Playing Fast & Loose With Clients' Money, Property Among Bad Acts Driving Illinois Supremes' Decision To Disbar Three Attorneys, Dispensing Lesser Discipline To Five Others

The Supreme Court of Illinois announced the filing of its most recent lawyer disciplinary orders on March 20, 2017, disbarring six (6) and suspending the licenses of eleven (11) others because the lawyers engaged in professional misconduct by violating state ethics law.

Of those disciplined, the following eight (8) have been either disbarred, suspended, or censured (ie. slap on the wrist) at least in part, for embezzling, or otherwise playing fast and loose with client funds or other assets.(1)

DISBARRED

Joel Mitchell Bell, Chicago
Mr. Bell, who was licensed in 1975, was disbarred on consent. He misappropriated over $364,000 in client funds and lied to two of his clients about the status of their respective settlement proceeds. He was suspended on an interim basis on December 2, 2016.

Michael David Gerhardt, Forest Park
Mr. Gerhardt, who was licensed in 2003, was disbarred. He neglected two civil cases, resulting in two judgments totaling approximately $500,000 being entered against his clients in one case and $20,000 in settlement funds not being distributed to another client. He also failed to return an unearned fee and made misrepresentations to his client regarding the status of that client’s case. He failed to appear at his own disciplinary hearing.

Teresa Searcy Woods, Naperville
Ms. Woods, who was licensed in 1992, was disbarred. She misappropriated approximately $27,500 entrusted to her in connection with four different real estate transactions and one personal injury matter. She engaged in further misconduct by entering into a purported repayment agreement with two of her clients in order to delay repayment of earnest money that she had converted. Finally, she signed a client’s name on two settlement checks without that client’s knowledge or authorization.

SUSPENDED

Alfonso S. Bascos, Chicago
Mr. Bascos, who was licensed in 1976, was suspended for one year and until further order of the Court. He failed to competently represent an elderly client who suffered from dementia when he prepared a power of attorney giving the client’s caregiver control over the client’s funds and making the caretaker and her family beneficiaries of the client’s will. Mr. Bascos did not discuss matters with the client before preparing the documents and the caretaker subsequently misappropriated $536,000 from the client. Mr. Bascos also engaged in a conflict of interest by representing the caretaker when she was being investigated for elder abuse.

G. Ronald Kesinger, Jacksonville
Mr. Kesinger, who was licensed in 1973, was suspended for one year and until further order of the Court. He impermissibly borrowed $26,000 from a client while he was representing her in a probate matter, purchased another client’s home at a foreclosure sale while he was representing that client in the foreclosure case, and falsely represented his financial condition in a loan transaction with a bank.

Magdalene Rose Wilson, Lakemoor
Ms. Wilson, who was licensed in 2013, was suspended for two years and until further order of the Court, with the suspension stayed after ninety days and until she completes the payment of certain restitution followed by a two-year period of conditional probation. She neglected eight different client matters. In five of those matters, she commingled and converted funds paid to her for security retainers and filing fees. The suspension is effective on April 10, 2017.

CENSURED

Matthew R. Hartley, Phoenix, Arizona
Mr. Hartley was licensed in Arizona in 1992 and in Illinois in 1998. He was censured and placed on probation for one year in Arizona for commingling and converting more than $6,000 of client funds, failing to properly train and supervise employees, and failing to maintain complete client trust account records. The Supreme Court of Illinois imposed reciprocal discipline by censuring him and ordering that he be placed on probation for one year, with the period of probation considered successfully served.

Steven Michael Landis, Tinley Park
Mr. Landis, who was licensed in 1996, was censured. He failed to refund an unearned portion of a $10,000 fee in a criminal matter after he had been discharged by the client. In addition, during the ARDC investigation into his conduct, he initially failed to cooperate.

Source: Illinois State Bar Association: Illinois Supreme Court disbars 6, suspends 11 in latest disciplinary filing.

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(1) In Illinois, the Client Protection Program of the Attorney Registration and Disciplinary Commission (ARDC) was established by the state Supreme Court to provide reimbursement to clients who have lost money or property because of dishonest conduct by lawyers admitted to practice law in the State of Illinois. The Program reimburses clients who cannot get reimbursement from the lawyers who caused their losses, or from other sources such as insurance.

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

• Directory Of Lawyers' Funds For Client Protection (February 2017) (includes a listing for Canadian client protection 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.

Federal Appeals Court OKs 11-Year Prison Sentence For Disbarred Attorney Who Fleeced Stroke-Stricken Client For Over $840K; Disability Rendered Victim Unable To Walk, Talk, Etc. For The Rest Of Her Life

In Baltimore, Maryland, The Daily Record reports:

• A federal appellate panel affirmed last week an 11-year sentence for [Saundra Lucille White,] a suspended-then-disbarred attorney in who defrauded a Silver Spring client over the course of several years and misappropriated hundreds of thousands of dollars in assets.(1)(2)(3)

For more, see 4th Circuit upholds fraud conviction for attorney disbarred in Md.

See also, Disbarred Attorney Sentenced To 11 Years In Prison for Scheme to Defraud Clients of More Than $841,000.

For the court ruling, see USA v. White, No. 16-4070 (4th Cir. March 9, 2017).

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(1) According to the facts set forth in the court's ruling, the victim "[s]uffered a severe stroke leaving her unable to walk, talk, or drive for the remainder of her life." Shortly thereafter, a close relative of the victim reached out to attorney White to seek legal assistance in organizing the victim's personal affairs. Among the stroke-stricken victim's assets were a condominium, a car, and three bank accounts totaling over $130,000. In addition, the victim also had access to her deceased mother’s assets, including bank accounts totaling $352,000, approximately $400,000 in savings bonds, and a house.

(2) See generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession (while Professor Miller's essay is over a quarter-century old, it appears that his observations maintain their vitality to this day):

• This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.
  
  There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.
  
  This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.
  
  ***
  The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.

(3) The Client Protection Fund of the Bar of Maryland, formerly known as the Client's Security Trust Fund, was established to reimburse clients who have suffered a loss due to the wrongful taking of money by a Maryland-licensed attorney. In most cases, according to the Fund, a victim can claim the full amount that was wrongfully taken. The amount reimbursed, however, cannot exceed 10 percent of the value of the Fund as of the close of the prior fiscal year.

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

• Directory Of Lawyers' Funds For Client Protection (February 2017) (includes a listing for Canadian client protection 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.

Attorney Agrees To Turn In His Law License After Bar Regulators Bag Him For Keeping Crappy Trust Account Records, Depositing His Own Money To Apparently Make Up For Missing Client Funds

In Madison, Wisconsin, The Associated Press reports:

• A Madison-area attorney has agreed to give up his law license after failing to keep records of his client trust account and possibly using client money over a period of several years.
  
  The Wisconsin Supreme Court revoked Adam Walsh's license on Thursday [March 23]. Walsh most recently ran Affordable Legal Services in Madison.
  
  The Office of Lawyer Regulation noted that Walsh couldn't provide complete records of the trust account but several thousand dollars appeared to be missing in at least two instances.
  
  Walsh admitted he'd deposited his own money into the account at times, apparently to make up for missing funds. According to the opinion, none of Walsh's clients have asserted he still owes them money.(1)
  
  Walsh didn't contest the accusations. He began practicing law in 2008.

Source: Wisconsin Lawyer Loses License Over Misuse of Client Funds.

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(1) The Wisconsin Lawyers' Fund for Client Protection, created by the state Supreme Court in 1981, is designed to provide reimbursement to clients who have incurred financial losses due to the dishonest conduct of their attorneys.

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

• Directory Of Lawyers' Funds For Client Protection (February 2017) (includes a listing for Canadian client protection 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.

Long Arm Of The Law Finally Catches Up To Thieving Ex-Lawyer Over 2 Years After Disbarment; Faces 21 Embezzlement Charges Relating To Accusations Similar To Those Made Against Him By Fleeced Former Clients In Ten Different Civil Lawsuits

In Charleston, West Virginia, the West Virginia Record reports:

• A former Charleston attorney has been indicted on embezzlement charges.
  
  R. Michael Martin, who worked for Michael Martin & Associates in Charleston, had his law license annulled in January 2015.
  
  Martin pleaded not guilty to the charges during his arraignment earlier this week in Kanawha Circuit Court. Martin agreed not to fight the Lawyer Disciplinary Board’s recommendation to annul his law license. His trial his scheduled for July. Circuit Judge Charles King is presiding over it.
  
  The allegations against Martin in his indictment are similar to those in the nearly one dozen lawsuits filed against him by his former clients.
  
