tenant turnover.

    So far, the Richfield case is the first of its kind to hit the courts in Minnesota. But depending on how it shakes out, others could follow. A change in ownership at the historically affordable 551-unit Meadowbrook Manor in St. Louis Park, for example, recently stirred similar controversy.

    The Section 8 issue is one facet of the broader discrimination case filed against Soderberg earlier this year. Tenants say the landlord planned a $10 million-plus renovation at the Concierge, including a pet spa and high-end fitness center, to replace longtime low-income residents with “young professionals.”

    Soderberg also imposed tougher tenant standards and announced it would eventually halt Section 8 and other rent subsidies at the property.

    The tweaks sent tenants scrambling, some for other affordable housing and others for a way to stay put. As of January, tenants have said, more than 150 households had cleared out as a result of the changes.

    Residents contend Soderberg’s overhaul disproportionately affects minority and disabled tenants, two groups that had been well represented at the complex and protected from unfair treatment under the federal Fair Housing Act.

    The tenants’ case marks an unconventional application of the act, often used to contest zoning policies that target people of color. No existing case law deals with its exact circumstances.

    Again on Monday, Soderberg billed its improvements as a much-needed boost that will make the Concierge stand out in the Richfield market.

    “By providing value at a reasonable cost, we believe that the property will be an asset to the City of Richfield and satisfy a market need for a privately funded and privately managed housing choice,” Soderberg said in its statement.

    Montgomery still needs to decide on other aspects of the suit — namely, whether to keep it in play.

    Soderberg in February asked the court to dismiss the lawsuit outright, saying the tenants haven’t shown how its practices violate the law. The judge at a hearing earlier this month said that decision could take a while, given the complexity of the case.

    She echoed that in her [] decision. She gave both sides credit for making compelling arguments but noted “many legal and factual questions yet to be determined and little controlling authority to offer guidance.”

    For his part, Tim Thompson, the attorney who heads the St. Paul-based Housing Justice Center and is representing the tenants, said that while Friday’s ruling was a blow, it did not necessarily spell trouble for the broader suit.

    “It’s a disappointment, but I think it’s clear that there are some serious issues here that are going to need some further development,” he said. If the judge strikes down Soderberg’s motion to dismiss, the residents’ counsel will get access to internal information from the landlord that Thompson expects will strengthen their case.

    Soderberg is represented by attorneys from Minneapolis law firms Meagher & Geer and Hanbery & Turner.

Massachusetts Supremes Say Fair Housing Discrimination Claim Can Be Brought Against Landlord Who Decided Against Renewing Section 8 Housing Assistance Payments Contract w/ HUD, But Nix Recent Legal Action Anyway Saying Tenants' Failure To Satisfy Rigorous Pleading Requirements Sinks Suit

Massachusetts Lawyers Weekly reports:
  • The Supreme Judicial Court has upheld the dismissal of a claim of disparate impact brought by current and prospective tenants of an apartment building following its owner’s decision not to renew a project-based Section 8 housing assistance payments contract with the United States Department of Housing and Urban Development.(1)(2)
For more, see Disparate impact suit over Section 8 non-renewal dismissed (requires paid subscription).

For the court ruling, see Burbank Apartments Tenant Assoc. v. Kargman, No. SJC-11872 (Mass. April 13, 2016).

For background information on this case, see Supreme Judicial Court to Hear Important Housing Case (go here for an amicus brief filed in support of the tenants).
----------------------------
(1) The court describes the gist of the lawsuit in the following excerpt:
  • This case arises out of a decision made by the defendants, the principals and owners of Burbank Apartments (Burbank), not to renew Burbank's project-based Section 8 housing assistance payments contract (HAP) with the United States Department of Housing and Urban Development (HUD) when its forty-year mortgage subsidy contract expired on March 31, 2011.

    In lieu of those project-based subsidies, the defendants opted instead to accept from its tenants Section 8 enhanced vouchers, enabling tenants living in units subsidized on a project basis to remain as tenants under an alternative Federal housing program.[4] See 42 U.S.C. § 1437f (2012).

    The plaintiffs, comprised of current and potential Burbank tenants, complained that Burbank's decision violated § 3604 of the Federal Fair Housing Act (FHA or Title VIII), 42 U.S.C. §§ 3601 et seq. (2012), and the Massachusetts antidiscrimination law, G. L. c. 151B, § 4, both by virtue of intentional discrimination as well as disparate impact on members of otherwise protected classes of citizens. In particular, the plaintiffs alleged that the defendants' decision not to renew their HAP would have a disproportionately negative effect on people of color, the disabled and elderly, female-headed households, recipients of public and rental assistance, and families with children (collectively, members of protected classes).
(2) From the court's ruling:
  • The plaintiffs' housing discrimination claims, based on the theory of disparate impact, raise an issue of first impression in Massachusetts concerning the relationship among Section 8, the FHA, and the Massachusetts antidiscrimination statute (together the fair housing statutes).

    Specifically, can a private building owner's decision not to renew participation in the project-based Section 8 subsidy program in favor of tenant-based Section 8 subsidies be the basis of a disparate impact claim when such decision was otherwise permitted by both Federal and State statutes, as well as by contract? And, if so, what are the pleading requirements for making out such a claim?

