Miami Non-Profit Law Firm, Local Feds Join To Score Wins In Two Novel Whistleblower Suits Accusing Local Landlords Of Illegally Squeezing Gov't, Section 8 Tenants Out Of Excessive Rent Subsidies; $uccessful Recovery Includes Tenants' Damages, Legal Fees

From the Office of the U.S. Attorney (Miami, Florida):

• Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, and Marcia K. Cypen, Executive Director, Legal Services of Greater Miami, Inc. (LSGMI),(1) announced the United States’ successful prosecution of several civil False Claims Act cases brought under the qui tam provisions of the False Claims Act, 31 U.S.C. §3730(b) against landlords participating in the United States Department of Housing and Urban Development’s (HUD) Housing Choice Voucher/Section 8 (HCV) Program who unlawfully received excessive rent subsidies known as Housing Assistance Payments (HAP).
  
  Through Section 8 of the United States Housing Act of 1937, as amended, HUD distributes federal funds to local public housing agencies to assist eligible low income families in obtaining decent, safe, and sanitary housing in the private rental market. To receive federally subsidized rents, landlords participating in the HCV Program contractually agree to comply with HUD requirements, to charge only the rent authorized by the local public housing agency and to not raise rents or change lease terms without the written approval of the local public housing agency.
  
  Two of the False Claims Act cases were originally filed by LSGMI who represented Sabrina R. Newberry and Taronda Wade, two low income tenants participating in the HCV Program administered by the Miami-Dade Public Housing and Community Development, a department of Miami-Dade County previously known as the Miami-Dade Public Housing Agency.
  
  The tenants brought the cases on behalf of the United States alleging that their landlords, the defendants, made unlawful false claims for rental subsidies by charging and accepting excessive rents, in violation of HUD rules and contractual requirements.
  
  After investigating the cases, the United States intervened in the two suits. The United States filed amended complaints asserting that the landlords violated the False Claims Act by making false statements to the County’s HCV Program and endorsing HAP rent subsidy checks for which the United States suffered damages.

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

• 1. United States of America, ex rel Sabrina R . Newberry, Relator, Plaintiffs, v. George David Horton, Defendant, Case No. 1:11-cv-20153-Graham.
  
  According to court documents, during her brief tenancy, Newberry’s landlord, the Rev. Dr. George David Horton, collected $5,377.32 in rent from Ms. Newberry in excess of that specified in the HAP Contract and the rental agreement approved by the County’s HCV Program. A settlement was reached in this matter after the United States filed a Motion for Summary Judgment.
  
  There, the landlord who denied wrongdoing, paid to the United States $26,000 of which Ms. Newberry received, pursuant to the provisions of the False Claims Act, a Relator’s share of $5,377.32 and recovery of her legal expenses.
  
  During its investigation of the matter, the United States learned that Rev. Dr. Horton had also accepted at least $19,169.00 in excessive rents from another HCV tenant over a long period of time. In settlement of that matter, the landlord agreed to pay to the United States an additional $24,000.00.

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

• 2. United States of America, ex. rel. Taronda Wade, Relator, vs. DBS Investments, LLC, and John P. Joseph, 1:11-cv-20155-Cooke.
  
  Court documents provide that Ms. Wade’s landlord, DBS Investments and John P. Joseph, unlawfully charged and accepted $4,398.00 more than Ms. Wade was lawfully required to pay during her tenancy.
  
  U.S. District Judge Marcia Cooke granted the United States’ motion for summary judgment in this matter and entered an award against the Defendants and in favor of the United States of $35,194.00, consisting of damages in the amount of $13,194.00 and penalties of $22,000. The Court additionally entered an award of $4,398.00 in damages, $10,470.00 in attorney’s fees and $152.35 in costs to Ms. Wade.
  
  U.S. Attorney Wifredo A. Ferrer stated, “We will not tolerate abuse of federal housing or other programs. Schemes such as the ones uncovered in these cases steal taxpayers’ monies and often prey on those who need our assistance the most. We appreciate the actions of Legal Services of Greater Miami in bringing these cases and applaud whistleblowers for coming forward and exposing these schemes. We are pleased to return these monies to the taxpayers.”
  
  “This is not only a legal victory for low-income tenants but also serves as a deterrent to other landlords who do not comply with federal housing requirements,” said LSGMI Senior Staff Attorney Sean Rowley. Added Mr. Rowley, “This case also illustrates how the novel use of the False Claims Act to challenge illegal conduct by landlords can be a highly effective legal strategy and can serve as precedent for other public housing tenant advocates.”
  
  Mr. Ferrer commended LSGM and Miami-Dade Public Housing and Community Development for their assistance and investigative efforts. These cases were prosecuted by Assistant U.S. Attorney James A. Weinkle.

For the U.S. Attorney press release, see United States Successful In False Claims Act Cases Against Landlords Charging Housing Choice Voucher Tenants Excess Rents.

For the False Claims Act quit tam complaints filed by Legal Services of Greater Miami, Inc. on behalf of the United States and its 'Section 8' clients, see:

• U.S., ex. rel. Newberry v. Horton,
• U.S., ex. rel. Wade v. DBS Investments, LLC.

(1) Legal Services of Greater Miami, Inc. is a non-profit legal services provider that handles a variety of civil legal matters benefiting more than 30,000 individuals and families each year. In most cases, eligibility for services is based on an annual income at or below 125% of the federal poverty guidelines.

Disbarred Long Island Lawyer Allegedly Used Forged Documents, Bogus POAs To Steal $4M+ From Wife, Clients, Others In Real Estate Deals

From the Office of the Nassau County, New York District Attorney:

• Nassau County District Attorney Kathleen Rice announced [] that a disbarred attorney has been indicted on multiple felonies for stealing more than $4 million from multiple individuals and banks he was representing in real estate deals, including his own wife.
  
  James Kalpakis, 52, of Old Westbury, was arraigned this morning on a grand jury indictment charging him with two counts of Grand Larceny in the First Degree, five counts of Grand Larceny in the Second Degree, four counts of Grand Larceny in the Third Degree, 10 counts of Criminal Possession of a Forged Instrument in the Second Degree and two counts of Offering a False Instrument for Filing in the First Degree.

***

• Rice said that Kalpakis, an attorney who was suspended from the practice of law in 2005 and disbarred upon his resignation in September 2009, stole approximately $4.315 million from five clients he represented in real estate deals between September 2008 and January 2011.
  
  In September 2008, Kalpakis illegally obtained a 30-year, $1.1 million mortgage loan from a bank to refinance a mortgage on a home owned by his wife by submitting a forged power of attorney in her name, giving him authority to sign the mortgage in her absence. He received a check made payable to him in the amount of $402,152 at closing. The balance of the loan was used to pay off the existing mortgage, but Kalpakis stopped making payments on the loan in December 2009. His wife knew nothing about the loan.
  
  Other fraudulent dealings by Kalpakis include:
  
  The theft of approximately $1.3 million from a victim to whom Kalpakis sold two homes with forged deeds from banks that were not actually the owners of the properties between October and December 2009. Kalpakis stole an additional $290,000 from the victim between February and April 2009 by never returning the victim’s escrow deposit on a home purchase that fell through.
  
  The theft of $500,000 from the same victim between June and July 2009 by falsely representing that it would be invested in oil, gas, and mineral leases in Texas involving Kalpakis’s brother.
  
  The theft of a $750,000 one-year mortgage loan in June 2010 from a private investment firm by representing himself as the attorney for the owners of a residential property, one of whom was the victim of the above listed crimes. Kalpakis provided the lender with a forged power of attorney giving Kalpakis authority to collect the loan.
  
  The theft of $150,000 between August and September 2010 from a different victim by “selling” him a property owned by the same victim in the above listed crimes. Kalpakis provided the buyer with forged documents that gave Kalpakis authorization to sell the property.
  
  The theft of $100,000 in escrow deposits from a different victim to purchase a home between October 2008 and April 2009. The sale fell through but Kalpakis never returned the escrow funds.
  
  The theft of a $45,000 escrow deposit from a victim between January and December 2010 for the purchase of a home. The sale never went through but Kalpakis kept the money.
  