  Martin was named in ten lawsuits in Raleigh, Kanawha and Wayne circuit courts, alleging he failed to settle lawsuits in a timely manner and that he wrongfully distributed settlements to his clients. Most of the plaintiffs were individuals, except one in Raleigh Circuit Court filed by Erie Insurance Company that alleged Martin breached the terms of a settlement agreement.
  
  Martin is facing 21 counts of embezzlement.(1) He agreed to voluntary disbarment on Jan. 20, 2015.

Source: Former attorney indicted on embezzlement charges.

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(1) In West Virginia, the Lawyers’ Fund for Client Protection is a method of (at least partially) reimbursing the public for losses caused by dishonest conduct committed by lawyers admitted to practice in this State.

The purpose of the Lawyers’ Fund for Client Protection is to promote public confidence in the administration of justice and the integrity of the legal profession by reimbursing losses caused by the dishonest conduct of lawyers admitted and licensed to practice law in the courts of this State occurring in the course of a lawyer-client or fiduciary relationship between the lawyer and the claimant.

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

• Directory Of Lawyers' Funds For Client Protection (February 2017) (includes a listing for Canadian client protection 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.

Lawyer Cops Guilty Plea For Allegedly Running Shakedown Racket w/ Another Attorney, Using Bogus Copyright Lawsuits To Squeeze Over $6 Million Under Threat Of High Financial Penalties, Public Embarrassment From Internet Users Who Supposedly Downloaded Pornographic Movies From File-Sharing Websites

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

• An Illinois attorney pleaded guilty today [March 6] for his role in a multi-million dollar scheme to fraudulently obtain payments to settle sham copyright infringement lawsuits by lying to state and federal courts throughout the country.
  
  ***
  John L. Steele, 45, currently residing in Pennsylvania, pleaded guilty to conspiracy to commit mail fraud and wire fraud and conspiracy to commit money laundering [...].
  
  According to Steele’s admissions in the plea, between 2011 and 2014, Steele and co-defendant Paul Hansmeier, both practicing lawyers, executed a scheme to fraudulently obtain more than $6 million by threatening copyright lawsuits against individuals who supposedly downloaded pornographic movies from file-sharing websites.
  
  Steele admitted that he and Hansmeier created a series of sham entities to obtain copyrights to pornographic movies – some of which they filmed themselves – and then uploaded those movies to file-sharing websites like “The Pirate Bay” in order to lure people to download the movies. Steele and Hansmeier then filed bogus copyright infringement lawsuits that concealed their role in distributing the movies, as well as their personal stake in the outcome of the litigation. After fraudulently inducing courts into giving him and co-defendants the power to subpoena Internet service providers and thereby identify the subscriber who controlled the IP address used to download the movie, Steele and Hansmeier used extortionate tactics such as letters and phone calls to threaten victims with enormous financial penalties and public embarrassment unless they agreed to pay a $3,000 settlement fee.
  
  ***
  Paul R. Hansmeier, of St. Paul, Minnesota, was charged as a co-defendant in an indictment filed on Dec. 16, 2016. The charges contained in the indictment against him are merely accusations, and he is presumed innocent unless and until proven guilty.

For more, see Attorney Pleads Guilty for Role in Multi-Million Dollar Scheme to Fraudulently Obtain Copyright Infringement Settlements from Victims Who Downloaded Pornographic Movies.

Contractor Gets Off Easy For Fleecing Two Homeowners Out Of $45K; Gets 24 Months Probation, To Be Allowed To Buy Out Of 60 Days Jail Time So Long As He Makes Prompt Restitution Payments Of $600/Month

In Pittsburg, Kansas, The Morning Sun reports:

• Steven A. Gaches was sentenced to 24 months probation by District Court Judge Robert J. Fleming Thursday afternoon [March 9] in Crawford County District Court in Pittsburg.
  
  Gaches was convicted late last year on two counts of theft by deception in a 2015 case, for taking approximately $45,000 from a pair of victims in exchange for materials and labor for home improvements which were never completed in 2014.
  
  Fleming gave Gaches an underlying sentence of 12 months on each count, to run consecutively, and ordered $45,000 in restitution — $30,000 to one victim and $15,000 to the other — as well as court costs. Fleming also ordered 60 days in the county jail, but put that on hold so long as Gaches makes the $600 per month restitution payments on time.

For the story, see Gaches sentenced to probation — Former contractor ordered to pay $45,000 in restitution for work never completed.

Home Repair Scam Duo Get At Least 2 Years On False Pretenses Charges For Targeting Elderly Homeowners, Duping Them Out Of Over $60K

In Arlington, Virginia, The Free Lance Star reports:

• Two Culpeper-area men were given prison sentences [] for defrauding elderly homeowners in Arlington out of $62,100 in a home-repair case similar to another one in Alexandria that resulted in charges against four other Culpeper-area residents.
  
  John Patrick Walsh, 32, of Culpeper and Mark Sisk, 31, of Boston (Va.) were sentenced to serve at least two years in prison and pay $62,100 in restitution to the victims, in addition to several years of probation, according to a news release from the Arlington County Police Department.
  
  On Sept. 10, Walsh and Sisk approached the victim’s residence in the Yorktown neighborhood and fraudulently claimed to be contractors working in the area, according to police. They advised the elderly residents that they were in need of serious home repair and that failure to comply could result in the home catching fire.
  
  Throughout the month of September, Walsh and Sisk misrepresented the need for work and provided false information to the victims that work had been performed, police said.
  
  Walsh was sentenced to seven years in prison, with all but two years suspended, on the charges of false pretenses and conspiracy. He was ordered to pay restitution to the victims in the amount of $62,100 and ordered to five years of probation upon release from incarceration.
  
  Sisk was sentenced to six years in prison, with all but two years and five months suspended, on three charges of false pretenses. He was ordered to pay restitution to the victims in the amount of $62,100 and ordered to three years of probation upon release from incarceration.
  
  In the other case, four Culpeper-area residents have been charged with bilking an 89-year-old Alexandria woman out of $71,000 for roof repairs, landscaping and other work that they never performed. Those cases have not gone to trial.

Source: Two Culpeper men given prison time in elderly repair scam in Arlington.

False Pretenses, Home Repair Fraud Among Charges For Contractor Who Allegedly Pocketed $57K To Build Home Addition, But Only Gave Homeowners A Concrete Slab; Cops Gave Suspect Pre-Arrest Opportunity To Complete The Work, Then Gave Him The Pinch For Not Performing

In Kingston, Oklahoma, KXII-TV Channel 12 reports:

• When we got to the Marshall County Sheriff’s Office, people were still coming in, filing complaints against 35-year-old Rusty Summit of Durant.
  
  “There’s not even a word for it,” Kristi Wade said. “Well if there was, it’d be a big curse word,” David Wade said.
  
  The Kingston couple said they hired Summit to build a workshop with an apartment back in August, when they turned their summer property into a permanent residence.
  
  Over the next several months, the couple said they paid Summit a total of $57,000, but all they got was an even concrete slab and a long list of excuses.
  
  “He had a head-on collision car wreck in December and that’s one reason he had been out of contact,” Mr. Wade said. “And his wife contacted my wife instead of him contacting me and I thought that was a little weird.”
  
  Then, Wade said, Summit stopped returning his calls. So they called the sheriff’s office.
  
  Marshall County Sheriff Danny Cryer said Summit told them he’d fallen behind, so they gave him another chance, but he still refused to do the work he was hired for.
  
  “He had a crew of workers that showed up and stayed for about an hour,” Cryer said. “And then left. The work was severely substandard.”
  
  Summit was arrested Friday morning [March 17], for Embezzlement and False Pretenses under the Home Repair Fraud Act.
  
  “We have been working with the Bryan County District Attorney’s Office, some of their investigators, and found that Mr. Summit has made a habit of this kind of business,” Cryer said.
  
  About a dozen separate cases so far that Cryer knows about.
  
  “Our new home here,” Mrs. Wade said. “We have a plan. Our two year plan is now a ten year plan and we live in the weekend place until we find the right people to do the right job.”
  
  The couple said they wished they would have performed a background check on Summit before they hired him.
  
  Sheriff Danny Cryer recommends people check multiple references and the Better Business Bureau before handing over any money.

Source: Durant man arrested for embezzling $57K from Kingston couple.

Contractor Gets Pinched For Pocketing Over $270K From Homeowner For Work That Was Left Incomplete, Leaving Home Uninhabitable; Prosecutor Nixes Defendant's 'It's A Civil Matter' Defense, Tags Her With Grand Theft Charge Instead

In Sarasota, Florida, WWSB-TV Channel 7 reports:

• A Sarasota contractor is facing numerous charges for committing Fraud and Embezzlement against a client.
  