    In his comprehensive memorandum of decision and order, the motion judge determined that a disparate impact claim under these circumstances is not legally cognizable, and never reached the second question.

    Subsequently, the United States Supreme Court released its decision in Texas Dep't of Hous. & Community Affairs v. The Inclusive Communities Project, Inc., 135 S. Ct. 2507, 2525 (2015) (Inclusive Communities), holding that claims, such as this one, based on the theory of disparate impact are generally cognizable under the FHA. We granted the plaintiffs' application for direct appellate review to consider their allegations in the context of the FHA, as well as the potential for similar claims under Massachusetts antidiscrimination law, and to examine the impact of the Inclusive Communities decision.

    We affirm the decision of the motion judge granting the motion to dismiss, although on somewhat different grounds. We conclude that even where the property owner has acted in accord with statute, regulation, and contract, a disparate impact claim under the fair housing statutes can be brought, subject to rigorous pleading requirements. The plaintiffs in the present case, however, have not satisfied those requirements.

Landlord Faces HUD Heat After Tenant Files Fair Housing Complaint Alleging A Failure To Renew Lease Due To Disability & Retaliation Over An Earlier Complaint Regarding Denial Of Request To Keep Assistance Animal

In Washington, D.C., the U.S. Department of Housing & Urban Development recently announced:
  • The U.S. Department of Housing and Urban Development (HUD) announced [] it is charging landlords in Beloit, Kansas with violating the Fair Housing Act after allegedly discriminating against a female tenant with disabilities by not renewing her lease, sending her a notice containing discriminatory statements about her disability, and retaliating against her for filing a previous fair housing complaint. Read HUD's charge.
    ***
    The case came to HUD's attention when the resident, who has a physical disability that substantially limits her ability to walk and sometimes requires the use of a wheelchair, filed a complaint with HUD alleging the Blass Family Trust, owner, and Lois Blass, trustee and property manager, of rental homes in Beloit, Kansas, discriminated against her due to her disability and retaliated for filing a previous fair housing complaint.

    Specifically, the resident alleged that the property manager of the single family home she was renting sent her a letter stating that she was a holdover tenant and that she should move to housing "designed for handicapped persons." The letter also stated that the home was "not designed for a handicapped person" and urged her to move out, while tenants at other properties were not given similar notices and were allowed to keep renting month-to-month. The tenant moved out of the rental home and into a less accessible and more costly rental property.

    The woman also alleged that the landlord's letter was issued in retaliation for her filing a fair housing complaint against the Blass Family Trust when they refused to allow her to keep her assistance animal. That complaint had resulted in an agreement that had allowed the woman to keep her assistance animal.

    The resident elected to have the case heard in federal district court instead of by an administrative law judge. If a judge or jury finds that discrimination has occurred, they may award damages to the woman for the harm caused by the discrimination. Injunctive relief and other equitable relief, as well as payment of attorney fees may be imposed. In federal court, an aggrieved person may also receive punitive damages.

    In FY 2015, disability was the most common basis of fair housing complaints filed with HUD and its partner agencies, being cited as a basis for 4,548 complaints, or nearly 55 percent of the overall total.

    Read HUD's notice regarding service or companion animals.

Non-Profit Group, Fair Housing Testers Shake $40K Settlement Out Of Virginia Landlord To Resolve Housing Discrimination Complaint Alleging A Refusal To Factor In Social Security Disability Income When Qualifying Tenants For Rentals

The Virginia non-profit fair housing organization Housing Opportunities Made Equal of Virginia, Inc. recently announced
  • Housing Opportunities Made Equal of Virginia, Inc. (HOME) settled a housing discrimination case with W.S. Carnes, Inc., owner of Meadowbrook Apartments complex in North Chesterfield. The case alleged that Defendants violated the federal Fair Housing Act for failing to accept Social Security Disability Insurance (SSDI) as income. The complaint contended that refusing to accept disability income for housing discriminates against someone because of their disability, which is a violation of the Fair Housing Act.

    In March 2014, a Hopewell woman brought to HOME’s attention Meadowbrook’s policy against accepting SSDI as a sole source of qualifying income. After an investigation that included fair housing testing, HOME filed a formal complaint with U.S. Department of Housing and Urban Development (HUD) in March, 2015. In the complaint, HOME claimed that this policy constituted housing discrimination against people with disabilities because 100% of SSDI recipients are disabled.1 W.S. Carnes, Inc. responded to the complaint and denied that it discriminates against any tenant or prospective tenant on the basis of disability.

    HUD proceeded with the investigation and facilitated the settlement. The settlement resolves all claims in the case. Part of the settlement includes a $20,000 fund that Meadowbrook Apartments will set aside to make reasonable modifications to the units or complex as requested by people with disabilities or on its own initiative. Another $20,000 will be used to compensate HOME for the time and resources used in the investigation.

