Saturday, June 23, 2012

Increase In Complaints Against Non-Lawyers Filing Bankruptcy Papers For A Fee Attributed To Upswing In Foreclosure Rescue & Loan Modification Peddling

The BLT: The Blog of Legal Times reports:
  • There has been an increase in the number of complaints against non-lawyers preparing bankruptcy filings for a fee, according to a report the Administrative Office of the U.S. Courts released [this month].
  • Federal law allows bankruptcy filers to use an attorney or go it alone as pro se filers. Those who elect to file themselves can use the help of non-lawyer, bankruptcy petition preparers who often charge a fee to help prepare the filing. The increase in the abuse is due in part to the mortgage crisis that has gripped much of the country, the AOC concluded.
  • "The increase in 'foreclosure rescue' and 'loan modification' services seems to be the source in the past three years," U.S. Bankruptcy Judge Maureen Tighe in the Central District of California said in the report. "The homeowners are desperate and take advice from the most questionable sources."(1)
(1) For more on the various types of foreclosure rescue ripoffs, see:

Foreclosing Bankster At Center Of Earlier Pet Parrot Pilfering Now Implicated In Alleged Vintage Muscle Car Heist

In Worcester, Massachusetts, the Worcester Telegram & Gazette reports:
  • As David vs. Goliath struggles go, they don't get much more lopsided than a lone muscle-car enthusiast going up against a mega-bank with more than $2 trillion in assets. But that's exactly what Aaron Dahrooge of Worcester has been doing for three months now in an effort to get back his beloved 1973 Dodge Challenger.

  • The distinctive muscle car, which is painted “plum crazy” purple and has a burly V-8 engine with a chrome air scoop popping up through the hood, was taken from the garage of his deceased mother's home in Burncoat in late March. Bank of America has vital information, but won't tell him, Mr. Dahrooge claims.

  • His mother, April Dahrooge, died last year. Her mortgage lender, Bank of America Corp., had an ongoing foreclosure proceeding against the house at the time of her death. The foreclosure proceeding has not been completed, according to city property tax and state land records.

  • Mr. Dahrooge said he stored the Challenger in the garage of his mother's house over the winter as he typically did because he was the executor of her estate. In late March, Mr. Dahrooge went to the house at 78 Uncatena Ave. with his teenage son to retrieve the purple Challenger, which he had found years before rusting in a field and fully restored into an attention-grabbing hot rod.

  • When he pulled into the driveway, he immediately noticed the garage door had been padlocked from the outside. I thought that was weird, so I went around to the back to look through the window and saw the car was gone. My heart just dropped,” Mr. Dahrooge recalled.

  • A neighbor told Mr. Dahrooge that a work crew in a GMC Yukon had come to the house a few days before to winterize and secure it, a typical step banks take to protect their collateral in foreclosure proceedings on vacant houses. A sign posted in the window of the house reads: “Caution: this house has been winterized with anti-freeze in all drains and toilet bowls. Please run water through the drains before using.”

  • The sign is dated March 19, 2012 — three days before Mr. Dahrooge came to get the car. The neighbor, who requested that he not be identified by name, said in an interview yesterday that he was outside playing basketball with his son in March when the same GMC Yukon pulled up to the house two days after the winterization work.

  • They unlocked the garage lock with their keys and towed the car out of there. The whole thing took five minutes,” the neighbor said.

  • Mr. Dahrooge reported the car stolen, and the neighbor gave a statement to police about what he had seen.

  • Mr. Dahrooge began frantically calling Bank of America to find out the name of the contractor the bank hired to secure and winterize the house. He called the bank numerous times, was transferred to different departments, left messages for various bank officials, he said, but never got anywhere.

  • I've called and called and called. Nobody will answer. When they do answer, they send you to some other department and things of that nature,” Mr. Dahrooge said.

  • Spokespeople for the Worcester Police Department and Worcester District Attorney Joseph D. Early Jr.'s office declined to comment on the case, saying the investigation into the missing car remains open.
  • Bank of America made headlines in Pittsburgh last year, and ultimately apologized, when its contractor there broke into the home of a borrower, who hadn't even defaulted on her mortgage, while she was away.

  • The workers padlocked the doors, shut off utilities and took her pet parrot, Luke, according to an account published in The Wall Street Journal. The bank has been hit with lawsuits alleging similar incidents in California and Texas, The New York Times reported.(1)
For more, see Worcester man battles bank after vintage muscle car hauled off (Owner claims bank stonewalls on info).
(1) For other posts on Bank of America's seemingly relentless involvement in mortgage servicing screw-ups, see:

BofA Fails To Give Vacant Home In Foreclosure Proper Attention Until It Finds Itself On City Wrecking Ball Appointment List

In Portland, Oregon, The Oregonian reports:
  • Mitch McKee clicked off his flashlight and walked out of a Northeast Portland house with broken windows, a fire-damaged roof, no working utilities and garbage piled waist-high in a detached garage. "They cleaned up a bit," he told police officers waiting outside.

  • The quick check last week that the house was empty was, in fact, pretty low-key for the Portland senior housing inspector who has become the point man for the city's recession-fueled stock of dilapidated homes.
  • According to Multnomah County records, the home was first scheduled for foreclosure sale in December 2010, but the bank called off the sale. It's now scheduled for auction next month. In the meantime, no one at Bank of America gave permission to vacate the house of people staying illegally and allow the city to board up entrances.

    Threatening demolition

  • Portland officials held an administrative hearing for a warrant to board up the house and, when break-ins continued, scheduled a hearing for permission to tear down the house. That got someone's attention. A Bank of America representative attended the hearing and agreed to provide basic maintenance and routine checks that the property was staying vacant.

  • "We weren't able to get anywhere until we held that hearing and proposed demolition, and we were prepared to go through with it," [Portland's Bureau of Development Services enforcement manager Mike] Liefeld said. "That's the goal. We're leveraging our ultimate authority to try and get a responsible party to comply with adopted codes."

Child Endangerment Among Charges Facing Mom Living In Abandoned Building In F'closure After 2-Year Old Son Falls Out 2nd Floor Window While Left Alone

In Chicago, Illinois, WLS-TV Channel 7 reports:
  • Police say a 2-year-old boy was alone when he fell from the second-floor window of an abandoned building on the city's Chicago Lawn neighborhood. His mother has been charged with child endangerment.