  Melissa Ann DeMarco, who does business as "Madinc" and "Sargent Enterprises" was arrested [] after the State Attorney's office filed charges. According to a Sheriff's Office report DeMarco filed a contractor removal request against a Sarasota couple she was doing contracting work for.
  
  According to the contracts and payment records, the victims she was trying to remove herself from had already paid her 92-percent of the contracted price of more than $300,000.
  
  However, the work done on the victims home was incomplete, uninhabitable and the work performed thus far totaled more than the FEMA 50-percent allowance.
  
  An investigation also showed that DeMarco deposited most of the checks from the victims into her personal account. DeMarco claims she was terminated from the job by the victims and this is now a civil matter.
  
  However, The state attorney's office determined based on the facts that DeMarco committed Grand Theft and an arrest warrant was issued. DeMarco was taken into custody on Thursday [March 9].

Source: Sarasota Contractor charged with embezzlement and fraud.

Miami Feds Bag Another Developer For Allegedly Using Controlled Dummy Company To Inflate Construction Contract Prices In Effort To Boost Receipt Of Low-Income Housing Tax Credit Dollars; Defendant Pays $5.2 Million In Forfeitures, Penalties In Exchange For Deferred Prosecution Deal To Dodge (Buy Out Of) Criminal Charges

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

• [Federal law enforcement authorities recently] announced the filing of charges against DAXC, LLC (“DAXC”), an affiliated entity of Pinnacle Housing Group, Inc. (“PHG”), a low-income housing developer operating in Miami, Florida.
  
  DAXC is charged by Criminal Information with theft of government money, in violation of Title 18, United States Code, Section 641. According to allegations contained in the Information, and statements made in Court, the DAXC theft scheme involved low-income housing developments built by PHG in Florida, specifically Vista Mar, an apartment complex in Miami; Pinnacle at Avery Glenn, an apartment complex in Sunrise; Orchid Grove, an apartment complex in Homestead; and Cypress Cove, an apartment complex in Winter Haven.
  
  According to the Criminal Information, Florida Housing Finance Corporation (“FHFC”) issued federal tax credits and grant monies to developers for the construction of low-income housing in Florida. To obtain these federal funds, FHFC required developers to submit proposed development costs, including a construction contract signed by the developer and contractor.
  
  [From] 2009 to 2011, PHG’s affiliated contractor solicited bids for concrete shell work for the housing developments. The affiliated contractor received a final bid for concrete shell work from Shell Subcontractor A.
  
  Instead of signing contracts with Shell Subcontractor A at its final bid price, the affiliated contractor signed contracts for concrete shell work with their affiliated subcontractor, DAXC, at prices inflated from $200,000 to $1.5 million higher than Shell Subcontractor A’s price. DAXC did not have the personnel or equipment to complete concrete shell work and in fact did not complete any shell work on these projects. Rather, DAXC subcontracted with Shell Subcontractor A to complete the concrete shell work at Shell Subcontractor A’s final bid price.
  
  PHG then submitted the inflated construction contracts to FHFC’s representatives for the receipt of federal tax credits and grant monies for the housing developments. As a result of DAXC’s fraudulent inflation scheme, FHFC allocated approximately $4.2 million in excess federal funds. On or about November 8, 2011, among other wire transfers, the five principals of the affiliated contractor received payments totaling approximately $2.5 million from this contract inflation scheme from DAXC’s bank account.
  
  The United States and DAXC entered into a deferred prosecution agreement filed today [March 20] pursuant to which DAXC has paid $5.2 million in forfeiture and fines to the United States.(1)
  
  This is the third in a series of prosecutions by the United States Attorney’s Office for the Southern District of Florida involving theft of government funds relating to low-income housing developments. The Office previously charged the principals of Carlisle Development Group, Inc. for a $25 million contract inflation scheme as well as the principals of Biscayne Housing Group, Inc. for a $10 million contract inflation scheme.

Source: Pinnacle Housing Group’s Affiliate Charged in $4 Million Government Theft Involving Low-Income Housing Developments.

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(1) See Miami Developer in Hot Seat Over Low-Income Housing Fraud (may need subscription; if no subscription, GO HERE, then click appropriate link):

• In exchange, prosecutors agreed to dismiss the criminal information with prejudice after three months—a move that prevents new charges for the same behavior already prosecuted, unless DAXC breaches the agreement.

Another Landlord Using 'Friendly Foreclosure' In Federally Subsidized Apartment Complex To Ditch Obligation To Provide Low Income Housing? 33-Unit Complex Facing Forced Sale Over Unpaid $10K Real Estate Taxes Leaves Residents Facing Possible Boot

In Heflin, Alabama, The Anniston Star reports:

• Some 33 tenants who reside at Woodland View apartments in Heflin will soon have to look for another place to call home, as the property’s owners face auction for failure to pay taxes.
  
  According to a legal notice published by the county on Thursday [March 23], the owners owe just over $10,000 in delinquent taxes. The property will therefore be sold at auction at the Cleburne County Courthouse on May 2, 2017, to the highest bidder for cash according to the published notice.
  
  Woodland View Apartments participates in the Section 515 Rural Rental Housing program,(1) which provides financial aid for the very low income, elderly and the disabled. The complex is divided into two sections: one for residents with income assistance and the other for those whose rents are fixed with no financial assistance, according to site manager Kelly Haskell.
  
  The tax records state the owners as Woodland View Apartments LTD for one section and Cleburne County Associates LTD for another section. Attempts last week to reach representatives of the companies were unsuccessful.(2)
  
  Residents received letters two weeks ago from the USDA informing them that the property might change hands and they need to be prepared to move, according to Haskell.
  
  For the displaced residents on financial aid there is a safety net. They can relocate to other section 515 apartments once they apply and receive what’s called a “letter of priority entitlement.” Such a letter puts a resident at the top of a waiting list at other 515 properties. Another option tenants can use is the Rural Development Voucher Program, Haskell added.
  
  The tenants have 4 months after the sale of the property to use their vouchers.
  
  ***
  Haskell worries about her tenants; one is on dialysis and another one has terminal cancer. One tenant known as “Granny” has lived at Woodland View for more than 12 years and can’t fully understand what is going on.
  
  Haskell is still processing applications, which can take up to two weeks as a lease is often 20 pages long and requires income verification, employment verification and a litany of other qualifications. She said she has two available units with four pending applications.
  
  “There’s no housing here, even for those that don’t need rental assistance,” Haskell said as she stared at a 3-inch stack of application documents in her office.
  
  “I don’t want to move, I want to stay here,” said tenant Melinda Hudgins. Hudgins and her husband, Johnny, have lived at Woodland View for more than a year and have formed a bond with Haskell.
  
  Resident Patricia Houston has lived at Woodland View Apartments for more than 15 years and feels connected to the town.
  
  “I was born here, raised here, I really like Heflin, I like Kelly and ‘em,” said Houston, who said she doesn’t know what she will do if forced to move.
  
  As for Haskell, she worries about her own job. Hired last December she says her job is like her old job as a schoolteacher. The tenants are her kids and there is a copious amount of paperwork to keep her busy.

Source: Their apartments up for auction, Heflin tenants face eviction.

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(1) The Section 515 Rural Rental Housing program makes direct mortgage loans to developers and landlords to provide affordable multifamily rental housing for very low-, low-, and moderate-income families, elderly persons, and persons with disabilities. Loans are for up to 30 years at an effective 1 percent interest rate and are amortized over 50 years. Tenants pay basic rent or 30 percent of adjusted income, whichever is greater. RHS rental assistance subsidy can be used to limit tenant payments to 30 percent of their income. Loans made through contracts entered into on or after December 15, 1989 cannot be prepaid. Owners may obtain guaranteed equity loans after 20 years as an incentive for participation.

(2) Reportedly, there is a growing number of landlords being accused of allowing their federally-subsidized complexes fall into foreclosure, with the intention of having an affiliated company buy the property at auction, and using the foreclosure action as a way rid themselves of the obligation to provide low-income housing which was agreed to at the time of obtaining the favorable federal financing. I wonder if this is one more case of that.

See, generally:

• Is prominent landlord using foreclosure loophole to ditch low income tenants?,
• Lawsuit: Midwest Landlord Of Complexes Built & Financed With Affordable Housing Tax Credits Is Using 'Friendly Foreclosures' To Foreclose On Himself To Weasel Out Of 30-Year Gov't Commitments To Offer Reduced Rents To Low-Income Tenants; Concerns Raised That Legal Maneuver May Be Growing Business Model To Improperly Jack Up Rents.