    In addition, W.S. Carnes, Inc. will train relevant staff at all of their rental properties on fair housing laws. It will also market Meadowbrook’s housing opportunities and its reasonable modification fund to Richmond-area disability advocacy groups. The fund will help make units and common areas at Meadowbrook more accessible to people with disabilities, and could include features such as ramps, grab bars, widening of doorways, and other improvements.
For more, see Housing Discrimination Complaint Settles for $40,000 (Meadowbrook Apartments in Chesterfield County changes policy).

Friday, April 29, 2016

Environment Feds Squeeze Another Landlord For Civil Penalties ($8,840) After Bagging Company For Fixing Up Pre-1978-Built Rental Home Without First Complying With Federal Lead Paint Rule

The U.S. Environmental Protection Agency recently announced:
  • EPA Region 7 has reached a settlement in a civil enforcement action against LHP, LLC, for alleged violations of the Lead Renovation, Repair and Painting (RRP) Rule in connection with renovation work done at one of its rental houses in Lincoln, Neb. As part of the settlement, the company will pay an $8,840 civil penalty to the United States.

    LHP, LLC, owns and rents numerous housing units in Lincoln. The RRP Rule is intended to reduce lead exposure from toxic lead dust and debris that can be generated during renovations and repairs of houses built prior to 1978. Lead poisoning is especially harmful to children.

    During a November 2012 RRP work practices inspection, EPA found that the company was conducting a renovation and violated several RRP work practices at one of its rental houses at 800 A Street in Lincoln. The inspection found the company failed to post warning signs, failed to close all doors and windows within 20 feet of the renovation, failed to ensure doors used in the work area were covered with plastic or other impermeable material, failed to cover the ground with plastic or other impermeable material to collect dust and debris, and failed to contain waste from the renovation to prevent the release of dust and debris before the waste was removed from the work area. The inspection noted paint chips and debris littering the site, extending onto the public sidewalk and beyond.

    In 2009, EPA issued a notice of noncompliance to LHP, LLC, for failure to disclose to its renters a required lead warning statement, failure to disclose the presence of lead-based paint hazards, and failure to disclose available records or reports pertaining to lead-based paint hazards. In 2008, the Nebraska Department of Health and Human Services issued a notice of violation to LHP, LLC, for engaging in a lead abatement project without a valid certificate after being notified of elevated blood levels of lead for a child residing at one of the company's properties.

    Lead exposure can cause a range of adverse health effects, from behavioral disorders and learning disabilities to seizures and death, putting young children at the greatest risk because their nervous systems are still developing. The most common way that children become exposed to lead is by breathing or swallowing dust or chips of lead-based paint, which is often found in and around housing or child-care facilities built prior to 1978, when lead-based residential paints were banned in the U.S.
    ***
    If you suspect the Lead Renovation, Repair and Painting (RRP) Rule has been violated at a recently completed or ongoing renovation project, EPA encourages you to contact Region 7 at 1-800-223-0425. For more information about testing your child for lead, please contact the Nebraska Department of Health and Human Services, Office of Environmental Health Hazards and Indoor Air, at 1-888-242-1100.
Source: EPA Reaches Settlement of Lead Renovation, Repair and Painting Rule Violations with Housing Company in Lincoln, Neb.

Go here for links to other examples of landlords getting hammered by the EPA for getting tripped up by the federal RRP Rule, and here to file a complaint reporting violations with EPA.

Go here for Lead Renovation, Repair and Painting (RRP) Rule Frequently Asked Questions.

Go here for the federal Renovate Right brochure that landlords and contractors are required to give to tenants before renovating more than six square feet of painted surfaces in a room for interior projects or more than twenty square feet of painted surfaces for exterior projects or window replacement or demolition in housing, child care facilities and schools built before 1978.

Go here for EPA Lead Paint Renovation Compliance Guide for landlords, property managers, contractors, and maintenance personnel working in homes, schools, and child-occupied facilities built before 1978.

Unwitting Real Estate Investor Faces Toxic $30K Remediation Tab After Discovering Recently-Purchased Home Suffers From Meth Contamination

In Claremore, Oklahoma, KOTV-TV Channel 6 reports:
  • A man bought a house in Claremore, only to find out afterward that it had been in a News On 6 story. [...] After Chris Young found our story on a meth bust at the house he bought, he had the house tested. All 12 areas tested came back positive for meth residue.

    Now it's going to cost him $30,000 to make it safe again.

    "All this flooring has to come out; all this woodwork will come out,” Young said.

    He has to replace all the cabinets, the heat and air system and the ductwork. The walls must be specially cleaned then sealed. He had hoped to sell all the possessions to recoup some of his costs, but it all has to be trashed because of contamination.

    “Respiratory problems that could last a lifetime... wouldn't want that to happen to my family or anybody who buys a home from me,” he said.

    The worst area is upstairs where deputies say the meth was being made, with only a tiny vent in the window. The children's bedrooms were just a few feet away. Three children were removed from the home when deputies arrested their parents and grandmother.

    The bottom line? If you buy any house, especially in a short sale or foreclosure, it's worth the money to have it tested, which could save you a lot of money or health issues down the road.