  The theft of $80,000 from a victim using three separate scams. Between August 2010 and January 2011, he stole $33,000 from the victim from a home purchase that fell through. In October 2010, he stole $35,000 from her by promising that a client he represented in a civil case would sign over the $42,000 settlement that would be received later, netting the victim a $7,000 profit. In fact, there was no lawsuit, no client, and no pending settlement. Kalpakis pulled this scam on the victim again in November 2010, stealing $12,000 and promising a $3,000 profit this time. Again, no lawsuit existed and Kalpakis kept her money.(1)

For the Nassau County DA press release, see Old Westbury Man Charged With Stealing More Than $4.3 Million From Clients He Represented In Real Estate Deals (Kalpakis, a disbarred attorney, forged paperwork to steal millions).

(1) The Lawyers’ Fund For Client Protection Of the State of New York may find itself being asked by the victims to step up and cover at least some of the losses they suffered. The Fund exists to protect legal consumers from dishonest conduct in the practice of law in the state, to preserve the integrity of the bar, to safeguard the good name of lawyers for their honesty in handling client money, and to promote public confidence in the administration of justice in the Empire State. It attempts to secure these goals by, among other things, reimbursing client money that is misused in the practice of law.

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian attorney ripoff funds; courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Nassau County DA: Ex-Real Estate Lawyer "Nothing More Than A Common Thief!" For Stealing $500K+ From Several Clients That She Represented In Real Estate Deals

From the Office of the Nassau County, New York District Attorney:

• Nassau County District Attorney Kathleen Rice announced [] that a Bay Shore attorney has been sentenced to two to six years in prison after she pleaded guilty to stealing more than $573,000 from clients who hired her to represent them in real estate deals.
  
  Yvonne DeBenedetto, 46, pleaded guilty to Grand Larceny in the Second Degree in September 2011. She was sentenced yesterday by Judge Francis Ricigliano.
  
  Rice said that in August 2009, DeBenedetto was given a check for $260,000 by a client to be held in escrow for the purchase of a new home. When the purchase of the home fell through, the client requested her money back. DeBenedetto issued her client two refund checks in December 2009 and January 2010, both of which bounced.
  
  In a separate incident in early 2009, DeBenedetto was retained by a different couple to handle the sale of their current home and purchase of a new home. As per an agreement between the victims and the purchasers of their home, $30,000 was to be held in escrow from the purchase of their home to ensure that the victims had vacated their home on time. After doing so, the victims requested that DeBenedetto issue them the escrow money. When they went to cash the check, however, they discovered that DeBenedetto had stopped payment on it.
  
  In addition, DeBenedetto stole $19,000 from a client she represented in a real estate deal that failed to close, $80,000 from a client she represented in a home sale, and more than $180,000 that was being held in escrow following the sale of a client’s home. DeBenedetto also forged the signature of a client she represented in an accident case on a settlement check for $4,000 and cashed it.
  
  “Instead of respecting the trust place in her by her clients, this defendant used it to rob them blind,” Rice said. “She revealed herself to be nothing more than a common thief, and this sentence ensures that she will no longer be able to victimize another client.”
  
  DeBenedetto stopped practicing law in December 2010 due to her involvement in this case and resigned from the New York Bar Association for disciplinary reasons.

For the Nassau County DA press release, see Bay Shore Attorney Sentenced to Prison for Bilking Clients Out of More Than $573K (DeBenedetto sentenced to 2 to 6 years in prison after pleading guilty).

(1) The Lawyers’ Fund For Client Protection Of the State of New York may find itself being asked by the victims to step up and cover at least some of the losses they suffered. The Fund exists to protect legal consumers from dishonest conduct in the practice of law in the state, to preserve the integrity of the bar, to safeguard the good name of lawyers for their honesty in handling client money, and to promote public confidence in the administration of justice in the Empire State. It attempts to secure these goals by, among other things, reimbursing client money that is misused in the practice of law.

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian attorney ripoff funds; courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Mortgage Broker Cops Plea For Role In Theft Of At Least $400K From Closing Attorney/Hubby's Trust Account; Loot Intended To Pay Off Existing Loans In Multiple Home Refinance Deals

From the Office of the U.S. Attorney (Rochester, New York):

• U.S. Attorney William J. Hochul, Jr. announced [] that Mary Brainard, 60, of Seneca Falls, N.Y., pleaded guilty before U.S. District Judge Frank P. Geraci, to wire fraud affecting a financial institution. The charge carries a maximum penalty of 30 years in prison, a fine of $1,000,000 or both.
  
  Assistant U.S. Attorney John J. Field, who handled the case, stated that Mary Brainard and her husband, Calvin Brainard, an attorney, owned and operated BMC Capital, a mortgage brokerage business in Seneca Falls. Through BMC Capital, the Brainards brokered mortgage refinancing loans for various clients. Calvin Brainard acted as the settlement agent for the lending banks, and received the refinancing loan proceeds into his attorney trust account.
  
  The loan proceeds were supposed to be used to pay off the client's original mortgage loan, but on multiple occasions, Mary Brainard accessed Calvin's attorney trust account and diverted the money to a different account that she controlled. Mary Brainard then used the client money for her own purposes, including to repay monies that she had previously stolen from other clients.
  
  To try to cover up her scheme, Mary Brainard created false bank records and other documents. In total, Mary Brainard stole at least $400,000 from at least 10 individuals in 2009 and 2010.
  
  Charges against Calvin Brainard are still pending.(1)

For the U.S. Attorney press release, see Seneca Falls Woman Pleads Guilty To Fraud.

(1) The Lawyers’ Fund For Client Protection Of the State of New York may find itself being asked by the victims to step up and cover at least some of the losses they suffered. The Fund exists to protect legal consumers from dishonest conduct in the practice of law in the state, to preserve the integrity of the bar, to safeguard the good name of lawyers for their honesty in handling client money, and to promote public confidence in the administration of justice in the Empire State. It attempts to secure these goals by, among other things, reimbursing client money that is misused in the practice of law.

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian attorney ripoff funds; courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

State Lawmakers Consider Change In Law To Ban Maine Municipalities From Snatching Surplus Proceeds From Homeowners Who Lost Their Homes In Tax Foreclosure Sales

In Augusta, Maine, Sanford News reports:

• A measure that would prohibit municipalities from keeping excess funds after sale of foreclosed properties recently received a public hearing before the Legislature’s committee on Judiciary.
  
  “Towns should certainly be able to recover the taxes and expenses they are entitled to, but they shouldn’t be able to keep any more than that,” said Rep. Anne-Marie Mastraccio, D- Sanford, a sponsor of the bill. “It is only right that surplus funds be returned to the former owner.”
  
  Under current law, a municipality is not obligated to give the former property owner funds gained from the sale that are in excess the amount owed.

***

• During last week’s hearing, Chet Randall, an attorney at Pine Tree Legal Assistance,(1) voiced strong support for the bill.
  
  “While the municipality may be entitled to be paid the real estate taxes owed, there should not be a windfall to the municipality,” testified Randall. “This bill protects the equity a homeowner has in the property and returns that equity to the homeowner after payment of the taxes owed.”
  
  The Legislature’s Committee on Judiciary will schedule a work session for the bill in the coming weeks and will make a recommendation on the bill to the full Legislature later this session.
  
  For more information about the bill, go online to: http://goo.gl/ollfL.

For the story, see Bill aims to return surpluses to former property owners.

(1) Pine Tree Legal Assistance is a statewide, non-profit organization that provides free, civil legal assistance to low-income people in Maine, whose mission is to ensure that state and federal laws affecting poor people are enforced while also addressing the systemic barriers to justice that low-income Mainers face.

Bay State Supremes Slam City Of Worcester Over Screwball Attempt To Invoke State Lodging House Act To Impose Fine$, Contempt Citations On Landlords Who Rented Apartments In 2- & 3-Family Homes To Groups Of Four Unrelated Adult College Students

From a Justia.com Opinion Summary:

• Defendants owned two-family and three-family rental properties in the City of Worcester. Defendants leased dwelling units in these properties to groups of four unrelated adult college students.
  
  The City determined that, where such a dwelling unit is occupied by four or more unrelated adults not within the second degree of kindred to each other, the dwelling unit is a "lodging" for purposes of the Lodging House Act, and Defendants were therefore operating a lodging house without a license.
  
  The trial court found Defendants in contempt and imposed monetary fines.(1)
  
  The appeals court affirmed.
  
  The Supreme Court reversed, holding that the dwelling units did not meet the definition of "lodgings" under the Act, and accordingly, the properties were not lodging houses under the Act.(2)

Source: Opinion Summary: City of Worcester v. College Hill Props., LLC.

For the Massachusetts high court ruling, see City of Worcester v. College Hill Props., LLC, No. SJC-11166 (May 15, 2013).