Housing Advocate Cries Foul As New Landlord Buys Apartment Complex Subject To Section 8 Contract With HUD, Then Announces That It Will No Longer Accept Rent Subsidies Without Allegedly First Giving Tenants 1-Year Notice Required By Statute; Dozens Of Poor Residents Now In Fear Of Possible Near-Term Boot

In Garner, North Carolina, WTVD-TV Channel 11 reports:

• Dozens of tenants at Forest Hills Apartments in Garner are fearing the worst after being notified last week that their public assistance would no longer be honored starting the first of April.
  
  "It should not be that easy for someone to come and just say, 'OK, I have enough money to buy this property, I want you out,'" one woman told town leaders at a meeting last night.
  
  At least one expert says it may not be that easy.
  
  Dave Layfield, CEO of Affordable Housing Online, said "It would appear this displacement is unlawful." Layfield profiled Forest Hills and wrote this FAQ on the rights and benefits tenants have.
  
  "I strongly encourage existing tenants not move until they consult with HUD about their rights," Layfield said. "Very often, new owners of Project-Based Section 8 properties are unaware of the regulations and protections afforded their tenants."
  
  "It could be completely innocent," Layfield said. "Sometimes, purchasers just ignore the law in an attempt to get higher-rent-paying tenants into their new investment. It could be this is their first experience with Project-Based Section 8 and are unfamiliar with the Uniform Relocation Act requirements associated with the program."
  
  Layfield said that under current law, tenants must receive notice that the owner is not renewing a subsidy contract with the government one year prior to the contract expiration.
  
  "If tenants did not receive such a notice," he said, "my understanding is the owner must continue charging the tenant only the amount they paid under the HAP contract until proper notice has been sent," and the one-year waiting period has expired.
  
  "42 U.S.C. Section 1437f (c)(8)(a) established the notice requirement," Layfield offered. "(8)(b) of the same paragraph establishes that if the required notice is not sent, the owner 'may not evict the tenants or increase the tenant's rent payment until such time as the owner has provided the notice and one year has elapsed.' So, if the previous owner did not send the proper notice at least one year ago, the lease termination letter ... is not in compliance with the statute."
  
  Layfield encouraged tenants to see whether they're eligible for Tenant Protection Vouchers, which he says "effectively gives them a portable housing voucher that they can use at their current property to pay the increased rent or take to another property."
  
  ***
  But it's not just the fear of having to leave; it's the worry of where people will go. Local experts say there is a stark shortage of subsidized housing units in Wake County.
  
  Debra King, Executive Director at CASA, a non-profit dedicated to finding affordable housing for people who need it, says their waiting list is 1,000 people long. What's more, King says her organization runs a 1 percent vacancy rate; there's very little turnover.
  
  King said the problem with housing vouchers in general is that they're hard to get in the first place and that many landlords don't take them. But King says according to local data, 43 percent of renters have difficulty affording their homes. She said in Wake County, the average price for a modest, two bedroom apartment is $918. The average renter, on the other hand, can only afford $750, according to NCHousing.org.

Source: Good news, bad news for Garner tenants facing eviction.

Lawsuit: Eminent Domain In Disguise: Southern Indiana Municipality Uses Crippling Fines From Home Inspection Racket To Drive Landlords, Homeowners, Tenants In Aging Low Income Neighborhood Out Of Town; Alleged Coordinated Effort With Developer Paves Way For Land Grab At Cheap Prices For Redevelopment

In Charlestown, Indiana, the News and Tribune reports:

• Casey Lozier lives in pain.
  
  He can’t count the number of surgeries he’s had on one hand. His back, his neck, both knees. In a tank top on a warm March day, a long scar that runs up his arm is visible.
  
  Lozier, 48, used to be a roofer, before he fell off a roof while working. His first spate of injuries came when he slipped in grease on the floor of McDonald’s during his shift. That was in 1999.
  
  His doctor recently found five nodules in his lung, so now he needs a biopsy.
  
  Lozier lights a cigarette, saying he knows he shouldn’t be smoking, but it’s hard to quit the habit he’s had for 33 years. Plus, it calms him down. He has a lot on his mind these days.
  
  “I’m dealing with all that, and I’m dealing with all this and everything, trying to find a place,” he said. “It’s a very big strain on my health.”
  
  Like many other renters in Charlestown’s Pleasant Ridge neighborhood, Lozier has only one week left to find a new place to live. That’s what his landlord told him, at the beginning of March.
  
  Josh Craven, Pleasant Ridge Neighborhood Association president, estimated Lozier is one of 50 or so individuals or families with March 31 deadlines to get out.
  
  The exodus is the first wave of mostly low-income residents who are scrambling to find a place to stay. It’s the culmination of several looming years of talks to redevelop Pleasant Ridge, an older neighborhood with some deteriorating homes.
  
  “I lay up in bed at night or sometimes cry myself to sleep because I don’t know what to do,” Lozier said. “I’m not in control. That’s a big issue for me. I want to be in control. But this situation, I’m not in control. I’m a renter. I have no say-so.”
  
  CITY’S RENTAL INSPECTION PROGRAM
  
  Neace Ventures LLC, the private development firm enforcing eviction, has bought more than 150 properties in the neighborhood, with a goal to eventually own them all. The plan is to demolish the homes to make way for a new subdivision similar in design to Louisville’s Norton Commons.
  
  Lozier’s landlord said he stopped collecting rent in March from his tenants to give them financial leeway in relocation, even though he doesn’t own the properties anymore.
  
  Although Neace Ventures isn’t contracted by the city of Charlestown, many say the city is behind redevelopment. An at-risk rental inspections program, approved by the Charlestown City Council in February 2016, has levied hefty fines against property owners, who in turn have sold their properties to Neace for $10,000.
  
  The landlord, who wished to remain anonymous, said he was billed with $163,000 in city fines. “They went away once I sold,” he said.(1)
  
  This landlord said he wouldn’t buy back his properties for $10,000, if given the chance. Properties aren’t valued much, in part because of their location, he said. Fixing them up would be a money pit.
  
  “There’s a lot of people up there that don’t have no place to go,” the landlord said. “ ... It’s very, very unfortunate. I think that it could have been handled a lot different.”
  
  A libertarian law firm, the Institute for Justice,(2) has sued the city on behalf of the Pleasant Ridge Neighborhood Association for its rental inspection program, which the Institute claims violates Constitutional rights.(3)

For more, see Pleasant Ridge renters search for new homes as March 31 eviction deadline looms (Evictions first round in neighborhood redevelopment).

For story updates, see:

• Pleasant Ridge renters facing eviction allowed to stay another month,
• Charlestown City Councilwoman testifies to Congress on eminent domain abuse bill.

For the lawsuit, see Charlestown Pleasant Ridge Neighborhood Association Corporation, et al. v. City of Charlestown, Indiana, et ano.

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

(1) See Eminent Domain in Disguise: Putting an End to Charlestown, Ind.’s Unconstitutional Home Inspection Scheme (City officials working in concert with a private developer have concocted a scheme to destroy the working-class Pleasant Ridge neighborhood through a process that amounts to eminent domain by other means):

• [W]hile homeowners try to address each violation, the fines continue to accumulate and the city finds new violations to compound the penalties. Faced with crippling fines, the homeowners find themselves confronted with an offer they cannot afford to refuse. Neace Ventures steps in and offers to buy the property for $10,000. Neace does not have to worry about the fines or repair orders because the city has agreed not to enforce the law against the developer.
  
  The inspections regime has been a windfall for Neace Ventures. Not only has it compelled more than 150 property owners to sell—it has also forced them to sell at a considerable loss. The tax assessed value of the homes is between $25,000 and $35,000, and their fair market value was much higher before the city destroyed the market by vowing to demolish every property. The net savings for Neace, so far, is near $2 million.
  
  Mayor Hall’s alternative eminent domain scheme is illegal and unconstitutional under local and state statutes, as well as the Indiana and U.S. constitutions. The Institute for Justice has teamed up with Pleasant Ridge residents, who just want to keep their homes, to file a preliminary injunction asking the court to put an end to the mayor’s mission to destroy their community.

(2) The Institute for Justice is an Arlington, Virginia-based non-profit, 501(c)(3) public interest law firm (with five other offices located across the nation in Florida, Minnesota, Texas, Arizona and Washington state) that litigates issues relating to, among other things, private property rights.

(3) Ibid. footnote 1 inverse condemnation

Landlord Joins His Tenants In Lawsuit Accusing Town Of Conducting Unconstitutional Program Of Rental Home Inspections; Renter Family w/ Five Kids Don't Want "Strange Men Coming In & Poking Around" Without First Articulating Legitimate Probable Cause Of Possible Violations

In Pottstown, Pennsylvania, the PhillyVoice reports:

• The Pennsylvania Constitution, a document older than the country's founding papers, is being violated in Pottstown, according to a couple who enjoys their privacy.
  