Foreclosure-Flipping Real Estate Investor Unwittingly Buys Home Contaminated w/ Meth; Unpleasant Surprise Discovered After Fix-Up, During Prospective Buyer's Contract Inspection Period

In Cheyenne, Wyoming, Wyoming Public Radio reports:
  • Many homes or apartments in Wyoming are contaminated by methamphetamine and if you move into one of those places, you may not know it. It can lead to health problems and be expensive to clean up. Wyoming is one of the few states that does not require disclosure of a meth-contaminated home.

    Sheridan realtor Dan Casey remembers when he first got caught. Casey had a client who had bought a home during a foreclosure sale and after his client fixed the place up he tried to re-sell it. Casey said they were close to a deal when a neighbor stopped by.

    “We got an offer right away on the house and right during the inspection phase the potential buyer was walking around and the neighbor came by and said…oh the people who used to live here were meth users…this was a meth house.”

    Casey and the homeowner were frustrated because it required extensive clean-up. He says local law enforcement and the Department of Family Services both knew that it was potentially contaminated.

    “That the DFS had been called for drug use, you know the police department had been called for drug use, but these separate governmental parties were never talking to each other and this poor investor got stuck with a contaminated home.”

    Clean-up can cost between five and 15-thousand dollars.

Thursday, April 28, 2016

Real Estate Operator Gets Four Years For Running Short Sale, Flipping Scheme; Admits To Acquiring Control Of Financially 'Underwater' Homes, Then Using Straw Buyers To Retain Possession Of Premises While Fraudulently Duping Lenders Into Taking 'Haircuts' On Their Outstanding Loan Balances

From the Office of the U.S. Attorney (Oakland, California):
  • Anthony Keslinke, 48, of Danville, was sentenced to four years in prison [] for his leadership role in a large-scale bank fraud conspiracy and a separate money laundering conspiracy, [...].

    Keslinke pleaded guilty in May of 2015 to one count of conspiracy to commit bank fraud and one count of conspiracy to commit money laundering.

    In pleading guilty, Keslinke admitted that he used straw buyers to purchase real estate throughout Northern California between 2011 and 2014. Keslinke identified properties, including his own properties, that were potential candidates for a “short sale.” A “short sale” is a sale of real estate in which the sale proceeds are less than the balance owed on the mortgage loan pertaining to the property and often occurs when a borrower cannot pay the mortgage loan.

    In furtherance of the scheme, Keslinke submitted offers to the financial institutions on behalf of straw buyers. In order to induce a bank to accept a short sale offer, Keslinke would draft fraudulent financial hardship letters and submit them on behalf of the seller of a property.

    In addition, in order to give the appearance to the financial institutions that the properties were worth significantly less than true fair market value, Keslinke often altered engineering and pest reports associated with the properties. Moreover, in furtherance of his scheme, Keslinke often altered bank account documents to create the appearance that the straw buyers had sufficient funds to purchase the properties in cash.

    Once a financial institution accepted a particular property for a short sale, Keslinke used his own funds to purchase the property in the name of the straw buyer.

    After a short sale was completed on a particular property, Keslinke maintained control of the property and often sold the property for a significant financial gain. Keslinke admitted using this mortgage fraud scheme to orchestrate the short sale of properties in Danville, Walnut Creek, and Kings Beach, California.

Co-Op Buyer's Lawsuit: Online Scammers Hacked Into My Lawyer's Unsecure Email System, Then Used Information From Pilfered Communications To Hijack My $2 Million Purchase Deposit

In New York City, the New York Post reports:
  • A former Lehman Brothers executive unwittingly wired a $2 million deposit for a $20 million Manhattan apartment to cyber criminals — and now he’s blaming his real estate attorney and her vulnerable AOL email address for the breach.

    Robert Millard, who was a managing director at Lehman and now runs the private investment firm Realm Partners, and his wife Bethany Millard hired Long Island lawyer Patricia Doran to help them buy a co-op last year.

    While in contract, Doran’s email was hacked and the cyber criminals intercepted communications about the purchase, according to the Millards’ Manhattan civil suit.

    Posing as Doran the hackers sent the Millards wire transfer instructions to a bank that purportedly belonged to the seller. They wired $1.938 million to the TD Bank account.

    Doran received a confirmation email from the “sellers’ attorney” that she forwarded to her clients, yet no one noticed that the lawyer’s name was spelled incorrectly, the suit says.

    TD Bank discovered the breach and Millards was eventually able to recover all but $200,000 of his deposit, the suit says. They blames Doran for the debacle, saying she didn’t use a “two factor identification” system to protect her email or switch to a more secure provider.

    They’re suing to recoup the $200,000 plus additional damages.

Negligent Law Firm Allows Online Con Man To Hack Into Email Correspondence, Then Hijack Net Proceeds Of Home Sale Belonging To Client/Couple; Outfit Refuses To Make Good On Screw-Up, Avoids All Communication With Victims, But Pockets Its Legal Fee Anyway

In Glasgow, Scotland, the Herald Scotland reports:
  • A COUPLE lost more than £30,000 after the solicitors’ firm they hired to sell their holiday home was duped by an online fraudster, in what is believed to be the first case of its kind in Scotland.