(1) According to the court, at the time the shameless City of Worcester filed its complaints for civil contempt, "[t]he students, some of whom were seniors, were preparing for final examinations and graduation[.] ... [a]nd they would not leave voluntarily in response to notices to quit ... ."

(2) In reversing the earlier ruling of the trial judge, which was subsequently affirmed by the state appeals court (see City of Worcester v. College Hill Props., LLC, 80 Mass.App.Ct. 757 (2011)), the state Supreme Judicial Court made the following analysis of the seemingly idiotic position taken by the City of Worcester in this case (Editor's Note: to be fair to the City of Worcester, they were able to get both a trial judge and the state's intermediate appeals court to go along with its position):

• Construing "lodgings" as the city suggests would lead to absurd results and selective enforcement.
  
  The city argued during a hearing before the Housing Court judge, as it did before us, that a building with three dwelling units could contain some units that are "lodgings" and others that are apartments.
  
  Under the city's view, a three-unit building with four unrelated students in the first-floor apartment, five siblings of the lessor in the second-floor apartment, and seven children of the lessor in the third-floor apartment, would contain "lodgings" requiring a "lodging house" license only as to the first-floor dwelling unit, the unit housing the fewest occupants.
  
  If the four students moved out, and a family of three moved in, the first-floor dwelling unit would transform from "lodgings" to a dwelling unit no longer subject to the lodging house act.
  
  This is an absurd result.
  
  "[B]y-laws must be construed reasonably. . . . [They] should not be so interpreted as to cause absurd or unreasonable results when the language is susceptible of a sensible meaning." (Citations omitted.) North Shore Realty Trust v. Commonwealth, 434 Mass. 109, 112 (2001), quoting Green v. Board of Appeal of Norwood, 358 Mass. 253, 258 (1970). See Lexington v. Bedford, 378 Mass. 562, 570 (1979).
  
  Moreover, during argument before us, the city acknowledged that, under its interpretation of "lodgings," the lodging house act would apply to a family of seven renting an apartment from an unrelated landlord, and would apply if a new baby were added to a family of three, but asserted that the city would not enforce the statutory provisions in those circumstances.
  
  We will not adopt an interpretation of a statute which relies upon selective enforcement of the statutory provisions. Cf. Commonwealth v. Lora, 451 Mass. 425, 439-440 & n. 27 (2008); Cote-Whitacre v. Department of Pub. Health, 446 Mass. 350, 376-377 (2006) (Spina, J. concurring).

Big Apple Environmental Control Board Invokes Local 'Hotel Law' To Belt Tenant With $2400 Fine For 3-Day 'Sub-Rental' To Another; Controversy Grows Over Private Individuals Using Popular Listing Service To Peddle Short-Stays In Their Homes To Tourists, Others Seeking Temporary Accomodations That Undercut Hotel Rate$

In New York City, CNET.com reports:

• New York officials have determined that a man who rented out part of his apartment on Airbnb(1) should pay $2,400 for violating the city's illegal hotel law, despite Airbnb stepping in on the host's behalf.
  
  The city initially asked host Nigel Warren to pay $7,000 total in fees for violating a law that makes it illegal for property owners to rent out homes temporarily -- essentially mimicking hotel stays -- and for unrelated issues with building and zoning codes, according to the decision and order issued by the board.
  
  The city argued that the apartment "may only be used as private residences and may not be rented for transient, hotel, or motel purposes."
  
  As Airbnb continues to shake things up for the hotel industry, it's increasingly running into issues with the law, particularly in areas where the law is not clear cut. It's not just in New York -- officials in the company's hometown of San Francisco are concerned about property owners potentially using its service to get around local tenant protections and land use codes.
  
  The New York case is centered around a 2011 law that makes it illegal for New York residents to rent out a property for less than 29 days. It was originally aimed at landlords who bought up residential properties and turned them into hotels. Airbnb has been lobbying legislators to change the law so it clearly protects hosts, like Warren, who are not trying to turn their homes into hotels.
  
  For Warren's case, Administrative Law Judge Clive Morrick dismissed the building and zoning code violations but agreed that Warren did violate the illegal hotel law. He lowered the fee total to $2,400.
  
  "While breech of the condominium rules is not of itself a ground for sustaining this (notice), respondent was in breach (through Warren's acts) and the existence of the rule against rental for transient, hotel, or motel purposes is evidence that the unit owners were to restrict their use to permanent occupation," Morrick wrote.
  
  Airbnb issued a statement to CNET, saying it was disappointed in Morrick's decision:
  
  This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed. But more importantly, this decision makes it even more critical that New York law be clarified to make sure regular New Yorkers can occasionally rent out their own homes.
  
  There is universal agreement that occasional hosts like Nigel Warren were not the target of the 2010 law, but that agreement provides little comfort to the handful of people, like Nigel, who find themselves targeted by overzealous enforcement officials.
  
  It is time to fix this law and protect hosts who occasionally rent out their own homes. Eighty-seven percent of Airbnb hosts in New York list just a home they live in -- they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law.
  
  Warren's landlord has 30 days from May 14, the date the decision was mailed, to appeal the decision, according to the Environmental Control Board, which oversaw the case. The board reviews cases related to regulations that "protect the city's health, safety, and clean environment."

***

• The case started in September when Warren rented his condo to a woman for a three-day stay. His housemate was also living at the apartment at the time, according to the hearing testimony, outlined in the document. He's used Airbnb for rentals twice before.
  
  Airbnb stepped in at Warren's hearing on May 9 to argue that his case should be an exception to the New York law. Airbnb argued that "allowing such transient use supports the city's desire to preserve living accommodations because it allows tenant the ability to bolster their income and pay rent."

***

• Now, this doesn't necessarily mean New York will crack down on all Airbnb hosts. The city enforces this regulation when a complaint is filed. It's not clear why officials zeroed in on Warren's situation. But this has to have Airbnb worried about concerned customers, particularly because the company can't formally do anything about Warren's case. Airbnb's only recourse is to change the law.

For the story, see NY official: Airbnb stay illegal; host fined $2,400 (An administrative law judge decides that a man leasing a condo broke New York's laws after he rented out part of his home on Airbnb).

See also WNYC Radio 93.9 FM and AM 820: NYC Tells Airbnb Hosts: Don’t Get Too Cozy.

For the NYC Environmental Control Board ruling and order, see In re Abe Carrey (May 9, 2013).

(1) Airbnb is an online service that provides a platform for individuals referred to as “hosts”, generally private parties, to rent unoccupied living space and other short-term lodging to guests. I think I'm somewhat reliably informed that this outfit was first known as Air Bed and Breakfast (airbedandbreakfast.com); the name subsequently being shortened to Airbnb (pronounced 'Air B-N-B').

Once-Single Rochester Renter Gets Probation, 'Pay-Back' Order For Failing To Report Change In Marital Status, New-Hubby's Income To HUD To Fraudulently Score $22K+ In Federal 'Section 8' Housing Subsidies

From the Office of the U.S. Attorney (Rochester, New York):

• U.S. Attorney William J. Hochul, Jr. announced [] that Debra Belcer, 58, of Rochester, N.Y., who was convicted of stealing government funds, was sentenced to three years probation and ordered to pay restitution in the amount of $22,609 by U.S. District Judge David G. Larimer.
  
  Assistant U.S. Attorney Marisa J. Miller, who handled the case, stated between July 2009 and July 2011, the defendant received Department of Housing and Urban Development (“HUD”) Section 8 rent subsidy benefits.
  
  To continue receiving the benefits each year, Belcer certified to HUD that she was the only adult living in her home and was the only individual in the household earning income.
  
  The government’s investigation in fact determined that the defendant had gotten married, that her husband was earning income, and that the defendant was not reporting all of her own earned income to HUD.

For the U.S. Attorney press release, see Rochester Woman Sentenced For HUD Fraud.

Central Florida Woman Accused Of Falsely Claiming To Be Active Duty Servicemember While Delinquent On House Payments To Stall Foreclosure Cops Mortgage Fraud Plea

In Pensacola, Florida, the Orlando Sentinel reports:

• No lie was too big to tell for an Orlando woman who wanted a new home in Pensacola, but didn't want to pay the mortgage for her Orlando home, federal officials said.
  
  Chantal M. Lanton, 37, of Orlando is accused of falsely claiming to be an officer in the United States Air Force who was being deployed to Germany when she let her home loan go into default in February 2011.
  