  Dottie and Omar Rivera have sued the Montgomery County borough, and cited at the top of the civil lawsuit is Article 1, Section 8 of the document that protects people in their houses from "unreasonable searches and seizures."
  
  The gist of the Riveras' complaint: the local government wants to inspect their rental home to ensure housing-code compliance, but they've allegedly given no specific reason for wanting to do so.
  
  In 2015, Pottstown approved new rules requiring biennial inspections of every rental unit, with every unit subjected to an inspection before Dec. 31, 2017.
  
  According to the lawsuit, before a scheduled inspection of the Riveras' home earlier this month, the couple wrote a letter to Keith Place, director of licenses and inspections, informing him they wouldn't voluntarily allow the borough to come inside and look around. They’d need to get a warrant.
  
  So Pottstown did. In its request for a search warrant to inspect the Riveras' two-story, colonial home, the borough cited compliance with the 2015 ordinance as its only probable cause.
  
  The warrant was granted by a Montgomery County judge despite no evidence of potential housing code violations, the suit claims.
  
  When asked for comment, a spokesperson for the borough referred PhillyVoice to its attorney, who said she does not comment on pending litigation.
  
  "The only people who are invited into that home are family, friends and the landlord when something needs to be fixed. That's it." – Rob Peccola, attorney for the Riveras
  
  Rob Peccola, an attorney with the Institute for Justice,(1) which is representing the Riveras, paints those administrative warrants as free passes for the local government to enter homes without probable cause.
  
  "Oftentimes the warrant application will just say inspection pursuant to whatever code," but without "showing that anything is wrong with the home, or that there's any suspicion whatsoever," Peccola told PhillyVoice.
  
  The Riveras have lived in Pottstown their whole life, and have rented from their current landlord, Stephen Camburn, for about five years. Peccola said they don't have anything to hide, but they have five kids at home, and don't want "strange men coming in and poking around."
  
  "The only people who are invited into that home are family, friends and the landlord when something needs to be fixed," Peccola said "That's it."
  
  (Camburn, by the way, is on his tenants' side. He's listed as a plaintiff in the lawsuit, and said in a video from IFJ that people are entitled to their privacy.)
  
  SEEKING A STATEWIDE RULING
  
  What's even more concerning, according to Peccola, is the lack of restrictions on who can accompany inspectors — for example, a police officer without a warrant of his or her own.
  
  "There's nothing stopping them from coming in, finding evidence and using that evidence against them," he said.
  
  Peccola went out of his way to note that the plaintiffs have no issue with inspections if there is legitimate probable cause of possible violations, or if the tenants or landlord request the inspection.
  
  The suit, which names Place and the borough as defendants, seeks to deem the rental inspection laws unconstitutional, force Pottstown to provide more traditional probable cause to obtain future warrants, and damages of one dollar.
  
  Place didn't respond to a request for comment on more general questions regarding rental inspections.
  
  When the new ordinance was passed in 2015, Place did respond to landlords who criticized the regulation saying renters were being treated differently than homeowners, who aren't subject to inspections.
  
  Place said landlords are "running a business" and need licensees that require inspections just like any other business, according to The Pottstown Mercury.
  
  The Riveras and the IFJ will be seeking an outcome similar to a recent federal ruling in Ohio(2) that deemed the city of Portsmouth's rental inspection law — which "authorizes warrantless administrative inspections" — unconstitutional.
  
  IFJ is shooting for a breakthrough by way of a statewide decision with its lawsuit, filed in the Court of Common Pleas of Montgomery County.
  
  The Pennsylvania Supreme Court uses other states' supreme court opinions as a factor when hearing cases, but one hasn't been delivered on the issue of mandatory rental inspections in any of the other 49 states.
  
  A favorable ruling in the state's highest court would effectively nix other laws in municipalities like Reading and Lancaster that allow for administrative warrants as means to inspect a rental property, Peccola said.
  
  "The goal is to get it to the Pennsylvania Supreme Court, because they get the last word on this."

For the story, see Lawsuit challenges legality of Pottstown's rental inspections (Couple sues Montgomery County borough, alleging practice violates state Constitution).

For the lawsuit, see Rivera, et al. v. Borough of Pottstown, et ano.

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

(1) The Institute for Justice is an Arlington, Virginia-based non-profit, 501(c)(3) public interest law firm (with five other offices located across the nation in Florida, Minnesota, Texas, Arizona and Washington state) that litigates issues relating to, among other things, private property rights.

(2) See Baker v. City of Portsmouth, Case No. 1:14cv512 (S.D. Ohio, West. Div. 2015).

HUD Declares Housing Authority-Owned, 38-Unit Complex Unfit For Habitation, Revokes Section 8 Contract, Sends Dozens Of Booted Low Income Tenants Scrambling For New Apartments

In Canton, Ohio, the Canton Repository reports:

• Dayree Stokes considered her move into Washington Townehome a step up from her previous home.
  
  Now she and others in the 38-unit apartment complex are being forced to relocate.
  
  Federal housing officials say the conditions at Washington Townehomes make the northeast-section housing complex unfit for human habitation and the tenants must move out.
  
  The U.S. Department of Housing and Urban Development's problem is not with the residents, but rather with the complex owner, the Stark Metropolitan Housing Authority.
  
  The federal HUD has maintained a Section 8 contract, formerly known as Housing Assistance Payments Contract, with SMHA. This arrangement provides vouchers to help cover the cost of providing tenants with housing. But inspections have revealed the maintenance is lacking and sanitation is unsatisfactory at the complex in the 1600 block of 10th Street NE, according to HUD.
  
  "They are just not up to par," said Gina Rodriguez, media relations officer for the HUD Chicago regional office. "They have been given several years to get the property up to standards. It has been at least three years that I know of. We are going to terminate the project-based Section 8 assistance and replace it with Housing Choice vouchers. We have folks on the ground that monitor this. We just felt this was the next best option to maintaining the health and safety of our residents."
  
  That means finding new housing for the tenants.
  
  The HUD Washington Townehomes housing voucher contract with SMHA for the current fiscal year was set at $271,295.
  
  "It was surprising," said Stokes, mother of two young children. "It has only been like seven months since I have been there. When I first moved in we had black mold in the basement."
  
  Vouchers
  
  SMHA acquired the Washington Townehomes complex in 2003.
  
  When the tenants relocate "depends really when people are issued vouchers," said Marty Chumney, director of the SMHA housing choice voucher program. "They have a 90-day voucher period. It is going to be over the three months that they have to find a private landlord to rent from that will accept their voucher."
  
  Photographs provided by the HUD Chicago office showed instances of structural damage and corrosion. Inspections were held Nov. 7, 2014, and on Nov. 17, 2015. A subsequent inspection was held Aug. 18. A letter from HUD, which came out in January, states the low inspection scores are "documenting your continued failure to correct the physical deficiencies and return the project to decent, safe and sanitary conditions."
  
  That letter was directed to Herman Hill, executive director of SMHA.
  
  "There is a shared responsibility," said Hill, explaining that Washington Townehomes tenants bear some responsibility. "We can't be there 24 hours a day. A lot of the hits that we took on inspections was the physical condition of the property."
  
  Revoking the Housing Assistance Payments Contract with a local housing authority "is actually something we don't do often," Rodriguez said. "It is something that we try to avoid. Who wants to go through disruptions? It is a last resort following multiple failing inspections. Because it is HUD-assisted housing, they have to maintain certain standards. It is not a decision that is taken easily."

For more, see Residents forced to leave unfit Canton housing complex (Because U.S. Department of Housing and Urban Development officials are not satisfied with conditions at the Washington Townehome apartment complex, Stark Metropolitan Housing Authority has to vacate the tenants).

Duo Bagged By Manhattan DA In NYC Real Estate Title Hijacking Racket Shipped Off To Serve Multi-Year Prison Sentences; Scammers Targeted Vacant Houses, Then Used Forged Docs To Snatch & Flip Them Out From Under Unsuspecting Owners

From the Office of the New York County District Attorney:

• Manhattan District Attorney Cyrus R. Vance, Jr., announced the sentencing of EDWARD FRANCO, 61, to 1-to-3 years in state prison and CALVIN NORWOOD, 58, to 2-to-6 years in state prison for engaging in a scheme to fraudulently sell residential homes in New York City, without the knowledge of the legitimate property owners. On March 7, 2017, FRANCO pleaded guilty to multiple charges, including Attempted Grand Larceny in the First Degree and Identity Theft in the First Degree. On the same date, NORWOOD pleaded guilty to Criminal Possession of Stolen Property in the Second Degree and Scheme to Defraud in the First Degree.
  