    Alan and Lizanne Richards, from Dunblane, say they are furious that the firm has never apologised or reimbursed them since mistakenly transferring the profits from the sale of their two-bedroom property in Pittenweem harbour into the scammer’s bank account in July last year.

    Exactly £30,366.65 was stolen when the fraudster hacked into online correspondence between the Richards and their solicitor at the Glasgow branch of Wright, Johnston & Mackenzie (WJM), before duplicating the couple’s email to request that the firm pay the funds to a new sort code and account number. It turned out to belong to a bank account in Birmingham.

    Mr Richards, who owns a window-making factory in East Kilbride, said the couple are “at the end of our tether” trying to recoup the lost cash.

    He said: “From the minute it happened, they’ve never spoken to us since. Not one member of that organisation has been on the phone to apologise. They could just say ‘we’re sorry and we’ll do everything we can to help you get the money back’. “But nothing – not a jot. It just beggars belief.”

    The businessman said plans to use the money to buy a new property in Dunblane or a student flat for their son were now “out the window”.

    Despite the error, the firm collected its fee of £1,261 for the sale.

    Mr Richards, 57, added: “They were in charge of our money, we never got it – and they got paid for it anyway.”

    An initial investigation by the Scottish Legal Complaints Commission has also infuriated the couple.

    The agency concluded in April that the firm was not at fault because “nothing in the content, email address or sender of the emails would, on the face of it, have caused the solicitor to have concern that the email was not genuine”.

    The couple are seeking a review of the decision. Mrs Richards, 51, said: “It’s left me feeling very vulnerable. You feel like you’ve been burgled, but nobody has been in your house – it’s virtual.”

    She has had to take medication for depression and anxiety and admits that some days the stress of the situation means she cannot get out of bed.

    “We can’t afford to lose that kind of money. I try not to think about the amount,” she said.

    The type of hoax, which has been nicknamed “Friday afternoon fraud”, is already known to have cost law firms in England and Wales some £85 million over the past 18 months.

    According to the Law Society of Scotland, such cases count as negligence and would be covered by insurance.

    However, similar cases in England have seen homeowners spending months fighting for compensation because legal firms refuse to accept liability for the hoax.

    [Local elected representative] Murdo Fraser, MSP [Member, Scottish Parliament] for Perthshire and a former solicitor, said the case had “quite severe implications” for the public.

    Mr Fraser said: “If you can hand over large sums of money to a professional who then pays it to the wrong account and you have no comeback, that just seems extraordinary to me.

    “Your heart goes out to the Richards, who are entirely innocent in all this.

    It just seems very odd that the solicitors’ response seems to be to wash their hands of the situation and refuse to take any responsibility.

    “I think there’s a huge moral imperative on the solicitors to settle.”

Wednesday, April 27, 2016

Cops: Wisconsin Woman Moved Dying 69-Year Old Man Out Of His Home, Then Used POA & Lies To Closing Agent To Walk Away w/ $90K By Selling $500K+ Residence Out From Under Elderly Victim's Heirs One Day After His Death

In Wauwatosa, Wisconsin, WITI-TV Channel 6 reports:
  • She's accused of telling a big lie about a dead man and making a profit. Wauwatosa police say 63-year-old Linda Crawford illegally sold a man's house -- but there's much more to this bizarre story.

    Crawford is charged with theft by fraud and false swearing. Family members say what she did to a dead man fits her M.O.

    A house in Elm Grove once belonged to a businessman, Wolfgang Voith. The 69-year-old died on January 24th of a rare brain tumor. He did not spend his final days at home. Instead, police say he stayed at an apartment complex on Milwaukee's north side.

    Voith had moved in with Crawford, a woman he met online. The two were never married.

    Family members say Voith didn't have a will.

    According to court documents, hours after Voith died, Crawford got busy. Police say she acted quickly to sell Voith's Elm Grove home. Its assessed value is more than $500,000.

    Records show Crawford closed on the home on January 25th -- one day after Voith's death.

    The closing was done at "US Title and Closing Services" in Wauwatosa. Crawford filled out paperwork indicating she had Voith's power of attorney. She did, but power of attorney is invalid once the person dies. So Crawford told the closers Voith was alive. After paying off the lien against the property, Crawford walked away with $90,000.

    From there, Crawford arranged to deposit all of the funds into her granddaughter's bank account. Police say she was hiding the money. Crawford and her son-in-law then left the state and settled in Utah.

    Other family members would later tell investigators, Crawford is "dishonest" and that she had been involved in welfare fraud and check fraud in the past.

    FOX6 News spoke with one of Crawford's sons by telephone. In one final twist to the story, he said his mother died in March while staying in Utah.

    Voith's family members say Crawford had made claims in the past she was dying. Police say there is no record on her death.

    It is unclear who currently owns the house in Elm Grove.

    Voith's daughter declined to comment -- but because her father didn't have a will, Voith's children would have inherited everything Crawford sold.