  She did so in an attempt to receive foreclosure-protection benefits that are available for service members, federal officials said.
  
  Lanton never served in the Air Force or any other branch of the U.S. military, officials said.
  
  Lanton pleaded guilty [] to two counts of making false statements to a bank while applying for a residential loan and mortgage, the U.S. Department of Justice said.

For the story, see Orlando woman lied about military service to avoid paying mortgage, feds say.

For the U.S. Attorney (Pensacola, Florida) press release, see Orlando Woman Pleads Guilty To Making False Statements In Connection With A Residential Loan And Mortgage.

Jurist's Retirement Could Mean End To "Russian Roulette" System Of Loss Mitigation Options For Relief-Petitioning Home Borrowers In Downstate NY Bankruptcy Court

In Brooklyn, New York, the Examiner.com reports:

• On Friday May 17, 2013 the United Sates Bankruptcy Court in the Eastern District of New York announced a “Ceremony in Honor of the Retirement of the Honorable Jerome Feller” and “On Tuesday, June 11, 2013 at 4:30 p.m. there will be a celebration.”
  
  One could hear the imaginary cheer across the district from homeowners and their advocates who have suffered the fate of losing their homes at the hands of Judge Feller. Nobody will celebrate Judge Feller’s retirement more than homeowners and their advocates who spin the wheel of hope when filing a bankruptcy and cringe when the judge is assigned to their case.
  
  In the Eastern District of New York whether or not a homeowner gets relief is based on which Judge gets assigned to their bankruptcy case. Indeed, some debtors or creditors may be given access to loss mitigation simply due to the judge who is randomly assigned to their case.
  
  The Court adopted General Order 582 and the Loss Mitigation Program Procedures and the order states” “and shall apply in all individual cases assigned under Chapter 7, 11, 12, or 13 of the Bankruptcy Code, to Chief Judge Carla E. Craig, Judge Dorothy T. Eisenberg, and Judge Elizabeth S. Stong, and Judge Joel B. Rosenthal, and any other Judge of this Court who may elect to participate in the Loss Mitigation Program.”
  
  The aim of the Program is for debtors and creditors to reach a consensual loss mitigation / mortgage loan modification resolution when a debtor’s principal residence is at risk of foreclosure.
  
  In Judge Feller’s courtroom, debtors and creditors have unfortunately lacked a remedy that similarly situated debtors and creditors in the same exact Courtroom enjoy in front of different Judges because he elected not to participate in the program which allowed homeowners and lenders an opportunity to work together.
  
  In what could be described as divine intervention or a simple stroke of luck, Judge Feller’s retirement could finally mean an end to the “Russian roulette” system of loss mitigation options available in the Eastern District Bankruptcy Court in Brooklyn.
  
  For those homeowners who have recently filed for bankruptcy and had the unfortunate break of getting Judge Feller, this announcement is a godsend and amounts to a second chance to keep their home
  
  In the Eastern District attorneys have had to adapt their advice to include a warning to clients when explaining bankruptcy and the loss mitigation program.
  
  “We could help to save your home in the loss mitigation program – unless we draw Judge Feller.”

For the story, see New York homeowners cheer as bankruptcy Judge Jerome Feller retires.

Scammer Gets 16 Months In $635K+ Home Improvement Ripoff; Suspect Accused Of Pocketing Cash, Beginning Preliminary Work Before Abandoning Projects, Using License Numbers From Unwitting Legitimate Contractors, Stiffing Subs, Moving Across Country To Dodge Cops

From the Office of the Orange County, California District Attorney:

• An unlicensed contractor was sentenced [] to 16 months in jail for defrauding over $635,000 from a Huntington Beach homeowner and a Yorba Linda family by stealing each of their payments and failing to complete construction projects.
  
  Alec Damos, 52, Pawley’s Island, SC, pleaded guilty Feb. 20, 2013, to one felony count of unlicensed contracting for emergency residential repairs in a disaster area, one felony count of fraudulent use of a contractor’s license, and one misdemeanor count of contracting for home improvement without a state license. In addition to his jail sentence, Damos was ordered to pay over $635,000 in restitution.
  
  In 2008, the Triangle Complex Fire burned over 30,000 acres and destroyed more than 200 homes in Orange County, making it the fourth largest fire in Orange County history.
  
  Between November 2008 and April 2009, Damos unlawfully posed as a licensed contractor in Yorba Linda fraudulently using contractor license numbers belonging to legitimate operators without their knowledge or consent. Damos approached one family and initially helped clear rubble and debris in the days following the fire and was then contracted to rebuild their entire home for over $729,000.
  
  Damos collected more than $147,000 in advances from the victims, began some preliminary work, and then abandoned the project, leaving it incomplete.
  
  Damos moved out of state with the proceeds without paying various subcontractors scheduled for the project. Damos paid himself over $61,000 and spent more than $72,000 to pay for his own family’s living expenses including monthly bills, personal shopping trips, restaurants, and travel.
  
  In 2009, the victims notified the Brea Police Department, who worked with the Contractor State License Board and the Orange County District Attorney’s Office and discovered that, in a separate case, Damos had defrauded another homeowner in Huntington Beach of over $488,000 in construction deposits in 2006.
  
  Damos was similarly unlicensed and abandoned the home improvement work which resulted in substandard conditions and unpaid creditor lines which indirectly caused the homeowners to later lose their home due to foreclosure.
  
  In 2011, Brea Police detectives located Damos living in South Carolina and extradited him back to Orange County.

For the Orange County DA press release, see Unlicensed Contractor Sentenced to 16 Months In Jail for Defrauding Over $635,000 from Two Homeowners, Including Family Who lost Their Home In 2008 Triangle Complex Fire.

Downtown NYC Butt-Kicking Condo Votes To Ban Smoking In Residential Units, Public Areas; Current Unit-Owning Puffers Granted 3-Year 'Grandfather' Waiver; Advocate: 'We're Protecting, Promoting Nonsmokers’ Air Rights In Their Homes'

In New York City, the New York Post reports:

• A towering 650-unit condominium complex in Manhattan has become the largest smoke-free residential building in the country, homeowners said yesterday.
  
  “I can finally breathe,” said Deloris Seiler, 82, a resident of Union Square’s 29-story Zeckendorf Towers, which passed a historic smoke-free ban that covers both residential units and the building’s public areas.
  
  “People are not stupid,” Seiler said. “People realize smoking is dangerous even if you are not a smoker.”
  
  While several new condominiums in New York City have prohibited smoking upon opening, Zeckendorf Towers is one of only a handful of condos whose unit owners have voted to transition their buildings to smoke-free complexes.
  
  The April 30 vote came on the heels of a recent Quinnipiac University poll revealing that 59 percent of New Yorkers would prefer to live in a smoke-free building, yet a majority would also prefer that the restriction not be dictated by the city.
  
  The building’s board first began to explore going smoke-free in 2010, after numerous complaints from residents about cigarette smoke.
  
  After confirming that they could legally prohibit smoking by amending the building’s bylaws, the board teamed up with the city Department of Health and the NYC Coalition for a Smoke-Free City.
  
  “This is a growing movement,” said Maria Pico, borough manager for the Manhattan Smoke Free Partnership. “We are protecting and promoting nonsmokers’ air rights in their homes. There is no way to isolate secondhand smoke from coming into your apartment. Sixty-five percent of all air is shared.”
  
  Residents said 85 percent of the owners voted on the policy.
  
  Of those unit owners casting ballots, nearly 84 percent voted in favor of the amendment to prohibit smoking in both residential units and public areas for all new residents.
  
  They also adopted a grandfather clause granting existing owners who smoke a three-year waiver before their units are subject to the smoke-free policy.
  
  “I am thrilled that such a large majority of my neighbors voted to make our building a healthier, safer, and more pleasant place to live,” said homeowner Andrea York.
  
  “It feels great to know that I can sit in my living room and sleep in my bedroom with clean air again.”

For the story, see Building kicks butt (Condo votes no smoking).

HUD Fair Housing Complaints For 2012

From the Fair Housing Defense blog:

• HUD is out with its most recent data concerning the number of discrimination complaints filed under our federal Fair Housing Act (FHA). In 2012, HUD investigated 1,817 cases while its partner entities investigated just under 7,000 cases. Those numbers are down a little from 2011 and 2010. When added to the number of complaints investigated by private fair housing groups, however, the total number of fair housing complaints filed is up to over 28,000.