  • The child, who was found on the ground outside the building by a neighbor, survived the fall. He is hospitalized at Comer Children's Hospital. Family members say the boy is wearing a neck brace, but doctors told them he'd be OK.

  • The boy's mother, Venisha Carter, 22, faces misdemeanor charges, including one count of endangering the life and health of a child and one count of reckless conduct and bodily harm. Authorities say Carter and her son were living in that abandoned building with others. Her boyfriend said they moved into the abandoned building when they fell on hard times.
  • As many as 20 people were living in that building, sources say. County records indicate it is in foreclosure. [...] Those staying in the building were offered housing in shelters or transportation to get to relatives.

  • The owner of the building did not return ABC7's calls.(1) The former property manager said its company quit working at the building last year when the owner did not maintain financial commitments.

(1) If the city of Chicago has a local ordinance requiring window guards in multiple dwelling units, the landlord in foreclosure might also find himself/herself in hot water. Apparently, pre-school children falling out windows is not an uncommon occurrence in Chicago, as well as other big cities. See, for example, Pediatric window falls: not just a problem for children in high rises (Window falls are a frequent cause of injury (15/100,000) among Chicago preschool children. In Boston and New York, public health efforts have successfully decreased window fall injuries. [...] The median age was 2 years old.).

Father/Son Landlords Face Manslaughter Charges After Fatal Fire In Illegal Carved-Up Bldg Claims Five; Blaze Allegedly Set By Drunk Guest Of A Tenant

In Brooklyn, New York, the New York Post reports:
  • A father-and-son team that owned an illegally carved-up building in which five Guatemalan immigrants died in a fire have been charged with manslaughter, Brooklyn prosecutors said [].
  • Vasilio Gerazounis, 68, and his son, Argyrios, 37, pleaded not guilty to charges tied to the January 2010 blaze. Daniel Ignacio, a guest of one of the doomed tenants, faces second-degree murder charges for allegedly setting the fire in a first-floor stairwell while drunk.
  • But DA Charles Hynes said, “The landlords share in the responsibility.”
Source: Landlords in fatal-fire bust. subdivided

Landscaper's Screw-Up Drives 200 Seniors From Their Homes; Damage To Gas Line Triggers Fire, Forcing Residents To Live Out Of Their Suitcases

In Lyndhurst, Ohio, Newschannel 5 reports:
  • A large group of Lyndhurst seniors have been living out of a suitcase for nearly three months, after a fire struck their apartment complex in late March. Many of the residents who call the Sherri Park Apartments "home" are wondering when they will finally be able to return to their units.

  • "We've had so many different dates, we don't know when we're going to get back," said Sherri Park resident Betty Hersch. "We were told June 15, then June 18, then June 28. Now nobody knows."

  • The fire started at the complex after a landscaping company hit a gas line just outside the building. Fortunately, there were no injuries, but residents have been forced to live in temporary accommodations at the Homewood Suites Hilton in Beachwood for 11 weeks.
  • Mayor [Joseph] Cicero believes delays in building repairs have been caused by insurance and legal issues surrounding the fire. "This is between, the gas company, the contractors and apartment management," said Mayor Cicero. "There's a boat load of lawyers on either side."
  • [Tenant] Les Checel and other displaced seniors can only hope their insurance coverage will hold-out, and keep them off the street. "I would encourage them to do whatever it takes to get the building inspected and make it ready for occupancy, so people don't have this cloud hanging over their heads as to what their future holds," said Checel.
For more, see 200 Lyndhurst seniors remain displaced nearly 3 months after apartment fire (Apartment management offers few answers).
  • Three thefts were reported last week at the Sherri Park Apartments, from where many residents were evacuated and eventually moved to temporary housing after a fire there in late March.

  • A gold coin valued at $10,000 and jewelry valued at about $3,000 were reported stolen June 12 from one apartment. On June 13, jewelry valued at $400 and a can of coins valued at $350 were reported stolen from another unit, and June 16, a $1,400 laptop computer and about $200 worth of coins were reported stolen from a third residence.

Friday, June 22, 2012

Minnesota AG: Hospital Bill Collector Used 'ASS' & 'Blue Balls' To Squeeze Emergency Room Patients With Bedside Collection Visits, Overbilled Charges

In St. Paul, Minnesota, Legal Newsline reports:
  • Minnesota Attorney General Lori Swanson wants to add new allegations in her lawsuit against Accretive Health, a company that engages in medical debt collection. Her initial complaint, filed in January, alleged the company failed to protect patient health care confidentiality. In April, she released a report that alleged the company may have broken the law by asking patients to pay their bills as they sought care.

  • The report prompted a stock plunge and shareholder lawsuits. Her second amended complaint would add the report's allegations to her lawsuit.

  • "Accretive prepared a document called the 'Accretive Secret Sauce,' or 'ASS,' touting: 'You've never seen ASS like ours!' and 'Check out our ASS!'" says Swanson's memorandum in support of a second amended complaint, filed Tuesday.

  • "The main ingredient of the 'Secret Sauce' is that only in 'Accretive hospitals' are emergency room patients hustled with bedside collection visits. The impact of the 'Secret Sauce' on patients is very real. Its tactics also violate the law." Swanson says state law forbids debt collectors to imply or suggest medical care will be withheld in an emergency situation when collecting on a bill.

  • Included in her memorandum are stories from several individuals who claim Accretive did just that. Those testimonials allege a woman from Accretive demanded payment while the patients were receiving emergency care. The woman allegedly gave the impression care would be withheld if payment was not collected. Seventeen affidavits in support of Swanson's motion were filed with it.

  • Swanson also alleges Accretive overbilled patients using its own software program, known as A2A. "A hospital registration employee using A2A cannot process a patient electronic record unless he or she first processes informational 'balls' that pop up on the screen," the motion says.

  • "The system is derisively referred to by hospital employees as the 'Blue Balls' program. A2A purportedly determines the financial responsibility of insured patients for co-pays, deductibles, co-insurance, and for past balances, as well as the amount to be asked of uninsured patients for past balances and present bills.