  “Deed fraud scams leave both the true owners and new ‘owners’ of a home out in the cold,” said District Attorney Vance. “New York City consistently has one of the most competitive and lucrative residential real-estate markets in the country, and as long as the market continues to boom, scammers will find new ways to illegally benefit from its success. In this particular scheme, defendants stole homes right out from underneath legitimate property owners – who often didn’t discover the theft until new owners had moved in or begun renovations. I urge anyone who believes they have been the victim of this type of real estate scheme to please call my Office’s Financial Frauds Bureau at 212-335-8900.”
  
  According to court documents and the defendants’ guilty pleas, NORWOOD and FRANCO fraudulently sold or attempted to sell properties in New York City, including 57 West 130th Street in Manhattan and 105-22 Merrick Boulevard in Queens. The defendants, along with co-conspirators, engaged in a scheme in which they would target vacant properties, many of which were in a dilapidated condition and which had owners who either were absent or did not use the property as their primary residence.
  
  The defendants would then forge personal identification and real estate documents in order to steal the identity of the true property owner, retain an attorney, and attend the closing for the sale of the property to a new, unsuspecting owner. The defendants and their co-conspirators would simultaneously open business bank accounts to retain the proceeds of the fraudulent sale or employ the use of various check-cashing locations.
  
  After the fraudulent sale to the new owner, the original property owner would then return to the home to find the locks changed or preparations for renovations underway. However, the new purchasers and the rightful property owners often did not become aware of the fraudulent scheme until after the closing had occurred and the proceeds had already been paid to the defendants and their co-conspirators.
  
  FRANCO impersonated one of the real property owners of 57 West 130th Street. NORWOOD assisted in the fraudulent sale of 105-22 Merrick Boulevard by opening a bank account in which to retain the illegal proceeds from that fraudulent sale.

For more, see Two Men Who Pleaded Guilty To Engaging In Deed Fraud Real Estate Scam Sentenced To State Prison.

Massachusetts AG Boosts Charges Against Indicted Real Estate Broker In Alleged Loan Modification Scheme, Now Accusing Defendant Of Fleecing 11 Financially Strapped Homeowners Out Of Over $464K In Mortgage Payments

From the Office of the Massachusetts Attorney General:

• A real estate broker has been indicted on additional charges in connection with stealing more than $464,000 through a larceny scheme targeting homeowners facing foreclosure, Attorney General Maura Healey announced today [March 27].
  
  Kevin Taing, age 49, of Lowell, was indicted [] by a Statewide Grand Jury on the charges of Larceny Over $250 (9 counts). Eastern Funding & Investment, Inc. (EFI), owned by Taing, was also indicted today on the charge of Larceny Over $250. Taing and EFI will be arraigned in Middlesex Superior Court at a later date.
  
  In November 2016, Taing was initially indicted on the charges of Larceny Over $240 (3 counts) and Obtaining a Signature by False Pretenses in connection with stealing more than $165,000 from three homeowners in Lowell and Lynn.
  
  The AG’s Office began an investigation into Taing, a licensed real estate broker and principal of EFI, in late 2014 after a referral from a non-profit legal services agency. Authorities allege that Taing, who is of Cambodian descent and speaks Khmer, persuaded 11 homeowners of Cambodian descent facing foreclosure to make payments to EFI rather than the actual holder of their mortgage loans.
  
  Authorities further allege that Taing led these families to believe that by paying EFI they would reduce their monthly payments, stay in their homes or otherwise resolve their mortgage issues.

Source: Real Estate Broker Indicted for Stealing $464,000 (Allegedly Stole from a Total of 11 Families Facing Foreclosure). affinity

Another Real Estate Operator Admits To Role In Atlanta-Area Bid Rigging At Foreclosure Sale Auctions; Antitrust, Northern Georgia Feds' Guilty Tally Reaches 22 In Ongoing Probe

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

• A Georgia real estate investor pleaded guilty today [March 24, 2017] for his role in a bid-rigging conspiracy and fraud scheme related to public real estate foreclosure auctions in Gwinnett County, Georgia, the Department of Justice announced.
  
  Clifford Wayne Hill pleaded guilty to bid rigging and fraud in the U.S. District Court for the Northern District of Georgia. On Feb. 3, 2016, a federal grand jury in the Northern District of Georgia returned an indictment against the defendant.
  
  According to the indictment, from December 2007 to March 2012, Hill and his co-conspirators agreed not to compete for the purchase of selected foreclosed homes so that they could win the auctions for those homes with artificially low bids. Hill made and received payoffs for the agreement not to bid; taking money that otherwise would have gone to mortgage holders and in some cases, to the owners of foreclosed homes.
  
  Including Hill, twenty-three defendants have been charged in connection with the Justice Department’s ongoing investigation into bid rigging and fraudulent schemes involving real estate foreclosure auctions in the Atlanta area. Twenty-two real estate investors have pleaded guilty.
  
  ***
  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 888-647-3258, or visit http://www.justice.gov/atr/report-violations.

Source: Georgia Real Estate Investor Pleads Guilty to Bid Rigging and Bank Fraud at Public Foreclosure Auctions.

Judge: "Franz Kafka Lives...He Works At Bank Of America"; Court Slams Notorious Bankster With $46 Million Judgment For Using "Mirage Of Promised Mortgage Modification" To Lure Couple Into "Kafkaesque Nightmare Of Stay-Violating Foreclosure & Unlawful Detainer...", Wrongful Foreclosure Leading To "Apparent Heart Attack, Suicide Attempt, PTSD..."

In Sacramento, California, The Sacramento Bee reports:

• Bank of America was told to pay a $46 million judgment last week after it wrongfully foreclosed on a Lincoln couple during the recession.
  
  The order by Sacramento bankruptcy court Judge Christopher M. Klein describes in detail how the bank improperly engaged and foreclosed on Erik and Renee Sundquist’s Lincoln residence.
  
  The judge awarded about $1 million in actual damages to the couple. Klein gave the rest of the sum to outside entities focused on consumer law and education, including the National Consumer Law Center and several University of California law schools.
  
  The trouble began in 2009 when the Charlotte, N.C.-based bank reportedly asked the struggling couple to default on the loan in order to obtain a mortgage modification. But the bank refused to honor that promise, according to court documents.
  
  At that point, the Sundquists filed for Chapter 13 bankruptcy, which triggered a stay on the foreclosure process. The bank disregarded the stay and started eviction proceedings. This included sending workers to the property on multiple occasions.
  
  “Without identifying themselves, they staked out the premises, tailed the Sundquists, knocked on doors, knocked on windows, and rang doorbells, all to the terror of the Sundquist family,” Klein wrote in a 109-page opinion for the ruling.(1)
  
  Bank of America eventually gained possession of the property for six months, after which it then agreed that the foreclosure had been a mistake. The company returned the keys to the Sundquists. When they re-entered their home, the major appliances had been removed and the lawn was dead, according to the court.
  
  “Throughout, the Sundquists were acting in good faith, not realizing that Bank of America had no intention of acting in good faith,” Klein wrote.
  
  In a written statement to The Sacramento Bee on Tuesday, Bank of America expressed regret for the “challenging experience” of the customers, adding that foreclosure processes in place at the time in 2010 were later modified.
  
  “In early review of the decision, we believe some of the court’s rulings are unprecedented and unsupported. We are determining the appropriate way to respond,” the statement said.
  
  The ruling can still be appealed, though bank officials have not indicated whether they will pursue that route.

Source: Bank of America ordered to pay $46 million for foreclosure tactics used against Lincoln couple.

For the court ruling, see In re: Sundquist, Case No. 10-35624 (Bankr. E.D. Calif., March 23, 2017).

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

(1) The court begins its ruling with this 'sugar plum' in the first paragraph summarizing the facts:

• Franz Kafka lives. This automatic stay violation reveals that he works at Bank of America.
  
  The mirage of promised mortgage modification lured the plaintiff debtors into a kafkaesque nightmare of stay-violating foreclosure and unlawful detainer, tardy foreclosure rescission kept secret for months, home looted while the debtors were dispossessed, emotional distress, lost income, apparent heart attack, suicide attempt, and post-traumatic stress disorder, for all of which Bank of America disclaims responsibility.

10+ Years After Buying Their Homes From The City (& Making Mortgage & Tax Payments), At Least 17 Homeowners Discover That Title To Properties Belongs To HUD

In Las Vegas, New Mexico, KOB-TV Channel 4 reports:

• After more than a decade of paying their mortgages and property taxes, at least 17 homeowners in the city of Las Vegas, New Mexico still don’t have the titles to their homes.
  
  Reynaldo Maestas hoped the city would resolve the issue by paying him his mortgage this March. The city hasn’t come to an agreement. Maestas is still fighting for the home.
  