***

• For what it is worth, claims alleging discrimination against those with a disability make up the largest percentage of cases (in 2012 over 55%). Race is second at over 25% of the complaints, with national origin coming in third at just under 23% of the cases.

***

• [W]hile the federal FHA contains the seven familiar protected classes, you need to know that:
  
  21 states (plus DC) include sexual orientation as an additional protected class: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.
  
  12 states (again plus DC) include source of income as a protected class in their fair housing laws: California, Connecticut, Maine, Massachusetts, Minnesota, New Jersey, North Dakota, Oklahoma, Oregon, Utah, Vermont, and Wisconsin.
  
  What does all this mean? HUD and its partner entities are out there looking to file discrimination complaints. You must know the laws where you operate properties. And remember there are also city and county anti-discrimination laws that you must follow.(1)

Source: Just How Many Fair Housing Complaints Were Filed in 2012 The Number Will Surprise You.

(1) For example, in New York City, the city's Human Rights Law enumerates 12 protected classes and three additional protections (based on one's lawful occupation, family status, and lawful source of income) against whom discrimination in the sale, rental or lease of a housing accommodation or in the provision of services and facilities is prohibited. See Protected Classes Under The NYC Human Rights Law.

Pair Cop Pleas To Interfering With Housing Rights Of Black Residents; Duo Charged With Engaging In Racially-Motivated Intimidation, Vandalism On Their Homes

From the U.S. Department of Justice (Washington, D.C.):

• Two Spring Hill, Tenn., men pleaded guilty in federal court [] for their involvement in a racially-motivated conspiracy to interfere with the housing rights of African-American residents of the Spring Lake subdivision of Spring Hill, the Justice Department announced. Dakota James Calderhead, 20, and Kristian Chancellor Mathis, 19, each pleaded guilty in U.S. District Court in Nashville, Tenn., to one count of conspiracy to deprive a person of his civil rights.
  
  According to their plea agreements, on or about December 30, 2011, Calderhead and Mathis conspired to vandalize homes in the Spring Lake subdivision. Mathis admitted to spray painting a swastika and racial slurs on the driveway of an African-American family’s residence.
  
  Calderhead admitted that he fashioned a noose which Mathis hung from a tree outside of the residence. Calderhead also admitted to hanging a second noose from the driver’s side rearview mirror of the school bus located in front of another African-American family’s residence.
  
  Both defendants further admitted that their acts of vandalism were intimidating, and motivated, in part, by the race, color, or ethnicity of the victims.

For the Justice Department press release, see Two Tennessee Men Plead Guilty to Conspiring to Violate Civil Rights of African-American Residents.

Fair Housing Feds Score $2.5M+ In Suit Settlement Accusing Louisiana Municipality Of Engaging In Discriminatory Zoning Practices To Keep Out Black Renters In Aftermath Of Hurricane Katrina

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department announced [] that St. Bernard Parish, La., has agreed to a settlement valued at more than $2.5 million to resolve separate lawsuits by the United States and private plaintiffs alleging that the parish sought to restrict rental housing to African Americans in the aftermath of Hurricane Katrina.
  
  The United States’ lawsuit alleged, among other things, that the parish: (1) passed a law, known as the permissive use permit ordinance, that prevented homeowners from renting single-family homes in residential zones without first obtaining a permit from the parish; (2) revised its zoning code to reduce dramatically the amount of land available for multi-family apartments; and (3) interfered with individuals’ housing rights.
  
  The lawsuit further alleged that these actions were done to limit or deny rental housing to African-Americans in violation of the Fair Housing Act. These actions came on the heels of the parish’s other efforts after Hurricane Katrina to restrict rental housing opportunities, including halting the re-establishment or redevelopment of rental housing and enacting a permit requirement for single-family rentals but exempting renters who were “related by blood” to the homeowners. The parish later rescinded these restrictions.
  
  “The Fair Housing Act is clear that local governments cannot use their zoning and land-use laws to discriminate on the basis of race,” said Eric Halperin, Senior Counsel and Special Counsel for Fair Lending in the Civil Rights Division. “People should have the freedom to choose where they live, without regard to race, and this innovative settlement will create greater housing opportunities in the New Orleans area.”

***

• Under the settlement, which still must be approved by the U.S. District Court for the Eastern District of Louisiana, the parish must pay $275,000 to eight aggrieved persons identified by the United States and $15,000 to the United States as a civil penalty, establish a new Office of Fair Housing and hire a fair housing coordinator with a gross annual salary of at least $40,000, spend $25,000 each year in a marketing and advertising campaign to attract renters and developers of multi-family rental housing to the parish, and establish a rental land grant program through which the parish will transfer lands in its possession, free of cost, to qualified persons or entities who are willing to create or rehabilitate housing for rental purposes.
  
  The land grant program, which requires the parish to offer lands worth up to $83,000 each year, will last for five years; other programmatic features will last for three. Parish officials must also undergo fair-housing training and provide periodic reports to the United States.
  
  In a separate agreement, the parish agreed to pay $1.65 million in compensation, costs and attorneys’ fees to two sets of private plaintiffs.

For the Justice Department press release, see St. Bernard Parish, Louisiana Agrees to $2.5 Million Settlement to Resolve Housing Discrimination Lawsuits.

Feds Settle Fair Housing Suit Against Developer Accused Of Building Housing With Features Making It Inaccessible To Those With Disabilities; Action Against Design, Engineering Professionals Continues

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department announced [] that Oregon developer David Montagne and others affiliated with him have agreed to pay $80,000 and remove accessibility barriers at Gateway Village, a 275 unit apartment complex in Salem, Oregon, to settle a lawsuit alleging that they had violated the Fair Housing Act by building the complex with steps and other features that made it inaccessible to persons with disabilities.
  
  Under the terms of the parties’ agreement, Montagne and the other developers, Montagne Development Company, Gateway II LLC, Dav II Investment Group LLC and William Jones, must take extensive actions to make the complex accessible to persons with disabilities.
  
  These corrective actions include removing steps from sidewalks, widening interior doorways, reducing threshold heights, replacing excessively sloped portions of sidewalks, and installing properly sloped curb ramps to allow persons with disabilities to access the sidewalks from the parking areas.
  
  In addition, these defendants will pay $48,000 to the Fair Housing Council of Oregon,(1) whose investigation revealed the violations and which intervened in the United States’ lawsuit,(2) and $32,000 to establish a settlement fund for the purpose of compensating disabled individuals impacted by the accessibility violations.
  
  This settlement does not resolve the entire lawsuit. The case continues against the defendant that provided design and engineering services for Gateway Village, Multi/Tech Engineering.

For the Justice Department press release, see Justice Department Announces Fair Housing Settlement with Oregon Developer.

(1)The Fair Housing Council of Oregon is a nonprofit civil rights organization whose mission is to eliminate illegal housing discrimination through enforcement and education across Oregon and southwest Washington..

(2) See Fair Housing Defense blog: Standing and Fair Housing Testers for a brief introduction to the subject of outfits that employ investigators, testers, etc. to conduct private probes into alleged housing discrimination and their legal standing to file, or intervene in, Fair Housing lawsuits.

'Anti-Discrimination' Feds Settle Suit With Architects, Engineers Involved In Design, Construction Of 800+ Housing Units That Allegedly Failed To Meet Fair Housing Act's Accessibility Requirements

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department [] announced a settlement with the architects and civil engineers involved in the design and construction of multifamily housing complexes located in Mississippi, Louisiana and Tennessee.
  
  The department’s lawsuit alleges that nine multifamily housing complexes with more than 800 units covered by the Fair Housing Act’s accessibility requirements were designed and built without required accessible features.
  
  No settlement has been reached with the developer, builder or former owners of these properties, who are alleged to have violated not only the Fair Housing Act, but also the Americans with Disabilities Act.
  
  Under the settlement, which was approved today by the U.S. District Court for the Southern District of Mississippi [...], nine architects and civil engineers will pay a total of $865,000 to make the complexes for which they were responsible accessible to persons with disabilities.
  
  They will also pay $60,000 to compensate aggrieved persons harmed by the inaccessible housing alleged in the government’s lawsuit. The settlement requires these defendants to undergo training on the Fair Housing Act and to provide periodic reports to the government.

For the Justice Department press release, see Justice Department Reaches Fair Housing Settlement with Design Professionals in Disability Lawsuit.