  • "Based on the information in A2A, patients are then told to pay money to the hospital. The amount calculated by A2A for patients to pay often exceeded the amount owed by the patient. As a result, Minnesota patients sometimes paid more than they owed."
Go here for the Minnesota AG's:
For the Minnesota AG report on Accretive Health, see:

Mobile Home Dealer Pockets Customer Cash, Then Fails To Deliver To Some, Sells Damaged, Mold-Vulnerable Houses To Others, Says NC AG

From the Office of the North Carolina Attorney General:
  • A Robeson County manufactured home dealer cannot take new orders or accept payments until all previous orders have been filled or consumers have gotten their money back, Attorney General Roy Cooper announced [].

  • Consumers deserve to be treated fairly when they buy a home, and they deserve homes that are safe to live in,” Cooper said. “People should get what they paid for and receive a refund if they don’t.”

  • Cooper filed suit [...] against McMillian Properties of Shannon and its manager, Bradley McMillian, for a variety of violations including taking consumers’ money but failing to deliver homes as promised and selling damaged homes that were virtually uninhabitable. He is seeking a permanent ban on the defendants’ unfair business practices, refunds for consumers, and civil penalties.
  • As alleged in the Attorney General’s complaint, McMillian Properties regularly misled consumers about the condition of the homes it sold. Many of the homes were unfit to live in due to mold and structural problems. When consumers complained, the company promised to make repairs but failed to keep their promises.

  • Cooper contends that some consumers never even received their homes from McMillian Properties, despite having paid for them. Instead, the company offered excuses about why the home couldn’t be delivered, and refused to provide refunds.

  • For example, as explained in an affidavit filed with the complaint, one 93-year-old woman paid McMillian Properties $25,000 for a manufactured home so that she could move out of an assisted living facility. The home was supposed to be delivered by February 1 but Bradley McMillian repeatedly told the woman’s neighbors, who were helping her make the purchase, that it was delayed due to bad weather and other excuses. In their final conversation, McMillian claimed that he was about to leave to pick up the home. The callers were outside and could see that McMillian and his equipment never left to go get the home.
For the North Carolina AG press release, see AG Cooper goes after shoddy manufactured home dealer (McMillian Properties can’t take new orders until previous customers are satisfied).

Minnesota Regulator Takes Action Tagging Outfit That Allegedly Used Correspondence Simulating Government Docs To Dupe Homeowners Into Loan Mod Ripoffs

From the Minnesota Department of Commerce:
  • In a coordinated effort with federal law enforcement agencies that executed search warrants at three locations associated with C.C. Brown Law Office in Utah Tuesday, Commissioner Mike Rothman issued a statement of charges against Charles Craig Brown, Chad Gettel, and C.C. Brown Law, LLC for allegedly engaging in unlicensed mortgage modification activities in Minnesota.
  • The statement of charges issued by the Commissioner includes allegations that C.C. Brown Law, Charles Craig Brown, and Chad Gettel:

    1) Operated in Minnesota without an appropriate license.
    2) Collected advance fees from Minnesotan consumers totaling more than $134,000 to work with the customers’ lenders to modify the terms of their mortgages.
    3) Failed to deposit the up-front fees in a trust account as required by Minnesota Statutes.
    4) Accessed customers’ bank accounts using E-checks, which resulted in unauthorized withdrawals.
    5) Neglected to return advance fees upon request, after failing to complete the loan modification.
    6) Misled consumers by using advertisements that appeared to be sent by the government, using perforated, government-style checks, prequalification numbers beginning with the letters “U.S.” and “Housing & Economic Recovery Program (PL 110-289)” on the outside of the envelope.
For the Commerce Department press release, see Commerce Department teams up to crack down on unlicensed loan modification companies (Commissioner Rothman issues statement of charges against C.C. Brown Law on behalf of consumers).

One More Alleged Loan Modification Racket Finds Itself On Indiana AG Civil Lawsuit Hit List

From the Office of the Indiana Attorney General:
  • Indiana Attorney General Greg Zoeller has filed a lawsuit against a foreclosure consultant for contracting with a local homeowner and then taking off with their money.

  • Zoeller’s lawsuit filed in Adams County Circuit Court targeted H&R Financial Services, Inc. of New Mexico and its owners William John Heckler and Richard Ruegsegger. The company is accused of collecting $1,683 upfront from a Geneva resident and failing to obtain the promised home-loan modification or to provide a refund.
  • According to the complaint, H&R Financial Services violated the Credit Services Organization Act, the Mortgage Rescue Protection Fraud Act and Deceptive Consumer Sales Act. The company also failed to obtain a certificate of authority from the Indiana Secretary of State’s Office to conduct business in Indiana. The state seeks an injunction, restitution and civil penalties.

Thursday, June 21, 2012

Sale Leaseback Peddler Gets 33 Months In Racket That Ripped Off Victims' Home Equity & Led To Their Getting The Boot

From the Office of the U.S. Attorney (Norfolk, Virginia):
  • Philip Villasis, 41, of Chesapeake, Va., was sentenced [] to 33 months in prison, followed by 24 months of supervised release for conspiracy to commit wire fraud in connection with a fraudulent foreclosure rescue scheme. Villasis also will be required to pay over $216,000 in restitution to his victims.
  • According to court documents, from November 2006 until February 2011, Villasis engaged in a foreclosure rescue scheme that defrauded homeowners and mortgage lenders. Villasis promised homeowners that he could save them from foreclosure by arranging a sale of their homes to co-conspirator, Ray D. Gata, and other straw borrowers.

  • The homeowners were promised that they could remain in their homes after the sale, pay rent, and Villasis would resell the homes back to them once they were more financially secure. Villasis and Gata profited from this scheme by taking all of the proceeds from the home sales.

  • They completed the scheme by executing false closing documents that showed the proceeds of the sale going back to the homeowners when, in fact, the proceeds were going to Villasis, Gata and the other straw borrowers.

  • The homeowners received nothing from the sale of their homes while Villasis, Gata and others received in excess of $170,000. In almost every case, Villasis required the homeowners to pay more in rent to cover a larger mortgage, and ultimately evicted these homeowners from their homes.
For the U.S. Attorney press release, see Chesapeake Man Sentenced For Mortgage Fraud Scheme.

Ex-Tax Preparer Who Provided Falsified Work, Income Records In Connection With Sale Leaseback Foreclosure Rescue Ripoff Gets Two Years

In Los Angeles, California, City News Service reports:
  • A former tax preparer from Downey was handed a two-year federal prison sentence [] for his role in a mortgage fraud scheme that preyed on Latino homeowners by secretly taking title to their properties and draining the equity from their homes. Pablo Araque, 41, was also ordered by U.S. District Judge S. James Otero to pay restitution of $1 million.