Foreclosure Rescue Scammer Cops Guilty Plea For Operating Loan Modification Racket That Swindled Ten Victims Out Of Nearly $60K

From the Office of the Nevada Attorney General:
  • Nevada Attorney General Adam Paul Laxalt announced that Benjamin Paul Narter, 36, of Las Vegas, pleaded guilty to one count of pattern of mortgage lending fraud, a category “B” felony. The fraud was committed between January 2013 and May 2014.

    Narter operated a purported mortgage refinancing scheme doing business as “National Mortgage Help Center” to dupe consumers. He solicited victims who paid him thousands of dollars in upfront fees to obtain loan modifications on their behalf. Narter entered a guilty plea agreement that requires him to pay back 10 victims nearly $60,000.
    ***
    This case was jointly investigated by the Mortgage Fraud Unit of the Office of the Nevada Attorney General and the United States Postal Inspection Service. The Nevada Attorney General’s Fraud Unit prosecuted the case.

    To view the criminal Information for Narter, click here.

Attorney Who Got Stiffed Out Of Legal Fees Now Faces Bar Disciplinary Charges Over His Collection Efforts After Slapping Lien On Client's Property, Then Buying It At Foreclosure Auction

In Helena, Montana, the Billings Gazette reports:
  • A Kalispell attorney put a lien on a client's property for nonpayment of fees, pursued foreclosure and then anonymously bought the property for well below market value at a sheriff's auction, the state's Office of Disciplinary Counsel said.

    The office filed seven counts of professional misconduct against David Tennant, alleging Tennant continued to represent his client in a divorce case even after filing the lien in February 2012, creating a conflict of interest.

    Tennant told The Associated Press [] he hadn't represented the man for two years before he sought foreclosure on the property and that his contract with the man included provisions for collection efforts.

    The charges allege Tennant filed a lien for $24,000 against two residential lots near Columbia Falls the man received in the divorce case. He illegally added to the lien $2,300 in fees the client owed him from an earlier case, the office said. He then billed his client $3,200 for attorney fees incurred while he tried to collect his fees in the divorce case.

    The foreclosure suit ended in May 2013 with a $34,000 judgment against Tennant's client.

    The Office of Disciplinary Council filed the misconduct counts []. It said Tennant used inside information about his client's financial circumstances and created a limited liability corporation to buy his client's property for $34,000 in September 2013. The two lots were put on the market for $80,000 each. If they sell, the disciplinary council claims Tennant will have charged an excessive fee in addition to those already levied against the client.

    The ODC alleges Tennant didn't withdraw as the man's client until July 2015 and didn't inform the man that he might want to seek independent legal counsel with regard to the property sale.

    Tennant's client filed an ethics grievance in September 2015.

    In his response, Tennant didn't indicate his LLC bought the property and instead referred to the buyer as "the purchaser." He said his firm incurred another $1,400 in fees dealing with his client's "recent illogical emails and this latest complaint filed with the Office of Disciplinary Counsel," and suggested the property wasn't worth much more than $34,000.

    However, the complaint said Tennant knew the listing price of the property.

    "The foreclosed property is on the market," Tennant said in an email to the AP []. "If the previous owner wants them back, all he needs to do is contact me (and) arrange to pay what he owed."

    Tennant said that total includes his attorney's fees, nearly $7,000 paid to his client's ex-wife for child support after she also filed a lien on the property, along with about $7,600 in past and current property taxes.

    Tennant has 20 days after being served with the complaint to file a response. A formal hearing will then be scheduled before the Commission on Practice's adjudicatory panel, which will recommend any disciplinary action it believes is warranted.

Tuesday, April 26, 2016

Sacramento Jury Hammers Foreclosure Rescue Operator w/ 23 Felony Convictions For Running Racket That Used Bogus Title Transfers, Sham Bankruptcy Petitions & Forged Mechanics Liens To Stall Bank Repossessions & Illegally Squeeze Cash Out Of Unwitting Borrowers & Their Homes In Foreclosure

From the Office of the Sacramento County, California District Attorney:
  • Fifty-two-year-old Richard Henri Fecteau was convicted by jury of 23 felony real estate fraud charges involving grand theft, recording false documents, and illegally acting as a foreclosure consultant. The jury also found true a white-collar crime enhancement.

    Between 2011 and 2014, Fecteau ran a foreclosure rescue company called Team Fecteau. He directed homeowners to deed their properties to a trust. The names of people who had recently filed for bankruptcy were then named as co-trustees of the trust, along with Fecteau himself, which had the effect of placing an automatic stay against foreclosure of the property. This protection is granted under federal bankruptcy laws. Fecteau would often tell the homeowners not to have any further contact with the banks or lenders and that he would handle all further negotiations regarding their mortgages. Homeowners were also directed not to pay their mortgages and make monthly payments to Fecteau for his service.

    Once the homeowners signed the first deed to Fecteau, he or his employees would then file additional grant deeds using the same scheme of adding names of people in bankruptcy to the deeds. There was no intent to transfer any true interest in the property to these individuals as their names were removed as trustee each time a new deed was recorded. Fecteau did not actually negotiate with lenders to take any action towards saving the homes of his unsuspecting clients. He continued this scam with some of the homeowners for several years.