  A declaration of trust between U.S. Department of Housing and Urban Development and the City of Las Vegas reveals at least 17 homes weren’t supposed to be sold in the first place. The properties still belong to the federal government.
  
  When Maestas bought his Las Vegas home, he purchased title insurance. However, the title company failed to disclose the property encumbrance.
  
  "This is why we bought the insurance,” Maestas said. “This is why when you have your mortgage and you're closing; you get the title insurance."
  
  4 Investigates discovered that former New Mexico Region III Housing Director Vincent “Smiley” Gallegos sold the homes through Housing Enterprises Inc. in the early 2000s. Housing Enterprises Inc. and Region III are now defunct. Gallegos was indicted for fraud but pleaded no contest in 2013. He served one year of probation.
  
  "It's just sickening,” Maestas said. “It's really sickening. I still have that home there with an active mortgage. There are people who have just walked away and declared bankruptcy."
  
  Maestas is suing the City of Las Vegas for allowing the sale.
  
  During a Las Vegas City Council meeting last week, councilors ruled it was too early to agree on a settlement with Maestas.
  
  "They've already admitted that there was wrongdoing and they need to clear this up,” Maestas said. “They need to finish what was started a long time ago."
  
  Attorney Geno Zamora has recently been hired to represent the City of Las Vegas in this case. He told 4 Investigates he cannot comment on pending litigation. At this time, it’s not clear if or when Maestas will get his money back.
  
  4 Investigates reached out to HUD to see if the federal government will release ownership to the current homeowners. 4 Investigates is waiting for a response.

Source: Las Vegas, NM homeowners not compensated after home sale fraud.

Property Insurer Stiffs Homeowner On Claim For Home's Snowstorm Damages, Ignores Court Judgments In Victim's Favor, Then Jacks Up Premium From $1,300 To $10K/Year; Family Now Left Facing Foreclosure

In Alto, Michigan, WXMI-TV Channel 17 reports:

• Seth and Haley Budrew say Frankenmuth Mutual Insurance Company has made their lives extremely difficult over the past three years.
  
  In February 2014, a snowstorm caused their two-car attached garage to collapse, causing structural damage to the rest of the property, the Budrews said. That includes cracks in the ceilings and gaps in the walls. They said it hired the insurance company's "preferred contractor," who may have caused more damage to the structure.
  
  The Budrews said they got an estimate for repairs from a restoration company. "It's a 170-something thousand dollars to fix it," Seth said.
  
  Despite paying on their homeowner's insurance policy, the Budrews said Frankenmuth Insurance denies and refuses to pay their claim.
  
  "All I want is my house to be fixed, [and] my kids to have a secure place to live," Seth said.
  
  But after four months and hiring an attorney, the couple said Frankenmuth shelled out a fraction of the estimated cost for repairs, about $46,500 dollars.
  
  For years, the Budrews have been in and out of court fighting Frankenmuth to get their entire claim paid. They said they won judgments for smaller amounts but Frankenmuth has refused to pay and has filed appeals.The Budrews say that in August 2015, an independent panel recommended a settlement of $150,000.
  
  "They never responded," Seth said. "They basically let it expire. We accepted [the decision]. They rejected it."
  
  They said Frankenmuth also cut off temporary relocation assistance, as the family awaited repairs to their foundation.
  
  "We had to have a court order for them to not drop us,"​ Haley said.
  
  "Our insurance company then turned around and jacked our premiums to $10,421 for one year," Seth recalled. That's up from $1,300 per year.
  
  The couple said they tried switching providers, but "we can't get another insurance company. Our house is in such disrepair," Haley said.
  
  "I called 10 different agents. Every single one of them said, 'No insurance company is going to cover you because of the liability of the damage,'" Seth explained.
  
  While contesting the premium hike, the couple said the state insurance commission did nothing. "They agreed with Frankenmuth," Haley said.
  
  "They didn't do anything," Seth added. "They're like, 'Oh, well yeah. Their risk is higher.' I'm like, yeah, their risk is higher because they won't pay to fix the house."
  
  With four young mouths to feed and Frankenmuth raising their premiums, the family said they're financially strapped and have fallen behind with the bank.
  
  "So now they're in the process of... they're going to foreclose on us," Seth said, adding, "I purchased insurance for my home so that I wouldn't have to go through this, and the insurance company did not fulfill their end of the bargain."
  
  "Friends don't let friends buy Frankenmuth Insurance," Haley said.
  
  Frankenmuth declined an interview. However, vice president of claims Andy Knudsen stated, "Both parties are represented by legal counsel. Frankenmuth is currently in settlement negotiations with the other party's attorneys. We won't litigate or negotiate the issue publicly."

Source: Family facing foreclosure over insurance claim battle.

County Property Auction For Unpaid Real Estate Taxes Yields Unclaimed Excess Sale Proceeds Of $470K; Foreclosed Ex-Owners Fail To File Claims For Their Money (From $51 To $35K), Are Nowhere To Be Found

In Calhoun County, Alabama, The Anniston Star reports:

• Nearly half a million dollars is waiting to be claimed by its rightful owners in Calhoun County.
  
  Just who owns the money, however, was less clear Thursday [March 23].
  
  Calhoun County commissioners on Thursday agreed to transfer the $470,781 into an escrow account until, and if, the owners come for it. If the owners fail to claim the money within the required timeframe, the county keeps the cash.
  
  Melissia Wood, assistant county administrator, said by phone after Thursday’s meeting that the cash is excess from the auctions of properties in tax sales.
  
  At some auctions, the winning bids were higher than what the previous property owners owed in unpaid taxes, Wood said, and the difference between the two figures resulted in the extra money.
  
  If it’s deemed the money belongs to the original owner of the property, those people have 10 years from the date of the purchase to claim their money, Wood said, but determining ownership of the money isn’t easy.
  
  “The claim for excess funds is a very complicated issue. Laws have changed on it several times,” said Gloria Floyd, grant manager and paralegal for Calhoun County, speaking by phone Thursday.
  
  Floyd suggested that anyone who believes they may have a claim to excess funds from a tax sale should contact an attorney to be certain.
  
  Ken Joiner, county administrator, speaking to commissioners before Thursday’s meeting, said the county can’t use the cash for anything until after the 10-year time limit from the date of any given sale.
  
  “If they don’t come in, then it can roll over,” Joiner said.
  
  Nearly 75 percent of the 90 property purchases were done by companies, according to the list of transactions given to The Star on Thursday. The amounts owed range from $51 to $35,000.
  
  The commission’s action Thursday to place the money into escrow is a legal requirement and happens each year, Joiner said.

Source: Calhoun County has $470K to return to its rightful owners -- if it can find them.

Miami Property Tax Official Threatens Homeowners w/ Loss Of Homestead Tax Exemption, Monetary Penalties, Possible Fraud Charges For Renting Out Their Homes On Airbnb For Over 30 Days/Year

In Miami, Florida, the South Florida Business Journal reports:

• Miami-Dade County’s property appraiser raised an argument against Airbnb last week that likely few in South Florida had heard before: Use of the platform can constitute tax fraud.
  
  Property owners who receive Homestead Exemption and host on the home-sharing platform could lose their tax exemption and be subject to a penalty fee, states the advisory, issued Friday by county property appraiser Pedro Garcia.
  
  In an interview with the Business Journal, Garcia explained that in Miami-Dade County Homestead Exemption caps annual property tax rates for primary residences at 3 percent, aiming to shield certain homeowners from rising taxes.
  
  However, state statutes state the exemption no longer applies if the residence — even just one of its bedrooms — is rented out for more than 30 days in a year. The property owner is also subject to a penalty fee of 50 percent in back taxes with 15 percent interest tacked on.
  
  “Homestead exemption is for people who live in that particular house … so they can pay a smaller amount of property taxes,” Garcia said. “But if they start renting … and if they go above the 30-day limit, they’re committing homestead fraud. You can make your own decisions, but be careful.”
  
  About 6,800 properties in Miami-Dade County were available on the Airbnb platform in 2016. According to ads by the San Francisco-based company, 66 percent of Miami-Dade hosts use the money they make by renting out their homes to pay their rent or mortgage.
  
  “When I see so much talk about Airbnb and ads from them to encourage people to use the service, it could be motivating people to make a mistake,” Garcia said.
  
  Airbnb spokesman Ben Breit said the home-sharing platform, similar to homestead exemptions, “empower the middle-class” by providing an alternative income source for homeowners.
  
  “Most places recognize a homestead exemption was established to let middle-income homeowners keep their homes,” Breit wrote in an email.

Source: Hosting on Airbnb may constitute tax fraud, property appraiser says.