  • Araque pleaded guilty in January to federal identity theft and mail fraud charges stemming from the scam in which homeowners' properties were sold, usually without their knowledge, to third-party straw buyers.
  • Co-defendant Juan Rangel, 48, was sentenced last year to 22 years behind bars for running both the foreclosure fraud and a separate Ponzi scheme that took in at least $30 million from over 500 victims.

Target Of Florida AG Probe Into Debt Settlement Scheme Now Peddling Purported Mortgage Cancellation Program To Homeowners Using Quiet Title Actions

In West Palm Beach, Florida, The Palm Beach Post reports:
  • By the time the stranger called that Thursday in March, suburban Boynton Beach homeowner Marcie Lowe was out of options to fix her failed real estate wager. The savvy 78-year-old played her hand well for years in the home-buying game, picking up properties in California and Key West to rent to kids in college and bartenders serving drinks on Duval Street.

  • But she got caught with a 10 percent interest-only loan on her gated Valencia Isles home, which is now worth hundreds of thousands of dollars less than the $571,000 she paid in 2003. “What would you think of this?” Lowe remembers the caller saying.

  • He proposed a fresh strategy to end-run the banks — a complex legal plan that begins when you deed your home to the Fort Lauderdale-based Fidelity Land Trust Co. for an average fee of $2,500. Conceived, at least in part, by a man barred by the state from engaging in consumer debt-related services, the trust then sues the bank to cancel your mortgage while offering a new contract with lower payments. “He said more than 250 people were already set up for this,” Lowe recalls.

  • Fidelity Land Trust has quietly amassed about 80 Palm Beach County deeds since it registered as a limited liability corporation with the state in December. The firm is the owner of record for another 76 properties in Broward and Miami-Dade counties, according to clerk of court records.

  • If the trust is successful in canceling the mortgage through a quiet title action, the homeowner is still responsible for the loan debt, or note, but the trust then tries to buy that debt from the bank for pennies on the dollar. Because the debt no longer has collateral in the form of the home, the idea is the bank will be more willing to negotiate.
  • Within the layers of corporations tied to Fidelity Land Trust is Edward C. Tudor — a registered fictitious name for Edward Cherry, according to the Florida Department of State Division of Corporations. State records show the managing member of Fidelity Land Trust Co. is Fidelity Land Trust Partners, whose “member or authorized representative” is Edward C. Tudor.

  • Cherry was barred in a 2009 consent judgment by Florida’s attorney general from dealing in consumer debt-settlement services after a state investigation concluded companies he was involved with “diverted millions of dollars to themselves and a coterie of families and associates.”

  • In 2010, the attorney general accused Cherry of violating the order after he allegedly conducted debt-related seminars that charged attendance fees of upwards of $95, according to a pending Broward County court case.
For more, see Underwater owners try to beat the bank (Post Exclusive: Homeowners seeking lifeline).

Wednesday, June 20, 2012

Accused F'closure Sale Bid-Riggers Dodge Bullet As Rocky Mountain Supremes Uphold 'Joint Bidding' Defense In Civil Suit Brought By Foreclosed Owner

In Aspen, Colorado, the Aspen Daily News reports:
  • The Colorado Supreme Court on Monday ruled in favor of bidders at a 2007 foreclosure auction for an Aspen condo who were accused by the former owner of collusion and bid rigging.

  • The case of Amos v. Aspen Alps 123, LLC, stems from the foreclosure sale conducted in February 2007 for a condo in the slopeside Aspen Alps complex that was owned by Betty Amos and the estate of her late husband Thomas Righetti. Amos had used the condo as collateral for a $1.6 million loan that had fallen into default, and Equitable Bank of Florida, which made the loan, initiated foreclosure proceedings.

  • The bank submitted a credit bid of $1.6 million, and three other bidders participated in the auction on the Pitkin County Courthouse steps. They were Debra Mayer of Aspen, Mike Seguin of Aspen and Thomas Griffin, who was there on behalf of James Flaum, of the Vail area. The initial bidding was competitive, and Seguin submitted what was ultimately the final bid of $1.86 million.

  • However, according to legal documents on file in the case, after Seguin entered the $1.86 million bid, Griffin suggested thatinstead of bidding the property up further and further,” the three parties stop bidding and form an LLC which would allow them to split the purchase three ways. All agreed, and they formed Aspen Alps 123, LLC, which was granted title to the condo by the Pitkin County Public Trustee in August 2007.

  • At issue in the case was whether the agreement, made by three people who had never met before the auction, was merelyjoint bidding,” which is permissible, or rose to the level ofbid rigging,” which violates state and federal antitrust laws.

  • The difference, according to relevant case law, is that joint bidding occurs when two or more people pool their resources to buy a property that they could not have afforded individually. Bid rigging is when parties collude to stifle competition.

  • In a 6-1 vote, the justices found that “we cannot say based on the limited evidence in the record that the purpose of the individuals joining to purchase the property was to eliminate, reduce, or interfere with competition.” Chief Justice Michael Bender, however, wrote a dissenting opinion and found that bid rigging did occur.

  • Amos also contended that the sale should be voided because the bank failed to properly notice the foreclosure sale to the estate, which included Righetti’s daughter, Brandy Righetti. Judges at the district and appellate court level never supported this argument, because Amos herself — who is a representative of the estate — was properly noticed. One of the seven Supreme Court justices wrote a dissenting opinion in favor of Amos’ arguments on the notice issue, but no other justices concurred.
  • In backing the bidders, the court relied on testimony they offered during the initial trial, when Mayer and Flaum said that the bidding had exceeded the funds they had at their disposal. Mayer stopped bidding at $1.75 million, and Griffin was authorized by Flaum to spend no more than $1.8 million, according to the testimony. It was Mayer’s testimony that after Seguin had entered the $1.86 million bid, Griffin suggested the parties “stop bidding the property up further and further” and the three agree to a joint-purchase arrangement.