Porn Peddler Accuses Chase Of Discrimination Over Failure To Refinance Home Loan; Suit: Bankster Asserted Moral Reasons, Reputational Risk As Reasons To Stiff Long-Time Customer

In Los Angeles, California, Courthouse News Service reports:

• A millionaire soft-core porn king claims in court that JPMorgan Chase violated the law and its own policies by refusing to underwrite a loan, for "moral reasons."
  
  Marc L. Greenberg - the producer behind the soft-core porn series "Co-Ed Confidential" and "The Best Sex Ever," among others - claims that Chase advertises its commitment to fair lending and non-discriminatory business. So when a JPMorgan Securities vice president approached him about refinancing one of his properties in Marina Del Ray, Greenberg says, he expected to be treated fairly - regardless of his profession.
  
  He sued JPMorgan Chase & Co. in Superior Court.
  
  "As a current JPMorgan securities customer and home loan lendee, plaintiff had previously researched and was familiar with JPMorgan's representations and promises of commitment to fair lending, diversity and non-discriminatory practices. Based on these representations and fair lending policies, plaintiff decided to obtain a home loan refinance service from JP Morgan," Greenberg says in his complaint.
  
  Greenberg says he expected a quick approval, given his established relationship with Chase, an annual income of more than $500,000 and a net worth of more than $10 million. But Greenberg claims Chase gave him the runaround for four months, telling him he needed to speak to a credit specialist because of questions "regarding income."

***

• [Greenberg continues:]  "In rejecting plaintiff's application, JPMorgan asserted that its superior moral position prevented it from loaning plaintiff money because one of plaintiff's sources of income did not meet JPMorgan's 'morality standards' and that the 'reputational risk' of loaning plaintiff money threatened JPMorgan's public image. JPMorgan's hypocrisy would be laughable except plaintiff was in fact illegally discriminated against and denied a loan by JPMorgan."

***

• Greenberg claims he was "highly offended" by Chase's rejection of his application, noting that the bank has held the first deed of trust on his home for years and never said a word about his line of work.
  
  "The rejection simply made no sense to plaintiff. Was JPMorgan, a bank whose multiple illegal dealings were under investigation by no fewer than eight different federal agencies (including the FBI, FDIC, SEC, the Commodity Futures Trading Commission, the Office of Controller of the Currency and federal prosecutors in Manhattan) really so ashamed of sex and nudity that they refused to consider plaintiff's loan application? It seemed impossible. Plaintiff was humiliated to be rejected by a bank as unscrupulous as JPMorgan because, according to JPMorgan, plaintiff was 'immoral' and presented a 'reputation risk' to JPMorgan," Greenberg says in his complaint.
  
  Greenberg suggests that his purveyance of skin flicks on late night cable may not be the only reason for Chase's rejection of his loan application.
  
  "Additionally, plaintiff believes that JPMorgan may have discriminated against him for other reasons including, but not limited to, his Jewish ethnic heritage and religious beliefs, his status as a Hollywood producer, or the loan officer's arbitrary and irrational jealousy of plaintiff's success. Plaintiff believes discovery will show additional reasons for JPMorgan's illegal discrimination against him," the complaint states.

***

• Greenberg seeks an injunction and damages for violations of the federal Fair Employment and Housing Act, the Unruh Civil Rights Act and California's consumer protection and fair business laws. [...] Greenberg never identifies himself in the complaint as a soft-core pornographer. He refers to himself throughout as a maker of films "that dealt with the subject of human sexuality."(1)

For the story, see Look Who's Talking, Porn Mogul Tells Bank.

(1) It would be interesting to see if discrimination based on one's lawful occupation or one's lawful source of income is prohibited in connection with home lending. In at least one place (believe it or not), discrimination in the sale, rental or lease of a housing accommodation or in the provision of services (ie. home lending?) and facilities is prohibited. See Protected Classes Under The NYC Human Rights Law.

Father-Son Duo Object To Getting 20 Months For Roles In Alabama Foreclosure Sale Bid Rigging Racket; Prosecutor: 'Perps Won Race To The Courthouse - They Got The Best Deal!' Ex-Homeowner/Victim: 'I Was Sick & Had No Insurance - I Could Have Used The Extra Cash From A Larger Surplus Check!'

In Mobile, Alabama, the Press Register reports:

• A federal judge Monday ordered almost two years in prison for a father-son investment team, the first area defendants in a long-running antitrust investigation to face incarceration for rigging foreclosure auctions.
  
  In addition to the prison terms, a year and eight months, U.S. District Judge Ginnie Granade ordered defendants Jason R. Brannon and Robert M. Brannon to pay $23,173 to homeowners who received less money from foreclosure sales than they would have gotten from a fair and open property auction.
  
  Deana Timberlake-Wiley, a trial attorney in the Justice Department’s Antitrust Division said her office calculated the figure using a formula it has applied to foreclosure-rigging cases across the country. The Department of Justice website lists some 45 defendants in active cases.
  
  “The formula that we use is very conservative,” she said.

***

• Defense attorneys Arthur Madden and Bradley Murray argued that their clients had cooperated completely and deserved leniency.
  
  “From the moment word of an FBI investigation got out … the Brannons stopped their activities,” said Madden, who represents Jason Brannon. “It’s a crime. They did wrong. They admit it.”

***

• Prosecutors have said the conspiracy operated like this: The investors would decide among themselves who would bid on a particular property put up for sale after the homeowner could not make mortgage payments. The collusion would artificially suppress the prices that the properties would fetch.
  
  The investors would hold a second, secret auction among themselves, writing their bids on a piece of paper. The highest bidder would get the property, and the others received payouts according to a formula based on their offers.

***

• Under state law, money from a foreclosure auction is used to pay off the outstanding mortgage to make the mortgage holder whole. Any money beyond that goes to the homeowner who lost the house. The rigged auctions reduced the money that those homeowners received.
  
  Prosecutors put on testimony from four area residents who lost homes in foreclosure. Deborah Adkinson testified that she, herself, had bought a Theodore home at a foreclosure sale 15 years earlier but fell behind in her mortgage payments when she developed Crohn’s disease and lost her job of 18 years.
  
  She said she was barely well enough to get out of bed when someone came to her house and told her she no longer owned it and would have to get out. She testified that no one informed her that she had a right to buy the house back even after the foreclosure sale. She said she believed she had to move out right away.
  
  “I honestly thought that’s how it worked,” she said.
  
  Adkinson testified that she would have benefited from a larger surplus check after the winning bidder won the auction. “I could have got medical help,” she said. “I had no insurance.”

***

• Madden argued that the Brannons were bit players in the conspiracy compared to some of the other investors, including ones given sweetheart deals by the Justice Department.
  
  “The major players have either been granted immunity or not been charged,” he said.
  
  Said [federal prosecutor] Timberlake-Wiley: “They were the earliest cooperators. They got the best deal.”(1)
  
  The prosecutor faulted the defendants for failing to take responsibility. “They’ve never shown any remorse,” she said. “They’ve always acted like this was just the cost of doing business.”

For the story, see Judge orders prison for father-son investment team in Mobile property auction rigging case.

For the U.S. Department Of Justice press release, see Two Alabama Real Estate Investors and Their Company Sentenced for Their Roles in Bid-Rigging and Mail Fraud Conspiracies Involving Real Estate Purchased at Public Foreclosure Auctions.

(1) See United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) for one Federal judge's observations on the so-called "race to the courthouse/prosecutor's office" that frequently takes place during the early stages of these "multi-target" criminal probes and conspiracy prosecutions:

• 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.

Antitrust Feds Settle Civil Suit Against Energy Outfits Alleging That Operators' Purported 'Joint Bidding' Arrangement Was Illegal Conspiracy Not To Compete For Gov't Mineral Rights Leases

From a client alert from the law firm McDermott Will & Emery:

• On Monday, April 22, 2013, after rejecting the initial settlement agreement, Judge Richard Matsch (D. Colo.) approved a revised settlement of a suit brought by the U.S. Department of Justice (DOJ) against two energy companies for conspiring not to compete for mineral rights leases.
  
  Gunnison Energy Corp. (GEC) and SG Interests I Ltd. and SG Interests VII Ltd. (collectively "SGI") will each pay a fine of $275,000 to the DOJ to settle allegations of agreeing not to bid against each other in violation of antitrust law for natural gas leases on government land in western Colorado.
  
  These fines are in addition to those related to alleged False Claims Act violations, for which SGI and GEC paid government fines of $206,250 and $245,000 respectively. The new settlement is twice the amount of the fines in the original settlement.
  