    Once the scheme was no longer effective and most of Fecteau’s clients lost their homes to foreclosure, Fecteau would then employ another scam to illegally obtain money from the properties. Fecteau and an employee filed false mechanic liens against those same properties hoping that the foreclosing lenders would settle the liens when they resold the properties.

NY State Cops Bust Albany Man In Alleged Snatch & Flip Scam; More Arrests Expected In Racket That Used Forged Deeds To Hijack Title To As Many As 80 Homes, Then Sell Or Rent Them To Unwitting Targets Throughout Seven Upstate NY Counties

In Troy, New York, the Albany Times Union reports:
  • The deeds and leases listed the address of The Trump Building in New York City, giving an air of authority to documents State Police now say were fake.

    In the last few weeks, investigators have uncovered evidence of forged deeds for foreclosed homes in seven Capital Region and Hudson Valley counties that date back 18 months. Officials said they expect to uncover as many as 80 forged deeds.

    One man is under arrest in the case, authorities said.

    It's affecting people who thought they were getting a deal on buying a home or renting an apartment. In either case, payments were always made in cash, according to authorities.

    The deeds are typically just three pages long and involve property transfers between two trust accounts. Zarak O. Ali or Darryl Casale are listed as the trustees, according to the documents.

    "It's just created a big mess. You have all these documents that are public records that are false," said Investigator Bruce MacWatters of the State Police Special Investigations Unit in Albany.

    Deeds from Albany, Rensselaer, Saratoga, Schenectady, Columbia, Dutchess and Ulster counties are under investigation. County clerks have been asked to check their records and received pictures of Ali and Casale.

    "It's creating a lot of issues," MacWatters said. "What do the tenants do?"

    That's what Krissa Allen wants to know. She and her boyfriend rented an apartment from Casale for $800 a month at 141 Maple Ave. in Troy's Eastside neighborhood near the Emma Willard School. Casale and Ali are listed as trustees on the deed filed with the Rensselaer County Clerk's Office.

    Allen said she's glad she turned down Casale's offer to sell her a house at 63 Collins Ave. for $50,000.

    In both cases, Casale expected payments in cash, Allen said. Her lease listed his address as 40 Wall St., New York City, the address for The Trump Building. Allen said she asked for a copy and was given an unsigned document.

    "He had me fooled. He played me. It's not fair," she said. "What are we going to do?" said Allen, who is fearful she could face eviction after moving in last month. Allen said investigators told her, "You're just the tip of the iceberg."

    On April 15, troopers arrested Ali, 42, of 29 Maiden Lane, Albany, on one count of third-degree burglary, two counts of offering a false instrument for filing and two counts of criminal possession of a forged instrument, all felonies. He was released on $25,000 bail.

    Casale, 25, of 22 Brickley Drive, Albany, has not been charged. His address is among those on a list of suspected forged deeds officials provided to the Times Union.

    Police said more arrests are expected. The case was forwarded to a Rensselaer County grand jury for investigation, according to court records.

    A man who answered the telephone listed online for Ali's real estate business said, "You have a wrong number," and hung up.

    The alleged scheme was revealed when the Rensselaer County Real Property Tax Services Office staff noticed unusual property transfers between two trusts in several real estate transactions filed by Ali.

    "Our mapping unit was reviewing the legal descriptions. They caught it," said William Film, the director of the tax services office.

    Film said the giveaways were the exchange of properties between two trusts and the sloppy paperwork. The property description was usually only a paragraph long, when typically it is lengthier. The trustees' names were written in by hand instead of typed.

    The investigation is focused primarily on Ali, who is involved in every investigation in Rensselaer County, according to police and the documents.

    "He's got a lot of moxie," Rensselaer County Clerk Frank Merola said. Merola said the suspect deeds involved foreclosed properties or, in some cases, parcels whose owners had died. He said it can be three years before a bank sells a property after taking it over.

    Merola and Film met with Rensselaer County District Attorney Joel Abelove and the State Police, who launched the regional investigation. Albany County Clerk Bruce Hidley said his staff found similar filings after learning about what happened in Rensselaer County. He turned over suspect deeds to District Attorney David Soares and the State Police.

    "He's doing bad things not just to the counties but to the people," Hidley said. "You have to feel badly for the victims this guy is taking advantage of."

Sleazy Attorney Again Finds Himself Swimming In Hot Water; Disbarred In Other Jurisdictions, Gets Pinched In Connecticut For Alleged Role In Scam That Duped Foreclosure-Facing Homeowners Out Of Their Homes, Then Used Properties In Rent-Skimming Racket

In Bridgeport, Connecticut, The Day reports:
  • Bridgeport attorney Bradford Barneys has been indicted in U.S. District Court on charges he conspired with accused con man Timothy W. Burke to operate a long-running mortgage fraud scheme that targeted homeowners throughout the state who were on the verge of losing their homes.

    Barneys, 50, who resides in Odenton, Md., appeared [] before Judge Donna F. Martinez in Bridgeport. He pleaded not guilty to charges of conspiracy and mail fraud. He was released on a $50,000 bond.
    ***
    His Connecticut law license remains active, according to public records, though it had been temporarily suspended four times since 2001.