  • The Supreme Court, in its 20-page majority opinion, noted that the joint purchase arrangement did not shut any other bidders out of the process, because no one else was participating in the auction.
  • Chief Justice Bender, in his dissenting opinion, cited the bidders’ own admitted intentions to stop the bidding process and keep the price from rising further. Justices in the majority are basing their exoneration of the bidders on the “self-serving testimony” that neither Mayer nor Flaum could afford to match Seguin’s final bid, he wrote.

  • The existence of a conspiracy to rig an auction is neither dependent on the success of the conspiracy nor on any showing that the agreement injured the seller by negatively impacting the final sale price,” Bender wrote. “In the present matter, the parties explicitly agreed to stop bidding to prevent the auction price from rising. This is the definition of anti-competitive behavior.”(1)
For the court ruling, see Amos v. Aspen Alps 123, LLC, 2012 CO 46, No. 10SC187 (June 18, 2012).
For earlier, related posts, see:

(1) Beware of dissenting opinions! Notwithstanding Colorado Supreme Court's overwhelming 6-1 vote upholding the 'joint bidding' defense in this case, the persuasiveness of Chief Justice Bender's logic in his dissenting opinion could be relied on by the Colorado state legislature to pass a statute specifically declaring the existence of a bid-rigging racket if the facts in future cases are similar to those in this case. See, for example, Foreclosing Lender's Failure To Serve Junior Lienholder Now OK In Indiana; New Law Reverses State High Court Ruling, Now Permits Lawsuit 'Do-Overs', reporting that Indiana Supreme Court Justice Frank Sullivan, Jr.'s lone dissent in the case (a 4-1 ruling), Citizens State Bank of New Castle v. Countrywide Home Loans, Inc. 949 N.E.2d 1195 (2011), formed the basis of a subsequently-passed statute that reversed the effect of the court ruling for future cases.

Further, there is nothing stopping judges in other states/jurisdictions from 'leaning' on Chief Justice Bender's logic in reaching a contrary conclusion to that of the majority in this case. See, for example, Highlights From Recent Oregon Court Ruling Booting MERS, in which a U.S. District Judge in Oregon gave significant consideration to the observations of a Minnesota Supreme Court Justice's dissenting opinion in Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487 (Minn. 2009) when reaching his decision. According to Chief Justice Bender:

  • ¶42 The majority reasons that the bidders’ agreement did not constitute unlawful bid rigging, but was instead lawful “pooling” of the bidders’ resources to create a joint bid similar to the arrangement that the Wyoming Federal District Court found to be lawful in Love v. Basque Cartel, 873 F.Supp. 563 (D. Wyo. 1995). Maj. op. at ¶ 33. Specifically, the Love court warned that “[b]id rigging should not be confused with joint bidding, which allows bidders to pool their resources to place bids on property which they would otherwise be unable to afford.” 873 F.Supp. at 578. I disagree with the majority’s reliance on Love because that case is easily distinguished from the present matter.

    ¶43 In Love, the court based its ruling that the joint bidding agreement constituted lawful bid pooling on three reasons.

    First, the Love court was persuaded by the fact that the parties to the joint bidding agreement were never in competition because each was only interested in owning a distinct parcel of the larger ranch that their joint bid succeeded in winning. Id. at 577-78.

    Second, the Love court reasoned that it was significant that the was no evidence that others that were present at the auction were prevented from matching or exceeding the joint bidders’ final bid. Id. at 578.

    the Love court held that the agreement constituted lawful joint bidding because the evidence showed that in the absence of the joint bidding agreement, the reserve would not have been met for several of the parcels and therefore the auction would have failed. Id. at 579.

    Each of these rationales is inapplicable to the auction in this case.

    First, there was
    only one parcel, the condo, and all three bidders were bidding competitively against one another to obtain the property in its entirety.

    Second, unlike in Love, where there
    were other bidders that may have competed against the joint bidders, here, all of the bidders present at the auction colluded to stop bidding. Their collusive behavior, which occurred while the auction was underway, destroyed any incentive among the bidders to match or to exceed the final bid.

    Finally, the reserve (or minimum bid amount) was
    met well before the parties conspired to stop bidding up the price of the auction. Thus, the success of the auction, in surpassing the reserve, was not contingent upon the parties’ ability to submit a combined bid. Although I am mindful of Love’s warning that ““[b]id rigging should not be confused with joint bidding,” id. at 577, Love should not control this case. I acknowledge that, under certain circumstances, a combined bid may actually serve to foster competition by allowing joint bids to reach ever higher. In this case, however, the combined bid served to cut off all competition and, in the words of one of the bidders, “stop the bidding process.”

    Indeed, in direct contradiction to the facts in Love, the uncontroverted evidence here shows that the bidders did not come together to make the final, winning bid.

    Rather, after several rounds of bidding, Seguin, in his individual capacity, bid $1.86
    million, and then, once that bid was submitted, Griffin (representing Flaum) approached Meyer and Seguin andproposed to the others that, instead of ‘bidding the property up further and further,’ they cease bidding against each other and buy the property jointly.” Maj. op. at ¶ 6.

    Unlike in Love, where, prior to the final round of
    bidding, the bidders pooled their bids to reach a price that they otherwise could not afford, here, Seguin could have afforded the final bid price independent of the financial contributions of the other bidders.

    Seguin won the auction with his individual bid, and it was not until after the close of the auction that the parties came together to form Aspen Alps. At the time that their anti-competitive agreement occurred, Seguin held the high bid independent of the others. Thus, the incentive for him to join in the agreement was to prevent the auction price from getting bid up “further and further.”

    Seguin was able to buy-off his
    competitors by agreeing toform an LLC and stop the bidding process.” In my view, their agreement represented a classic bid rigging scheme. It constituted an “’agreement between competitors pursuant to which contract offers are to be submitted to or withheld from a third party.’” Love, 873 F.Supp. at 576 (quoting United States v. Mobile Materials, Inc., 881 F.2d 866, 869 (10th Cir. 1989), cert. denied 493 U.S. 1043 (1990)).

    The majority reasons that this scheme did not constitute bid rigging because the non-winning bidders, Flaum (who was represented by Griffin at the auction) and Meyer, each provided self-serving testimony that they could not afford to match Seguin’s final, winning bid. Maj. op. at ¶¶ 34-35.

    In my view, this misapprehends
    federal bid rigging jurisprudence, which has long recognized that the existence of a conspiracy to rig an auction is neither dependent on the success of the conspiracy nor on any showing that the agreement injured the seller by negatively impacting the final sale price. See ABA Section of Antitrust Law, Model Jury Instructions in Criminal Antitrust Cases 61 (2009) (“Bid Rigging”).