  McDermott Will & Emery wrote an article in February 2012 analyzing the DOJ's initial complaint against the parties, and the competitive implications of joint bidding. At the time, the parties had agreed to pay a total of $550,000 in fines. The court rejected the settlement in December 2012 finding that it was not in the public interest. "There is no basis for saying that the approval of these settlements would act as a deterrence to these defendants and others in the industry, particularly as GEC considers 'joint bidding' to be common in the industry."
  
  Further, the settlement amount was "nothing more than the nuisance value of [the] litigation." Additionally, as reflected in the newly approved deal, the court wanted the alleged Sherman Act violations and False Claims Act violations settled separately, with a payment for the Sherman Act claims separate from, and in addition to, any amount due under the False Claims Act. At heart, it appears Judge Matsch wanted any settlement he approved to be meaningful enough to have a deterrent effect on future agreements.
  
  This was the DOJ's first challenge to an anti-competitive bidding agreement for mineral rights leases, but it is just one of the recent cases in which joint bidding activities have become the focus of antitrust scrutiny.
  
  In Summer 2012, the DOJ opened an investigation into Chesapeake Energy's acquisition of oil and gas properties in Michigan and the possibility that Chesapeake conspired with Encana Corp. to allocate bids on those properties. In 2006, the DOJ began investigating the joint bidding practices of private equity firms in connection with leveraged buyouts. That investigation led to class action suits against private equity firms. One of those suits survived a motion for summary judgment last month.
  
  It is important to note that the DOJ is paying attention to joint bidding practices and taking action. As noted in the SGI/GEC matter, while joint bidding may in fact be common practice in the energy field, it is not necessarily lawful.(1)  Each arrangement should be evaluated for potential anticompetitive effects.(2)

Source: Natural Gas Companies Settle Antitrust Suit Stemming From Joint Bidding.

(1) See Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement? for some background on what distinguishes a lawful joint bidding activity from an illegal racket designed to suppress competition and artificially depress prices in violation of the Sherman Antitrust Act in the context of competitive bidding activities.

(2) See DOJ Finds Antitrust Violation in Joint Bid for Oil & Gas Leases:

• [J]oint bidders increase their risk profile if the arrangement prevents them from bidding for assets that, absent the joint bid arrangement, they would have bid for separately.
  
  Joint bidding is typically pro-competitive when two companies that would otherwise be unable to bid individually work together to submit a bid. For example, if two energy companies would not individually bid on a lease because of their size or risk profile, they may choose to pool their resources and bid jointly. Joint bidding of this type should make the market more competitive, creating a bid the seller would not otherwise have received.
  
  On the other hand, parties incur risk if their intent in entering into the agreement is to purchase property at artificially depressed prices and to divide the savings among those competitors who refrained from bidding. From a practical perspective, if there are many firms likely to bid on an asset, a joint bid is less likely to lead to an anti-competitive outcome.

California Supremes Reverse Foreclosure Sale Where $200K Error In Announcing Credit Bid Attributable To Trustee's Mistake, Not Lender's Negligence; Winning Bidder Loses Out On Big Windfall, Parties Entitled To A 'Do-Over'

From a Justia.com Opinion Summary:

• Plaintiff filed an action to quiet title to a parcel of real property, alleging he owned the property because he had been the highest bidder at a trustee's sale.
  
  After Plaintiff gave the auctioneer his cashier's check at the sale, the trustee told Plaintiff the sale was void. The trustee based its refusal on its discovery that it had mistakenly communicated to the auctioneer an incorrect opening bid by the lender that was less than ten percent of the actual amount of the bid.
  
  After the trustee refused to tender the deed to Plaintiff, Plaintiff filed this action.
  
  The trustee moved for summary judgment on the ground that it had properly set aside the foreclosure sale due to a significant procedural irregularity in the statutory foreclosure process coupled with an inadequate sales price.
  
  The trial court ultimately granted the motion. The court of appeals reversed, holding that the trustee's error was not a procedural irregularity in the statutory foreclosure process and that the trustee therefore had no discretionary authority to void the foreclosure sale.
  
  The Supreme Court reversed, holding that, under the circumstances here, the trustee acted within its discretion authority in declaring the sale void.(1)

Source: Opinion Summary - Biancalana v. T.D. Serv. Co..

For the ruling, see Biancalana v. T.D. Service Company, S198562 (Calif. May 16, 2013).

(1) For those who make a living or otherwise buy real estate at foreclosure sales in California, this court ruling, as well as the cases cited therein, make for must reading in understanding when a screw-up involving a foreclosure sale auction resulting in a windfall for a foreclosure investor may call for the sale to be voided and when it won't.

In a nutshell, whether or not a California court should exercise its discretion and void a foreclosure sale infected with some type of mistake will depend in large part on the following issues:

• Was the mistake attributable to the trustee and/or auctioneer conducting the sale while carrying out its statutory-definined duties (probably allowed to void the sale), or
  .....
• Was the mistake wholly under the control of the beneficiary/lender seeking foreclosure and arose solely from the beneficiary/lender's own negligence, thereby falling outside the procedural requirements for foreclosure sales described in the statutory scheme (probably not allowed to void the sale)?
  

If the mistake was attributable to the trustee and/or auctioneer conducting the sale while carrying out its statutory-defined duties, a further question must be addressed:

• Was the mistake caught before or after the trustee issued the deed to the winning bidder and did the error result in a grossly inadequate purchase price?

In this regard, the California Supreme Court made the following observation:

• Our holding is premised on the trustee discovering its mistake before it issues the deed.
  
  After the deed is issued, a bona fide purchaser is entitled to conclusively presume that the sale was conducted regularly and properly. (Moeller, supra, 25 Cal.App.4th at pp. 831–832.) The trustee thus has an incentive to exercise diligence in promptly reviewing the sale and identifying any irregularity before issuing the deed.
  
  In the present case, the trustee discovered its error within two days of the auction, and the error resulted in a grossly inadequate purchase price.
  
  Under such circumstances, we do not think the balance of public policy objectives weighs in favor of allowing the buyer to enjoy a substantial windfall while leaving the beneficiary to collect whatever remedy it can from the trustee. The more efficient course is to permit the trustee to quickly correct its mistake and hold a proper sale.

Lender Refuses To Accept Underwater-Home Title Surrender, Won't Foreclose, Won't Release Lien; Forceful Negotiation Or An Improper Coercion In Violation Of Bankruptcy Discharge Injunction??? 'It Depends,' Says Federal Appeals Court

From Bankruptcy-RealEstate-Insights.com:

• After filing a chapter 7 bankruptcy, the debtors tried to surrender their residence to the mortgage lender. After the bankruptcy the lender refused to accept a surrender, refused to foreclose and refused to release its lien.
  
  The debtors brought an adversary proceeding claiming that, among other things, this refusal constituted a violation of the discharge injunction they received in bankruptcy. The bankruptcy court found no violation; the Bankruptcy Appellate Panel agreed; and on appeal the 1st Circuit affirmed – but with some cautionary comments.(1)

For more, see Discharge Injunction Violation Can a Lender Refuse to Foreclose, Release Its Lien, or Accept Surrender of a Property.

For the ruling, see Canning v. Beneficial Maine, Inc. (In re Canning), 706 F.3d 64 (1st Cir. 2013).

(1) The court closed with these cautionary comments:

• A coda is necessary before we conclude. Today, where both lenders and homeowners strive to recuperate from hard economic times, this opinion should not be relied upon to leverage a way out of the bargaining table.
  
  It is one thing to insist upon state-law rights in refusing a recalcitrant “foreclosure or release” demand by a debtor, and completely another to refuse negotiating with a debtor willing to compromise.
  
  Put differently, while this case may provide some guidance on the dos and don’ts applicable to the bargaining dynamics between secured creditors and bankruptcy debtors, our remarks in Pratt still control: “the line between forceful negotiation and improper coercion is not always easy to delineate, and each case must therefore be assessed in the context of its particular facts.” 462 F.3d at 19.

Homeowner: Dubious Real Estate Operator Swindled Me Out Of $440K Home Sale Proceeds; Accused Perpetrator Has $1M+ In Unrelated Court Judgments, Was Recently Described By Judge As A "Scoundrel" & Slammed For $15K For Renting Out Vacant Recently-Foreclosed REO Without Authorization

In Calgary, Alberta, CBC News reports:

• A Calgary homeowner says he was swindled out of his own property by a realtor he thought was trying to help him.
  