    He was disbarred from practicing law in Maryland in 2002 and in the District of Columbia in 2004.

    The indictment [] alleges that from April 2011 to September 2014, Burke and Barneys conspired to defraud individuals, mortgage lenders and the U.S. Department of Housing and Urban Development by falsely representing to homeowners who were in or facing foreclosure on their homes that he would purchase their homes and pay off their mortgages.

    According to the government, the distressed homeowners agreed to sign various documents, including quitclaim deeds, indemnification agreements, management agreements and third-party authorization letters, which Burke and Barneys presented to them on the understanding that, by signing the documents, they would be able to walk away from their homes without the burdens of their mortgage or other costs associated with home ownership.

    Barneys met or spoke with homeowners to reassure them about their sale to Burke, according to the indictment.

    Burke told homeowners that the process of negotiating with the lenders could take time and that, in the meantime, they should ignore any notices regarding foreclosure, according to the indictment.

    After he gained control of the houses, Burke advertised them for rent, sometimes on Craigslist.com, and falsely represented to tenants that he owned them, according to the government.

    The indictment further alleges that Burke or one of his agents collected rent from tenants, in person, and Burke used the funds for his own benefit.

    When tenants failed to pay rent, Barneys would evict them so that Burke could rent the property to other tenants.

    Burke failed to negotiate with the mortgage holders of the distressed properties or make mortgage, tax and other payments on the homes and failed to pay any rental income he was collecting to the homeowners, according to the government.

    Many of the properties were ultimately foreclosed upon by the mortgage lender.

Monday, April 25, 2016

Property Manager At 180-Unit Building Gets Pinched For Allegedly Pilfering Over $80K In Rent Collections From Landlord

In Dudley, Massachusetts, the Worcester Telegram & Gazette reports:
  • An employee of a large subsidized housing apartment complex allegedly fueled her addiction to prescription pain medications by collecting rent from tenants, depositing their checks and money into a petty-cash account, and writing 176 checks to herself totaling $81,130.

    She covered up the months-long scheme at Brookside Terrace by creating false monthly bank statements, police said in their request for a warrant, which was granted this week by William F. George, first assistant clerk magistrate of Dudley District Court.

    Christine D. Bogdahn, 51, [...] will face charges of larceny valued at more than $250 and making false entries in corporate books.

    An arraignment has yet to be scheduled. Mr. George found probable cause to issue a complaint Tuesday.

    Newton-based Meredith Management Corp. operates the 180-unit Brookside Terrace, and its Chief Financial Officer Jonathan S. Hickok and director of leasing Jerry A. Belair reported Mrs. Bogdahn to police on March 28, according to a police report.

    Mr. Hickok said that Mrs. Bogdahn, the senior site property manager, had been fired March 25. He cited nonperformance of her job duties. He said Mrs. Bogdahn’s performance and behavior had drastically changed in the last nine months, and it was assumed she was addicted to drugs, the report said.

    Mr. Hickock said that the company cleaned her desk and found overdraft notifications from the company’s petty cash account.

    He said they also found foreclosure paperwork for her home, and a pending bankruptcy. Mr. Hickok said her annual salary with the company was about $76,000, and she is married with two children.

Prosecutor Offers Jail 'Buy Out' Deal To Property Managers Pinched For Allegedly Fleecing HOA Of Over $84K; 'Pay Back The Loot, Keep Your Nose Clean For Nine Months & I'll Let You Walk Without Criminal Records!'

In Cambria County, Pennsylvania, The Tribune-Democrat reports:
  • A family allegedly at the center of a scheme to embezzle money from a Richland Township homeowner association have paid back the money – some of it anyway.

    Dennis P. Michaels, 57, his wife, Julia S. Michaels, 62, and their daughter Julianna Theresa Zamias, 32, are accused of stealing more than $84,000 from Skyview Estate Homeowner Association from Jan. 1, 2007, through Dec. 31, 2013, while they were officers of the association.

    Dennis Michaels appeared for an accelerated rehabilitative disposition ["ARD"] hearing [] before Cambria County Judge David Tulowitzki.

    He paid $17,390 to the association before being placed on ARD for nine months for theft by deception, Assistant District Attorney Joseph Green said. “He paid the full amount that was attributable to him and his wife,” Green said.

    If Michaels stays out of trouble while on ARD, his criminal record will be expunged. If he violates probation, his ARD will be revoked and he will be resentenced.

    Criminal charges against Julia Michaels were withdrawn.

    The case against Zamias appears more complicated.

    She is not only accused of stealing the bulk of the money but also driving off with the associations’ two tractors.

    Green said Zamias is on the hook for about $82,000. That amount includes the tractors and $15,000 for a forensic audit done by Wessel and Co., a local accounting firm. Zamias is scheduled for a pre-trial conference on May 4.

    When asked the chances of Zamias paying back all the money, Green was clear.

    It’s the difference between not having a criminal record or being found guilty of felony theft and possibly going to jail,” he said. “So I would think the likelihood is pretty good.

    “That’s been my motive all along is to get the (association) their money,” he said.