    Rather, the relevant inquiry is whether the
    “aim and result” of the conspiracy was “the elimination of one form of competition.” Id. Thus, the sole issue in determining whether a joint bidding scheme constitutes unlawful bid rigging is whether it produces an anti-competitive result. In the present matter, the parties explicitly agreed to stop bidding to prevent the auction price from rising. This is the definition of anti-competitive behavior. Id. (“A conspiracy to rig bids may be an agreement among competitors about . . . who should be the successful bidder . . . or who should refrain from bidding . . . that affects, limits, or avoids competition among them.”).

    Finally, I do not agree with the majority’s implication that the fact that the bidders’ agreement was made during—rather than before—the auction supports the conclusion that this scheme did not constitute bid rigging. Although the majority acknowledges that “a prior agreement is not necessary to prove bid rigging,” maj. op. at ¶ 34, it nevertheless uses this fact to distinguish the present matter from Guthrie, in which the federal district court for the Eastern District of Washington denied a defendant’s motion for judgment of acquittal on bid rigging charges because the defendant had contacted other potential bidders and offered them money to refrain from participating in upcoming auctions. 814 F.Supp. at 943-44, 950.

    In my view, from
    a competitiveness standpoint, this case presents a more troublesome situation than existed in Guthrie. In Guthrie, because the alleged bid rigging occurred prior to the auctions, there was no guarantee that the defendant had bought off every potential bidder that might attend the auction. See id. at 943-44.

    In contrast, because the bidders’
    agreement in this case was not made until after the auction was already underway, the three bidders were assured that their agreement eliminated all competition.

    I would hold that the bidders’ agreement constituted unlawful bid rigging in violation of section 6-4-106 and proceed to address the remedy issue consistent with section 6-4-121, C.R.S. (2011), which, in my opinion, would void this unlawful transfer. Accordingly, I respectfully dissent from Part II.B of the majority’s opinion.

Property Buyer Pursuant To Contract For Deed Sues Seller For Failure To Transfer Legal Title After Being Tendered Payment

In Galveston, Texas, The Southeast Texas Record reports:
  • Local resident Ivonne Elena Davila has filed suit against Flor Reyna of Spring for failing to provide documentation to real property in Texas City. A lawsuit filed June 7 in Galveston County District Court says Reyna, also known as Flor Orihuela, has failed to provide annual accounting statements to Davila for property on 11th Street as mandated by Texas law.

  • The original petition states that Davila demanded the defendant execute a warranty deed conveying the legal title to the property, tendered a promissory note and drafted a deed of trust.

  • According to court papers, Reyna contacted Davila's attorney and notified him "that she was willing to sign the deed and accept the proposed promissory note and the proposed deed of trust." The defendant also reportedly divulged that she had an attorney, but the suit states "no communication from the defendant to the plaintiff's counsel is appropriate or needs to be recognized."

  • Davila alleges her counsel repeatedly urged Reyna's to approve and sign the proposed documents to no avail. Failure to do so violates state law, according to the suit.

  • The plaintiff seeks a temporary injunction which prevents the defendant or anyone affiliated with her from "accelerating, maturing or canceling the contract for deed or threatening to do so" and at least $20,000 in attorney's fees.

Attorney Suspected Of Moving Nearly $200K Of Client's Cash Into Firm's Bank Account Now Facing Felony Charges

In Raleigh, North Carolina, The News & Observer reports:
  • A Raleigh lawyer faces embezzlement and forgery charges after prosecutors say he took more than $30,000 that belonged to his clients. Nicholas Andrew Stratas Jr. was released from the Wake County jail Friday on $20,000 bond.

  • The felony charges aren’t the only problem facing Stratas, 54. The North Carolina State Bar has also filed a complaint against Stratas, saying he took clients’ money held in trust. A hearing later this year could result in Stratas losing his law license.
  • Last week, a Wake County grand jury accused Stratas of taking more than $30,000 from two clients between March 2010 and June 2011. One of the cases involves Laura Candes, who hired Stratas to pursue an injury settlement after her car was rear-ended on Interstate 440 near Crabtree Valley Mall.

  • The collision left Candes, 69, with persistent back pain, according to her husband, Chris. The bar’s complaint against Stratas says the attorney settled the case without the family’s permission. A $24,000 insurance check was deposited into the firm’s bank account, and the family has not received any money, the complaint says.

  • Stratas cashed the check and kept the money after the couple refused to accept the settlement offer, said Chris Candes, former owner of the well-known Two Guys Italian restaurant on Hillsborough Street. “I’ve known him for 25 years,” Chris Candes said in an interview Wednesday. “I felt betrayed. I considered him a friend.”

  • A disciplinary hearing on the Candes case and others has been set by the state bar for Sept. 6 and 7. Stratas has been prohibited from being involved in any financial matters related to his practice since the bar began its investigation in December. The bar alleges that Stratas moved nearly $200,000 of clients’ money into the firm’s account.(1)

(1) The North Carolina State Bar Client Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a North Carolina-licensed attorney. Request for possible reimbursement can be made with this reimbursement application form.

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

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

Tuesday, June 19, 2012

More Suits Filed Targeting HOAs That Allegedly Squeezed F'closure Sale Investors w/ Inflated Lien Shakedowns For Unpaid Assessments When Taking Title

In Clark County, Nevada, Vegas Inc. reports:
  • Four more Southern Nevada homeowners associations have been sued over allegations they’ve been requiring purchasers of foreclosed homes to pay off inflated liens.

  • In one case filed this week in Clark County District Court, Metroplex Realty LLC sued the Black Hawk Homeowners Association in North Las Vegas, Shadow Wood Homeowners Association Inc. in Las Vegas and Highgate Condominium Property Owners Association in Las Vegas. In another suit filed in the same court May 29, Elsinore LLC sued the Springs at Centennial Ranch Homeowners Association.

  • The plaintiffs in both suits are represented by Las Vegas attorneys James Adams and Puoy Premsrirut. Those attorneys regularly sue HOAs over what they call unauthorized collection costs and other charges included in liens that HOAs file against properties whose owners are delinquent on assessments and that ultimately are foreclosed on.