  Seyfeddin Mohammed and his wife sold their home to a company offering a deal without legal or realtor fees. Now, Mohammed says that the property was transferred out of his name without him receiving any of the $440,000 purchase price.
  
  "There is some fraud going on," said Cass Lintott, Mohammed's lawyer. "That's our position and it will be Mr. Mohammed's position, and it's just a question of taking it in chunks, so first get title back into his name, make things right with his lender and then deal with the people who have done this to him."
  
  The company Mohammed sold to, www.freelistcalgary.com, is controlled by Derek Johnson.
  
  Johnson was recently fined by the Real Estate Council of Alberta for trading in real estate without authorization.(1)
  
  Court documents also show that Johnson has more than $1-million in judgements against him. All of the judgements are from separate matters and are not related to Mohammed.
  
  In one judgement unrelated to Mohammed's complaint, a Court of Queen's Bench judge described Johnson as "a scoundrel" who has appeared in court on several foreclosure proceedings.
  
  "Mr. Johnson ... has repeatedly and consistently argued the same nonsense to the detriment of his victims," Master Keith Laycock wrote. "These defendants have been victimized by him and his numbered company. He may even have committed fraud obtaining title to their residence."
  
  Recovering costs could be difficult
  
  Now, Mohammed is fighting to get his property back. He says that because he wasn't paid, the conditions of the sale were not completed. Mohammed also alleges that his signatures on the land transfer agreement were forged.
  
  "I got stress," Mohammed says, "not easy, during all life in this country, working everything for down payment for house and if I lost everything, I have no money, no house."
  
  In an email to the CBC, Johnson said that he has done nothing wrong. He wrote that the Mohammeds consented to the sale, including the transfer of title to Johnson's company.
  
  Despite going public and hiring a lawyer, Mohammed's lawyer says that recovering his costs could be difficult.
  
  Johnson says he's locked in a court battle against the mortgage company and that's why no funds have been paid out. He says that he will pay Mohammed once the court battle with the mortgage company is settled.

For more, see Homeowner says he was swindled out of his own property (Homeowner says he never received any of the $440,000 purchase price).

(1) See Calgary man fined $15K for posing as realtor (Real Estate Council of Alberta levies fine against man):

• The council says in schemes like this people obtain lists of foreclosed properties and then try to rent or sell them.
  
  "We find it's for nefarious purposes, and that is that they want to generate cash flow," said Charles Stevenson of the Real Estate Council of Alberta. "If at all possible they'll find a way to steal identity, perpetrate mortgage fraud and move the people on through without their knowledge."
  
  Calgary police would not say whether they will be investigating the Real Estate Council of Alberta information, but it is against the Real Estate Act to deal property without a licence in the province.

Bankster Accused Of Running Florida Force-Placed Insurance Racket Settles Class Action Suit, Dodges Stiff Penalties; Agrees To Cash/Credit Refunds Of 25% Of Premiums; Refuses To Admit Wrongdoing, But Promises It Won't Gouge Florida Borrowers In The Same Way Again

In Miami, Florida, The Palm Beach Post reports:

• Wells Fargo Bank and insurer QBE have agreed to pay an estimated $19.25 million to more than 24,000 Florida homeowners under a proposed settlement that plaintiff attorneys call “unprecedented.”
  
  Without admitting wrongdoing, the firms would settle claims they inflated premiums — often to five or six times above normal rates — for “force-placed” insurance. Lenders may impose such insurance in cases where a homeowner falls behind on payments or lets coverage lapse, but attorneys for homeowners have argued such charges have often been abusive and loaded with kickbacks for banks.
  
  The proposal filed in U.S. District Court in Miami May 13 is subject to a judge’s approval, which the parties are seeking within 60 days.
  
  Plaintiffs attorney Adam Moskowitz of Coral Gables said the settlement’s cash and credit refunds of 25 percent of premiums represent the highest percentage of any case involving force-placed insurance, to his knowledge.
  
  “It’s going to have a real impact on people’s lives,” Moskowitz said.
  
  This case represents a significant settlement in Florida, the biggest market for force-placed insurance, but his firm and others are also pursuing national cases involving Chase, Bank of America, Citi, HSBC and Wells Fargo, he said.
  
  The plaintiffs filed suit in 2011. U.S. District Judge Robert N. Scola Jr. in Miami ruled the case could proceed as a class-action suit last year.
  
  After the filing, Wells Fargo said it would no longer take an 11 percent commission on force-placed insurance for Florida borrowers, according to the settlement documents. Insurer QBE Speciality announced it would phase out certain lines of business while affiliate Praetorian Insurance would operate under an 18.8 percent rate cut approved earlier this year by state regulators.
  
  “We are pleased that we were able to resolve this particular matter,” said Wells Fargo spokeswoman Vickee Adams. “We continue to support programs like our lender-placed insurance services which provide continuous hazard insurance protection for real property owned by our customers.”

For more, see Wells Fargo, insurer QBE agreed to $19.25 million settlement with 24,000 homeowners.

Renter-Family Given 5 Minutes Notice Before Getting 'Screw-Up Triggered' Foreclosure Boot From Home Landlord Bought For All Cash From Foreclosing Bankster Several Years Earlier; Fear Of Arrest Keeps Victims Out Of Improperly-Seized Premises

In Charlotte, North Carolina, WSOC-TV Channel 9 reports:

• Frank Cole was shocked to get a call from his wife in tears Thursday. She explained that sheriff's deputies were at their rented home in west Charlotte and were forcing them to get out.
  
  "The sheriff was giving her five minutes to pack some things and leave and apparently, we've been evicted," Cole said. "They left all kinds of embarrassing kinds of papers all over the door and windows and stuff."
  
  Since the homeowner, Allison Brown, had paid cash for the home several years ago, this seemed impossible to both her and the Cole family.
  
  The Cole family had been receiving letters about foreclosure proceedings threatening eviction, but they were addressed to Arthur and Kim Felder, the previous homeowners, who lost the home to foreclosure years ago. The Cole family did what most would in the incident in receiving wrongly addressed mail and sent the letters back.
  
  Channel 9 obtained the eviction order and it has the Felders' names on it and not the Cole family. Brown, an Asheville resident, bought the home after the bank foreclosed on it.
  
  Similar to the Cole family, Brown is upset about this unexpected eviction and the manner in which it was handled.
  
  "So get this, I am not allowed on property. They threatened my property manager to get off. My tenants are in a motel, and I can't seem to get any answers," Brown said.
  
  Several calls were made to the Hunover Law firm, who Eyewitness News was told ordered the eviction, but no contact was made. Cole said he has called them too, and wants answers and his family back in his home.
  
  Until then, going back to their home is out of the question.
  
  "Because it is a court order, it still stands and until that order is rescinded, we cannot go into the house or we risk being arrested," Cole said.(1)

Source: Family says they were erroneously evicted from home.

(1) For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

• Nevada High Court OKs $1M+ Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure (for the court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (Nev. 2008)),
  .........................
• Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure (for the court ruling, see Wells Fargo v. Tyson, 27 Misc.3d 684, 897 N.Y.S.2d 610 (Sup. Ct., Suffolk County, 2010); reversed on procedural grounds Wells Fargo v. Tyson, 82 A.D.3d 757, 917 N.Y.S.2d 914 (App. Div. 2d Dept. 2011).

For examples of filed lawsuits involving illegal bank break-in, "trash-out" lockout cases, see:

• Bank admits mistake on Willcox home foreclosure (involving an Arizona homeowner) (for a copy of the resulting federal lawsuit, see Newman v. Bank of America, N.A. and go here for the attached Exhibits),
• Couple: Bank Foreclosed On Wrong House (New Bedford Couple Suing Bank Of America) (involving a Massachusetts resident with a home in Florida) (for a copy of the resulting federal lawsuit, see Cardoso v. Bank of America, et al.),
• Family's recently purchased home, gutted by property removal service (involving a Michigan homeowner) (for a copy of the resulting federal lawsuit and accompanying Exhibits , see Rought v Deutsche National Trust Company, Trustee, et al.),
• In a Sign of Foreclosure Flaws, Suits Claim Break-Ins by Banks (involving a California homeowner) (for a copy of the resulting federal lawsuit, see Ash v. Bank of America),
• Former Lake Villa couple sues Bank of America over ‘illegal’ lockout (involving a Chicago, Illinois-area homeowner) (for a copy of the resulting federal lawsuit, see McKee v. Bank of America).