Oregon Non-Profit To Save Another Aging Mobile Home Park, Preserve Housing For Low-Income, Lot-Leasing Homeowners; Group To Buy Out Current Landlord, Make Significant Infrastructure Improvements While Avoiding Displacement Of Any Residents

In Saginaw, Oregon, The Register-Guard reports:

• The St. Vincent de Paul Society of Lane County is furthering its efforts to buy and rehabilitate ­mobile home parks for low-income ­tenants with the purchase of the Saginaw Trailer Park north of ­Cottage Grove, the nonprofit organization’s spokesman said.(1)
  
  The mobile home park will be St. Vincent’s sixth such purchase, spokesman Paul Neville said. The organization is striving to preserve the shrinking stock of trailer parks, which provide affordable housing for low-­income families, he said.(2)
  
  St. Vincent also invites social workers to each park it acquires to work with residents on issues such as alcohol and drug addiction, health care and financial management, Neville said.
  
  “The social services component is really essential to ­changing the culture in the parks and improving the quality of life for the people who are there,” he said.
  
  The organization, which is buying the park from a private owner, plans to close on the purchase by the end of April. Neville declined to specify the sale price. The seller is Oakland resident Michael Brown, who has been an owner of the park since 2007.
  
  St. Vincent paid more than $1.7 million to acquire a ­mobile home park in Junction City in January 2016. The agency ­secured a $1 million grant from the state and a $1 million low-interest loan from Banner Bank to buy the 43-space Tivoli ­Mobile Home Park.
  
  The Saginaw Trailer Park is off Highway 99 about three miles north of Cottage Grove. The park has 41 mobile homes and RVs; about 30 are occupied, Neville said. St. Vincent will replace the trailers that are dilapidated and no longer fit for occupancy, he said.
  
  “Many of these are not places that you’d normally want people to live in,” Neville said. “So we will, as we can afford to, start taking out the old trailers and removing the old RVs and replacing them with new units.”
  
  St. Vincent will not displace any of the tenants, he said. But some may be temporarily housed in other units while St. Vincent ­purchases new homes.
  
  The organization also will make infrastructure improvements at the mobile home park, including paving the roadway and installing storm sewers, as well as making improvements to the septic ­system, Neville said.
  
  In the past, the park’s managers have been fined by the state Department of Environmental Quality for failing to maintain the septic sewer system and improperly dumping ­partially treated sewage.
  
  Neville said the park’s troubled past is one reason St. Vincent is purchasing it. “We want to take a park that’s been problematic for the people living in it and the surrounding area and make improvements that will make it a better place to live, and a better place for people to live near,” he said.
  
  Neville said St. Vincent other trailer park acquisitions have been successful ...

For more, see St. Vincent de Paul buying Saginaw Trailer Park north of Cottage Grove.

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

(1) St. Vincent de Paul Society of Lane County is Lane County, Oregon’s largest nonprofit human services organization that, among other things, helps more than 84,000 individuals and families each year with emergency and homeless services, and affordable housing. St. Vincent de Paul's mission is to provide comprehensive programs to alleviate poverty and help all individuals find a path out of poverty and into self-sufficiency.

(2) See, generally, Save mobile home parks.

Another Broken Elevator - More Disabled Tenants Left Stranded In Their Apartments

In Denver, Colorado, KDVR-TV Channel 31 reports:

• A broken elevator at the Renaissance Off Broadway Lofts left several tenants of the building stuck and stranded in their apartments for five days.
  
  Tenants told the FOX31 Problem Solvers the elevator stopped working Thursday [March 9]. Most assumed it would be fixed by the weekend, but five days later, it still wasn't functioning.
  
  "Something's got to be done. I can't live like this," 65-year-old Walter Johnson said.
  
  Johnson is an amputee and because he doesn't have a prosthetic leg, he was trapped inside his fourth-story loft. "I feel like my life is being taken away from me because I can't go anywhere," he said. "I ain't no dog. I ain't going to be locked up like this. I ain't did nothing wrong."
  
  "People were obviously frustrated. I don't blame them," said Cathy Alderman, a spokeswoman for the complex at 2135 Stout St.
  
  Alderman said while she empathizes with residents, there's not much the property manager can do. Elevator parts can take days to arrive and even longer to install.
  
  The property manager did offer to go grocery shopping for at least one tenant who couldn't leave.
  
  It's a problem property managers statewide often experience, and the Colorado Civil Rights Division said fair housing laws do not specify how long a landlord has to repair an elevator.
  
  "Under fair housing laws, housing providers are required to make reasonable accommodations for residents with disabilities," the Colorado Civil Rights Division said in a statement. "In this situation, it sounds like the landlord is taking steps to make the resident's housing accessible to him by scheduling repairs for the elevator.
  
  "There is no specific timeline for making repairs. A long delay could be seen as a denial of an accommodation, but it sounds like the landlord is attempting to address the problem."
  
  That wasn't news Johnson wanted to hear. "It don't take me that long to dig a grave. That don't make sense," he said.
  
  However, Johnson did get a surprise late Tuesday when the elevator was fixed ahead of schedule.

Source: Broken elevator leaves disabled tenant stuck in apartment for days.

Hours Before Auction, Explosion & Fire Take Down Home In Foreclosure; Investigators Find Deceased Owner In Basement w/ Self-Inflicted Gunshot Wound

In Rockville, Maryland, WTOP Radio 103.5 FM reports:

• The remains recovered from the wreckage of a Rockville, Maryland, house after an explosion and fire last week have been identified as the home’s owner, [...].
  
  The county’s chief medical examiner determined Beck died from a self-inflicted gunshot wound. Beck also shot and killed his dog, Montgomery County police said Monday [March 20] afternoon. His remains were recovered from the home’s basement over the weekend.
  
  Authorities said they were still trying to working to determine the timing and the circumstances of the explosion, which reportedly could be heard miles away and damaged several nearby homes on Ashley Drive.
  
  The single-story brick home, which was in foreclosure, exploded shortly before 1 a.m. Friday [March 17] — just hours before it was set to go up for auction. Authorities said last week there had been unauthorized gas use in the home since December, but investigators do no yet know whether that was the cause of the explosion.
  
  Officials have said the pending auction will be part of the investigation.

For more, see Owner of Rockville house destroyed in explosion shot himself, dog.

Gov't Regulator Announces Closure Of Substandard Nursing Home; Deals Devastating Blow To Dozens Of Dementia Patients As Families Scramble To Find New Accommodations

In Liverpool, England, the Liverpool Echo reports:

• Dozens of dementia sufferers will be forced to find somewhere new to live after a Knotty Ash care home revealed plans to close.
  
  Relatives, residents and staff contacted the ECHO after hearing of the closure of the Thomas Leigh care and nursing home, which is believed to have around 40 residents.
  
  One woman whose aunt is in the home called the huge upheaval of a move “abhorrent” for a vulnerable group of people.
  
  Bosses at the home did not respond to a request for comment about why it was closing, but the Care Quality Commision confirmed it had been told the home would shut.
  
  The news comes just a few months after one of its residents was found wandering around two miles away and suffering from hypothermia, cuts and bruises.
  
  Inspectors also slammed the home on Thomas Lane, owned by Parveen Limited, as “inadequate” and put it in special measures in December.
  
  One carer at the home said: “I’m most gutted for the residents and their families - it’s torment for them. “The move isn’t good for them. They like routine and structure, and they might be separated from their friends.”
  
  Lorraine McKinley, from Hoylake, said she was now frantically looking for a new place to live for her 96-year-old aunt, Ellen Parsley. She said: “We’ve got 90 days, after the families were called to an emergency meeting to tell us the home is closing.
  
  “All the families face a situation where they are moving very sick people, and there are not that many other homes that take people with dementia. “It is awful for residents, they are used to each other and they will not know where they are.
  
  “It’s abhorrent - it’s breaking up a community so they’ll have to start again - my aunt is not going to cope.”
  
  The ECHO revealed in December that 86-year-old resident Richard Singleton had been found walking along Roby Road in Huyton by concerned passers-by.
  
  His distraught family said paramedics told them he could have died from hypothermia if he had not been found.
  
  A Care Quality Commission spokeswoman said: “People are entitled to services which provide safe, effective, compassionate and well-led high quality care. We found the care provided at Thomas Leigh Care Home fell a long way short of the standards we expect services to provide. While we were considering our enforcement options for the breaches in regulation we found, the registered provider has taken steps to close the home.
  
  “We will always look to celebrate examples of outstanding care, but we won’t hesitate to take enforcement actions to close down locations which aren’t providing the level of care that people are entitled to.”

Source: Dementia patients left in the lurch as care home shuts down (It's the same home where an 86-year-old resident was found wandering two miles away in December).