  • State law says HOAs can file ''Super Priority Liens'' that are ahead of mortgage liens, meaning the HOA lien amounts have to be paid for the buyer of a foreclosed property to obtain clear title.

  • Adams and Premsrirut insist these Super Priority Liens are limited under state law to six or nine months of assessments, depending on the circumstances. In some cases, Adams and Premsrirut say the liens are also limited by individual HOA CC&Rs (covenants, conditions and restrictions).

  • The HOA and collection industries say the law allows interest and collection costs on top of the caps claimed by Adams and Premsrirut. They say HOA budgets, already depleted by the recession and the flood of foreclosures, would be harmed even more if Adams and Premsrirut and their investor clients have their way.

  • State agencies and Clark County District Court judges have issued conflicting rulings on this issue, and many attorneys expect the Nevada Supreme Court to ultimately decide the dispute.

Illinois AG Tags Defunct Home Improvement Company's Owners w/ Suit Alleging They Pocketed Customer Cash On Orders That They Knew Would Go Unfulfilled

From the Office of the Illinois Attorney General:
  • Attorney General Lisa Madigan [] filed suit against a defunct south suburban home improvement supply company for failing to refund Cook County homeowners more than $90,000 in down payments for orders that were never fulfilled after the company went out of business.

  • The lawsuit was filed in Cook County Circuit Court against Family Security Doors & Windows Inc., [...] in Alsip. The suit names company principals Robert E. Starr, of Worth, his brother Michael Starr, of Chicago, Thomas J. Abbott, of Chicago, and Gordon Jackson, of Oak Forest.
  • Madigan alleges Family Security solicited and accepted down payments from consumers for new business throughout the summer of 2011, even though previous orders already faced lengthy delivery and installation delays as the company prepared to shut down. The lawsuit alleges that beginning in at least April 2011 the company was preparing to liquidate as it struggled to meet debt and operating costs, yet it continued to accept new business.

  • When the business finally closed in September 2011, Family Security had accepted down payments from more than 150 consumers totaling more than $90,000 that it would never fulfill. Customers who were able to reach company representatives after the closure were told services would not be provided nor would they be refunded for their down payments, which totaled as much as $1,000 per person.

  • While the company’s operators were actively preparing to shut down, they continued to take customers’ down payments even though it was evident that the company couldn’t fulfill the orders already on its books,” Madigan said. “Now hundreds of consumers who’d been waiting months for their orders are out thousands of dollars for nothing in return.”
For the Illinois AG press release, see Madigan Sues South Suburban Home Improvement Supply Company (Attorney General Alleges Manufacturer Bilked Consumers of $90,000 as Shutdown Loomed).

Foreclosing Lender's Lack Of Due Diligence May Leave It Holding The Bag On Environmentally Contaminated Collateral

From a recent story posted on JD Supra:
  • When the collateral has environmental contamination, the lender is faced with a take-it-or-leave-it dilemma, either of which poses significant financial risk.

  • Taking a property in foreclosure may result in the lender bearing substantial costs of cleanup and regulatory compliance just to sell in a market where property values may still be depressed. If the lender does not foreclose, then it loses its investment in the loan.

  • Often, however, it’s not clear that property is contaminated, which makes it imperative not to wait until the end of the foreclosure decision process to find out whether and how much cleanup might be necessary.

Monday, June 18, 2012

Federal Appeals Court Ruling Adds Uncertainty To Timing For Filing Rescission Lawsuits Under Truth In Lending Act

From the law firm Ballard Spahr LLP:
  • A borrower cannot bring a lawsuit seeking rescission more than three years after loan consummation, the U.S. Court of Appeals for the 10th Circuit has ruled. In its June 11, 2012, decision in Rosenfield v. HSBC Bank, USA, the 10th Circuit rejected the borrower’s argument that her lawsuit was timely because, before the three-year period ended, she had sent a notice of rescission to the holder of her mortgage loan.

  • The borrower’s position—that she needed only to send notice of rescission within the three-year period to validly exercise her rescission right—was not compelled by the plain language of the Truth in Lending Act or Regulation Z and conflicted with TILA Section 1635(f), which provides that the right to rescind expires after three years, the 10th Circuit concluded.
  • The 10th Circuit has now joined the Third and Ninth circuits in holding that notice alone within the three-year period is insufficient to validly exercise a right to rescind.

  • By contrast, the Fourth Circuit, in its decision in Gilbert v. Residential Funding LLC, is the only federal appeals court to hold to the contrary. Commenting on Gilbert, the 10th Circuit stated that it “simply [could not] square the Fourth Circuit’s view with the Supreme Court’s strong pronouncement in Beach [v. Ocwen Federal Bank] that the TILA rescission right is extinguished if it is not exercised within the three-year statutory period.” (For more information on Gilbert, see our prior legal alert and blog post.)

Fighting Off Zombie Debt Buyer Lawsuits

From Public Citizen's Consumer Law & Policy Blog:
  • Peter A. Holland of Maryland has written Defending Junk-Debt-Buyer Lawsuits, 46 Clearinghouse Review No. 1-2 (May/June 2012). Here is the abstract:

    Junk debt buyer lawsuits have overwhelmed the courts all across the United States. These lawsuits wreak havoc on consumers and their families. Often overlooked is the fact that judgments against consumers which are based on junk debt are part of a zero sum game, where every bogus judgment deprives a legitimate creditor of the chance to get paid from scarce resources.

    Thus, the legitimate creditor to whom money is owed is materially harmed by the junk debt buyer who extracts money based on an illegitimate claim, or who causes someone to declare bankruptcy. Providing representation to this otherwise unrepresented population will not only help individual consumers. It could improve the entire U.S. economy, by preserving precious resources to pay what is legitimately owed, and avoiding paying for what is not.

    This article surveys the landscape of the junk debt buyer industry and provides advice for consumer advocates engaged in the battle against unscrupulous junk debt buyers.

LA Feds Bag 3 For Allegedly Running Short Sale Rackets Targeting Distressed Homeowners; Unwitting Buyers Left Holding Bag On Homes With Crappy Titles

In Los Angeles, California, KCBS-TV Channel 2 reports:
  • Federal authorities say three Southern California men have been indicted for allegedly running a scam involving short sales that caused more than $10 million in losses. [...] Atiqullah Nabizada, 29, of Coto de Caza, and Kenneth Moore, 49, of Tustin, were arrested Thursday at their homes after a grand jury returned two indictments charging them and a third defendant – 32-year-old Ahmed Tariq Asghari, of Sherman Oaks – with fraud violations and identity theft in connection with a variety of schemes using real or fake short sale real estate transactions and home loans.
  • The defendants preyed on distressed homeowners, claiming to have insiders working at the bank, who, in exchange for cash, would authorize short sales for far less than fair market value, according to court documents. At least twice, the defendants used short sale approval letters that had been entirely fabricated.

  • The defendants also allegedly assumed the identities of property owners and sold and refinanced their properties without authority. [...] As a result of the schemes, federal officials said home buyers and investors bought homes they believed had clear titles but were actually devalued and subject to hundreds of thousands of dollars worth of liens.

Sunday, June 17, 2012

S. California Man Gets 55 Months For Scoring $5M+ In Mortgage Loans By Pledging Real Estate He Didn't Own As Collateral

From the Office of the U.S. Attorney (Riverside, California):
  • A Sylmar man has pleaded guilty to federal conspiracy and tax evasion charges, admitting that he plotted with others to fraudulently obtain four loans for more than $5 million by pledging houses that they didn’t own as collateral, falsely claiming that the houses had enough equity to secure the loans, forging documents and falsifying notary stamps.

  • Hamlet Sardariani, 42, pleaded guilty [...] in United States District Court. Hamlet Sardariani was scheduled to go on trial next week before United States District Judge Virginia A. Phillips.

  • Three other members of the conspiracy have previously pleaded guilty. Hamlet Sardariani’s brother – Henrik Sardariani, 44, of Glendale – pleaded guilty in January and is scheduled to be sentenced by Judge Phillips on August 6 (see: Glendale Man Pleads Guilty In $5 Million Loan Fraud Case).

  • Wanda Tenney, 66, of South Los Angeles, who was an escrow officer, pleaded guilty on December 5, 2011 and is scheduled to be sentenced on October 15. The fourth co-conspirator, Christopher J. Woods, 53, of Beverly Hills, pleaded guilty on November 8, 2011, and is scheduled to be sentenced on July 16.(1)
For the U.S Attorney press release, see Sylmar Man Pleads Guilty In $5.4 Million Loan Fraud Case.

(1) To get a flavor of the kind of civil litigation that was spawned as a result of Sardariani's handiwork, see:

High-Living Steeltown Closing Agent Gets 55 Months For Looting $1.5M In Real Estate Escrow Cash, Closing Loans Without First Paying Off Existing Liens

From the Office of the U.S. Attorney (Pittsburgh, Pennsylvania):
  • A resident of Pittsburgh, Pa., has been sentenced in federal court to 55 months of incarceration on his conviction of wire fraud, United States Attorney David J. Hickton announced []. Senior United States District Judge Maurice Cohill imposed the sentence on Jason Sheppard, 31. Sheppard has been incarcerated since his arrest after he violated the conditions of his bond and fled the jurisdiction. As part of his sentencing, he was ordered to pay approximately $1.5 million in restitution.

  • According to information presented to the court, Sheppard was the president of TruClose Financial Services, which is a company that closed loans collateralized by real estate with an office in Mt. Lebanon. For much of 2009 Sheppard withdrew money from TruClose's accounts, and spent the majority of the money paying off gambling obligations and substantiating his life style.

  • In just a few months (October through December 2009) Sheppard sent nearly $600,000 to casinos from the accounts of TruClose Financial. Sheppard also wire transferred money into his wife's account and used the business's account to pay her substantial credit card bills. The shortfall that Sheppard caused is approximately $1.5 million.

  • As part of the closing of real estate transactions, representatives of TruClose signed settlement statements that represented to the lenders that the liabilities associated with the collateral would be paid off. The payment of those liabilities would ensure that the lenders would be in the first lien position and that the borrowers had only one mortgage on the property.

  • Sheppard withdrew so much money from the accounts of TruClose, however, that TruClose could not pay the liabilities that were required to be paid as part of the closings, and some of the checks used to pay the liabilities bounced. Sheppard knew that TruClose could not pay its liabilities, but he instructed the employees to close the transactions anyway.

Judge OKs Asset Attachment Against Alleged F'closed Home Hijacker For Renting Out House To Unwitting Family, Charging Pet Deposit For Service Animal

In Auburn, Maine, the Sun Journal reports:
  • A Turner family is suing a Leeds man claiming he rented them a house that he didn’t own. John Stetson and Melissa Rollins say they were seeking a rental in December for themselves and their children: two sons, ages 2 and 17, and a 19-year-old daughter. They answered an ad for a house for rent that was posted on the Craigslist website. They recently filed a complaint in Androscoggin County Superior Court against John Gray.

  • When the family called the phone number listed in the online ad, Gray answered. He showed the family a four-bedroom house at 64 Bean St. in Turner with a two-car garage during the two weeks following Christmas.

  • The family signed a one-year lease with Gray on Jan. 6, the complaint said. They paid Gray a security deposit of $500 and a $50 propane fee plus a pet deposit of $250, because their daughter, Brittany, needs a black Labrador service dog for her post-traumatic stress disorder.
  • At the time the family leased the house from Gray, it belonged to the MSHA. Before a scheduled June 6 eviction hearing, the family agreed to MSHA’s eviction judgment.
  • In a separate court proceeding shortly after the lawsuit was filed, the family was successful in securing an attachment of Gray’s property and other assets in the amount of $4,300 in the “reasonable likelihood” they would recover judgment against Gray and the Rebis Agency.

  • The family, represented by attorneys Maureen Boston and Matthew Dyer at Pine Tree Legal Assistance,(1) claim Gray falsely represented himself when he signed a lease with the family.

  • The family claims it suffered monetary and emotional damages due to what they said was Gray’s fraudulent misrepresentations. The family is seeking an award of punitive damages as well as attorney’s fees.

  • In addition, the family claims that state law bars landlords from charging tenants damage deposits for service animals.(2)

(1) Pine Tree Legal Assistance provides free legal help to Maine people with low incomes, and has offices in every part of the state, from Presque Isle to Portland.

(2) The inability to make the distinction between a service animal and a pet can become a very costly problem for landlords, homeowner associations, etc. See, for example: