Saturday, July 11, 2015

NYC Couple's Lawsuit: Stifling Heat From Downstairs Bagel Shop Drove Away Our Tenant & Is Driving Down Value Of Our 2nd Floor Condo

In New York City, the New York Post reports:
  • Two Upper West Side condo owners say a ground-floor bagel shop is making their apartment “uninhabitable” by causing temperatures to reach a stifling 100 degrees, a new lawsuit charges.

    Philip and Yarina Birnbaum are airing their beef with Bagel Talk, located directly underneath their unit, 2A, at 200 W. 78th St., in a Manhattan Supreme Court lawsuit.

    The heat, which hovers around 90 degrees year-round, has already driven one tenant out and has caused the condo’s value to plummet, the suit says. It claims that the shop refused to repair its ventilation system.

    “I just made a $25,000 deposit to the ventilation company. It should be fixed in a matter of days,” owner Abid Islam, 50, told The Post.

Ex-Real Estate Agent (Five Years), Pastor (33 Months) Get Jail Time For Running Scam That Recruited Church Members & Affiliates To Act As Unwitting Straw Buyers In Mortgage Scam; Cleric Fails To Self-Surrender, Currently Remains On The Lam

From the Office of the U.S. Attorney (Phoenix, Arizona):
  • [J]ulio Cesar Esquivel Reyes, 41, of Tolleson, Ariz. was sentenced [...] to five years in prison and ordered to pay $568,413 in restitution. Reyes previously pleaded guilty to conspiracy to commit wire fraud.

    “Mortgage fraud is a serious offense that has detrimental effects on the economy as a whole. The facts of this case are especially egregious because the defendants used their affiliation with a church to further the crime,” said U.S. Attorney John S. Leonardo. “This sentence and that of Pastor Tovar send a solid message that those engaging in such actions will be prosecuted and incarcerated.”

    Reyes, a former realtor, and his co-conspirators embarked on an 11-year mortgage fraud scheme that resulted in losses just under $2 million. Among other things, the defendants provided false information to lenders and used straw buyers to perpetrate the scheme. During the course of the conspiracy, the defendants obtained at least 14 loans on 11 properties that totaled over $3 million and resulted in nine foreclosures.

    A portion of the scheme was co-led by Pastor Luis Antonio (“Tony”) Maldonado Tovar of Grupo Amistad church. By misrepresenting that the proceeds would be used to benefit the church, Tovar and Reyes recruited members and affiliates of Grupo Amistad church in Phoenix to act as straw buyers for a number of the fraudulent transactions.

    Tovar was previously sentenced to 33 months imprisonment for his role in the offense. He was ordered to self-surrender to serve his sentence on Jan. 20, 2015, but failed to appear and remains at large - any information on Tovar’s whereabouts should be reported to the U. S. Marshals Service at 1-800-336-0102 or

    Also sentenced in this case were Evangelina Gardner (14 months’ imprisonment) and Reyes’s father, Andres Esquivel (12 months’ imprisonment).

Friday, July 10, 2015

Dubious Leaseback Deals Not Limited To Home Equity Stripping, Usury Evasion Scams As Spotlight Of Suspicion Shines On N. California School Districts' Use Of Arrangement In Attempt To Conveniently Sidestep Competitive Bidding Requirements To Hand-Select Contractors To Construct Its Facilities

While so-called leaseback deals are common and legitimately used in the field of business and finance, the nature of the leaseback transaction is such that it is quite easily adaptable for somewhat dubious uses as well, such as an instrument of fraud (see, for example, Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals), and as an attempt to evade usury laws (see, for example, Sale Leasebacks Or Disguised Usurious Loans; Substance vs. Form).

In a couple of recent stories out of Northern California, it appears that at least one other application of the leaseback transaction giving rise to some controversy involves the use of such an arrangement in a way that some believe is being used to possibly sidestep competitive bidding requirements imposed upon California school districts involving the building of its facilities (and involving the spending of a lot of money, not to mention potentially controlling whose "brother-in-law" ultimately scores the lucrative job), as the following two stories illustrate.

In Fresno County, California, The Fresno Bee reports:
  • Fresno Unified School District leaders have denied bids by school board members to schedule a vote on hiring an independent investigator to examine a controversial construction deal.

    So trustees Brook Ashjian, Carol Mills and Luis Chavez are taking their campaign public. On Tuesday, The Bee published a letter to the editor from the three, who urged their fellow board members to consider an outside investigation. Ashjian, Mills and Chavez say it’s time for an independent probe into a lease-leaseback deal the district had with Harris Construction to build Rutherford B. Gaston Middle School that was recently deemed illegal.(1)


    [School Board President Cal] Johnson said the staff is in the process of reviewing the contracts in question. Before any related items can be placed on the agenda, the superintendent and his staff should have the opportunity to “thoroughly assess the impact of the Davis decision(2) and the use of lease-leaseback in constructing district facilities,” he wrote in the email.

    Johnson and [Superintendent Michael] Hanson did not comment on whether the item would be added to next month’s meeting. Amy Idsvoog, interim chief information officer for Fresno Unified, said Tuesday that the district is looking at ways to modify its contracts concerning lease-leaseback issues. “In the meantime, our Board of Education has asked the Supreme Court to provide further direction,” she said. Idsvoog did not say if the item would be added to next month’s agenda.

    The Fifth District Court of Appeal recently found that the district sidestepped the competitive bidding process to the benefit of Harris Construction and in violation of state law.(3)

    Lease-leaseback contracts are traditionally used to help poor or small school districts build schools by allowing them to lease the land where they plan to build to a contractor for a small amount, and then the contractor pays all the upfront costs. The district then “leases back” the building from the contractor and pays down the project costs over several years. But in this case, Fresno Unified had the money, which has led to allegations that the deal was made solely to ensure Harris Construction got the bid.
For the whole story, see Fresno Unified leaders reject hiring outside investigator on leaseback deal.


In neighboring San Benito County, California, the Free Lance News reports:
  • The county's civil grand jury is the latest organization to challenge the use of lease-leaseback arrangements such as the ones planned for San Benito High School's bond projects.

    The recently released San Benito County Grand Jury report culminated the past year’s work of 19 volunteers who investigated taxpayer-funded agencies, either upon request or on their own volition. Those government entities are required to respond in some manner to the report’s allegations within 90 days.

    Among the grand jury's examinations, it looked at the San Benito High School District's narrow passage of the $42.5 million bond last June. As for question marks, the grand jury recommended the high school district reexamine the use of lease-leaseback arrangements, for construction projects, which forgo the public bidding process.

    San Benito High School District trustees earlier this month approved moving ahead on lease-leaseback arrangements for upcoming construction upgrades at the school gym, to air-conditioning systems and in classrooms.

    A court case from earlier this year called into question the Fresno Unified School District’s use of a lease-leaseback arrangement, according to media outlets.(4)

    Opponents of the process have argued it shuts down the public bidding process, a key part of maintaining transparency with taxpayer funds. In light of the court case, San Benito High School staff officials and district trustees recently examined the issue further in trying to ensure construction contracts were done appropriately.

    A lease-leaseback plan allows a district to lease land for a small amount—a minimum of $1, according to state education code—to any person, firm or company constructing a building for the school on that site. The private party picks its own subcontractors to do the work and is responsible for delivering the project at a fixed, “guaranteed maximum price,” swallowing extra costs if expenses run over budget.

    Once the project is done, the developer leases the property back to the district for a given amount of time.

    One of the grand jury's recommendations in its report includes the following:

    "District Leadership should conduct an in-depth evaluation of the feasibility of a lease-leaseback arrangement, compare and contrast to other construction methods and subsequently make public its decision and rationale before construction begins."

    The report went on: "If the Board chooses the lease-leaseback method, it should be with full understanding, awareness and ability to address issues that will arise due to inherent conflict with Public Contracts Code requirements that require bids. If the lease-leaseback method is implemented, clear guidelines should be established to address that conflict."
For the story, see Grand jury urges evaluation of lease-leaseback deals.

Editor's Note: These leaseback deals are apparently controversial enough to attract the attention of authorities. See The Fresno Bee:

Go here for other stories involving "leaseback" transactions as a method method of financing school district facilities, and occasionally, as a way to refinance an existing (sometimes empty) school building.(5)

(1) Davis v. Fresno Unified School District, No. F068477 (Cal. App. 5th Dist, June 19, 2015). For a discussion on this court ruling, see Financing and an extended lease term now required for enforceable lease-leasebacks in California.

For a Sacramento Bee opinion piece on leaseback deals used to finance school construction, see Opinion: Politics, self-interest infest construction of California’s schools:
  • The decision, if upheld by the state Supreme Court, could be a financial bombshell, forcing school districts and their corporate partners to undo deals worth hundreds of millions of dollars.

    In response, school construction and contractor groups are seeking legislative validation of their leaseback deals. Their lobbyists are circulating language to that effect in the Capitol, looking for a bill to which it could be attached.
(2) Ibid.
(3) Ibid.
(4) Ibid.
(5) Wisconsin Watchdog: Lawmaker: Milwaukee school sale ‘stinks to high heaven.'

Thursday, July 09, 2015

Boulder Jury Convicts Con Man Of Tricking 86-Year Old Woman He Met Thru Volunteer Work Out Of Possession Of Her Home For $2,350, Then Using Craigslist To Find Tenants & Pocket $30K+ In Rent; Probe Into Add'l Dubious Deals Involving Other Possible Victims To Continue: DA

In Boulder, Colorado, the Daily Camera reports:
  • Following the felony theft trial of two men charged in a real estate scam of more than $30,000 from an elderly Boulder woman, one defendant was acquitted on all charges, while the other was found guilty and now faces up to 32 years in prison.

    After the 12-person jury, having sat through a five-day trial [...], announced its verdict [], District Attorney Stan Garnett hinted at possible additional charges for Gilbert Million, the defendant found guilty. "Throughout the trial, we have received calls and emails from other people concerned about transactions with Mr. Million," Garnett said. "We will be investigating those."

    Million [...] and associate Lance Stromberg were originally charged in connection with a real estate deal Million brokered. That deal, prosecutors successfully argued, took advantage and robbed, in installments, an 86-year-old woman named Kathryn Howe, who died in November 2014 and whose daughter has been linked romantically to Million.

    After four hours of deliberation [...], the jury found Million guilty on all counts, including criminal exploitation of an at-risk elder, theft of an amount between $20,000 and $100,000 and criminal impersonation.

    Of Million's guilty verdict, [the acquitted] Stromberg said, "I've known him for 30 years. He's sloppy with details. He doesn't dot the i's and cross the t's all the time
    , but he has a big heart and he's a great man, and he just made a mistake here, and the jury saw it differently than I did."

    According to a June 2014 grand jury indictment, and, evidently, in the eyes of the jurors, Million's actions exceeded mere misunderstanding.

    Court documents show he first met Howe at the West Boulder Senior Center, where he volunteered. In 2012, she indicated to him that she planned to sell her home and move closer to her daughter's Longmont residence.

    Million and business partner Stromberg got involved at that point, according to court documents. The three met, and Howe agreed to sell them the home in the 600 block of Dellwood Avenue at a price of $412,500, with the condition that Million and Stromberg pay just $1,000 up front and $9,000 at closing.

    In March 2013, the closing date arrived, and Million presented no check. Two months later, he began advertising the property for rent on Craiglist and collected $32,500 over the next 11 months, funneling payments through Stromberg.

    Million did not wish to comment following the verdict, but he did tell the Camera 10 months ago, "We just had a delay in the closing."

    "It's a fair deal," he said at the time. "The seller is a very sweet person. I care about her dearly. ... Things just got delayed. My mother got sick, my father died, we had the flood, my attorney was late on closing the paperwork. We were trying to get to the closing, but we had a series of events."

    Eighteen months after the deal was made, Howe and her daughter — whom Million dated at some point after the sale — said they'd received a total of $2,350, even though the house was valued initially at up to $600,000.

    "We never bring a case in order to make an example of anybody," Chief Deputy District Attorney Sean Finn said Friday, "but it is important that the community know that if someone is going to take advantage of seniors in our community, we're going to look at it extremely seriously.

    "These cases are not easy to put together, but they're absolutely worth it, and we'll continue to do this."
For the story, see Boulder man faces up to 32 years after conviction in real estate scam (Gilbert Million brokered deal to buy elderly woman's house).

Saga Of 84-Year Old New Jersey Senior Victimized By State-Sanctioned Granny-Snatching, Guardianship Scam That's Left Her 'Incarcerated' In Nursing Home, Broke & Without Personal Possessions Or Contact w/ Relatives, Beloved Pet

In Asbury Park, New Jersey, the Asbury Park Press reports:
  • She has broken no law, committed no crime.

    Yet Helen Hugo, a soft-spoken, grandmotherly, 84-year-old "Wheel of Fortune" fan, is a prisoner of the state.

    Its laws and bureaucracy have forced the retired secretary into a nursing home. Disposed of her antiques and other belongings. Separated her from her cat, Sweetie Pie. Barred her closest relatives from visiting her, and exhausted her life's savings to pay the legal fees of the attorneys involved in her guardianship case.

    In the court's eyes, Hugo is mentally incapacitated and requires a state agency to serve as her guardian and manage her care and finances.

    That's what a judge ruled in 2012, after a five-day trial that Hugo didn't attend, except for a private conversation with the judge. She spent all of 33 minutes in the courtroom.

    A sturdy, brown-eyed woman with warm, silky hands and wavy hair that's still more brown than gray, Hugo says the court ruling three years ago was "a lot of nonsense." "Probably the people calling me nuts," she says, "are crazy themselves."

    The terms of her guardianship aren't so easily dismissed. As a ward of the state, Hugo can't vote, write a check, receive her own mail, or make decisions for herself. Inmates in New Jersey have greater legal autonomy.

    Hugo has lived under those restrictions since the day she first met Barbara J. Lieberman.

    An esteemed elder law attorney and respected member of the New Jersey bar, Lieberman, 63, served as Hugo's court-appointed temporary guardian prior to Hugo's capacity trial.

    At the same time, Lieberman was leading a double life as a thief. Using her legal skills and her status as a trusted insider, she stole millions of dollars in other cases involving 16 seniors in their eighties and nineties.

    Among them was the 85-year-old widow of the former head of the Ocean County Police Academy in Lakewood.

    Lieberman moved some into nursing homes and sold their homes. With several, she manipulated their wills so she could keep stealing from them even after they died, authorities have said.

    More than a year after Lieberman's crimes came to light, Hugo, who never married and was living alone prior to her guardianship, is still fighting to be free again, to go where she wants, when she wants, even to be reunited with her beloved Sweetie Pie.

    The problem is, she can't.

    Like tens of thousands of elderly New Jerseyans, and at least 1.5 million Americans, she's consigned to a guardianship system that's shrouded in secrecy, tangled in red tape, and rife with corrupting temptation.

    Across the U.S., the vast majority of court-appointed guardians do difficult, honest work, providing a critical service for society's most vulnerable citizens. But there are some who have exploited a system with few checks and balances, using the supreme authority the courts grant them over their wards' lives to enrich themselves.

    The lawbreakers have included family members, attorneys, professional guardians, even a high-ranking judge in Minnesota.

    Corrupt guardians have stolen millions in New Jersey in recent years, and perhaps billions across the country. No one knows for sure.

    New Jersey's top judge says these crimes are "deeply troubling."

    "There are simply too many cases in which individuals who've been granted authority, who've been granted responsibility, take advantage of the very people that they have ...promised to assist," New Jersey Chief Justice Stuart Rabner said June 15 at an elder abuse conference at Stockton University in Galloway.

    The crimes are easy to commit and even easier to hide. Few courts across the country have the resources, or will, to police the guardians they appoint.

    At risk is the biggest treasure chest of all: $30 trillion — yes, trillion — that today's graying baby boomers have amassed in assets over the last 50 to 70 years. That's enough money to run the U.S. government for three decades.

    Why does all this matter to you? ...
For more, see Betrayal of trust (An Attorney's Shocking Crimes Show How Easy It Is To Steal Millions From Seniors) (Part One of a Four-Part series).

For Parts Two, Three and Four of the series, see:
  • Easy prey (Elderly And Vulnerable, 16 Men And Women Became Prime Targets For Theft),
  • Broken system (Vulnerable Seniors Have Few Options For Protection. Will This Happen To You?),
  • How to help the vulnerable (Billions are stolen from the elderly and infirm across the country each year. Here's how to stop it).
See generally, The Wall Street Journal: Abuse Plagues System of Legal Guardians for Adults (Allegations of financial exploitation and abuse are rife, despite waves of overhaul efforts) (Non-WSJ subscriber? Try here, then click appropriate link).

Go here for other horror stories on the use of the guardianship process to 'kidnap, hijack, granny-snatch' (call it what you want) the elderly, infirm and vulnerable as part of a money grab by slimy relatives, sleazy attorneys, judges and professional guardians, authority-abusing employees of bloated government agencies, and other assorted lowlifes seeking an easy payday. granny-snatching racket

Wednesday, July 08, 2015

Owners In Aging 'Historic' 35-Unit South Florida Co-Op Score Big Win; Convince County Leaders To Rescind Building's Value-Toxic, Historic Designation Status; Residents Now Able To Maximize Their Equity By Dumping Deteriorating Structure Onto Developer For $17M For Date w/ Wrecking Ball & Subsequent Rebuild

In Bay Harbor Islands, Florida, The Real Deal (South Florida) reports:
  • For the second time in just more than a month,(1) the Miami-Dade County Commission has granted an appeal to overturn the historic designation of an aging apartment building — a move welcomed by property-rights advocates but condemned by preservationists. The decision paves the way for the sale and demolition of the Bay Harbor Continental, a 35-unit cooperative in Bay Harbor Islands.

    After an hours-long acrimonious hearing, the commission voted just before midnight to agree to the appeal, brought by a majority of the cooperative’s owners and by developer P3 Investments, to rescind historic designation status. The Miami-Dade Historic Preservation Board, in a move to stop the building’s demolition, granted the designation earlier this year.

    In a surprisingly lopsided 8-2 vote, commissioners largely agreed with arguments brought by 86 percent of the co-op residents, many of them elderly, who said they wanted to sell their units to P3 investments. P3 wants to demolish the building and replace it with a seven-story Pininfarina designed residential project containing 28 units.

    Many said they would not be able to sell their units because of the historic designation, and would not be able to afford special assessments to fix deteriorating balconies, roof areas, and plumbing fixtures that supporters of the sale could cost as much as $8 million. Thirteen of the 35 co-op residents opposed the sale. Some said they would have nowhere else to go if the building is demolished and others called The Bay Harbor Continental an important example of Miami Modern, or MiMo architecture that should not be demolished.

    Daniel Ciraldo of the Miami Design Preservation League told The Real Deal the vote was “very disappointing,” saying the commission ignored its own guidelines on historic preservation. “The commission was totally swayed by evidence that shouldn’t have even been considered,” he said.

    A statement from Gaurav Butani, president of P3 Investments, praised the vote, calling it “victory for seniors and residents,” and a strong stand “in favor of the property rights of homeowners.” Pininfarina designers say the new building they have designed for the site will “put new energy into MiMo.”

    Bay Harbor Islands Mayor Jordan Leonard, who opposed historic designation for the building called the commission vote a win for the “will of the people.” Jordan said the city has already lost 4 percent of its buildings because owners have torn down many buildings fearing historic designation. Jordan supports historic preservation for buildings whose owners want such designation, he told TRD.

    “I’ve spoken with the historic preservation chief and I will be working with them to help people that want to have their properties designed be designated,” he said. “If there are people who want to have their properties designated, we are going to do everything possible to help them.”
Source: Overturned: Historic designation of Bay Harbor Islands co-op (Move paves way for sale and demolition of 1958 MiMo structure).

See also, The Miami Herald: Miami-Dade commissioners overturn historic board again ("At issue [] was the 35-unit Bay Harbor Continental, a waterfront co-op slated for demolition by a developer that wants to buy it for about $17 million.").

(1) See Historic designation of Surfside condo building overturned (Preservationists warn decision on Seaside Terrace could jeopardize other historic structures):
  • In a decision that could have broad implications for developers, preservationists and residents of historic structures in Miami Dade County, the Miami-Dade County Commission [...] granted an appeal to overturn the historic designation of the Seaside Terrace Condominium located at 9241 Collins Avenue in Surfside.

    In doing so, the commission went against the recommendation of its own Office of Historic Preservation, finding in favor of a majority of owners in the building who said Seaside Terrace’s designation as historic earlier this year has devalued their investment and limited their ability to sell their units.

    Commissioner Sally Heyman, who supported the appeal to overturn the designation told the commission most historic properties cannot comply with current code requirements regarding storm-resistant windows, cannot replace old electrical and plumbing systems and she said many condo owners in such buildings now face skyrocketing insurance rates because of the condition of their structures.

Tuesday, July 07, 2015

Racket Leader Who Rolled Dice On 7-Week Trial & Lost Gets Belted w/ 27 Years For Peddling Phony Consulting Services To Hapless Consumers Saddled w/ Crappy Timeshare Investments Looking To Unload Them Or Obtain Discounted Mortgage Payoffs

From the Office of the U.S. Attorney (Camden, New Jersey):
  • An Atlantic County, New Jersey, man was sentenced [] to 324 months in prison for his role in a $3 million conspiracy to scam customers by offering phony consulting services to owners of timeshares through the New Jersey-based Vacation Ownership Group LLC, U.S. Attorney Paul J. Fishman announced.

    Adam Lacerda, 31, of Egg Harbor Township, New Jersey, was convicted [...] of one count of conspiracy to commit mail and wire fraud, nine counts of mail fraud and three counts of wire fraud [following] a seven-week trial [...] in Camden federal court.

    According to documents filed in this case and the evidence presented at trial:

    Lacerda and his codefendants schemed to defraud hundreds of timeshare owners by offering fraudulent consulting services through their company, the Vacation Ownership Group (now VO Financial). Lacerda, the company founder, president and chief executive officer, devised the company’s fraudulent sales pitches. He directed his sales force to tell numerous lies to VO customers, including that VO worked with the banks holding the customers’ loans, would use money sent by customers to pay off the customers’ loans on their timeshares, and could cancel customers’ timeshares with money back.(1)

    Three codefendants were convicted with Lacerda at the same trial: his wife, Ashley Lacerda, 35, the company vice president and chief operating officer, sent fraudulent contracts to customers and managed the office. Ian Resnick, 40, of Absecon, New Jersey, a convicted bank robber, started as a salesman giving the fraudulent sales pitch but became Adam Lacerda’s enforcer, with the title “director of compliance.” Genevieve Manzoni, 49, of Lake Worth, Fla. was a top VO sales representative who falsely told one victim she worked with a bank, another victim that she worked with a timeshare developer. They are all awaiting sentencing.

    The 14 victims who testified at trial – including business executives, veterans, senior citizens, a lawyer and a professor – were defrauded out of a total of tens of thousands of dollars by the defendants’ sophisticated scheme.

    In addition to the prison term, Judge Hillman sentenced Adam Lacerda to three years of supervised release.
Source: Atlantic County, New Jersey, Man Sentenced To 27 Years In Prison For $3 Million Time-Share Mortgage Fraud Scheme.

(1) See Ten Charged In Superseding Indictment In Time Share Mortgage Fraud Scheme:
  • [T]he defendants through the VO Group participated in a fraudulent scheme in which representatives of the VO Group called owners of timeshare vacation properties purchased from Flagship Resort Development, Wyndham Vacation Resorts Inc., and other timeshare developers and convinced the owners to submit money to the VO Group, purportedly to pay off their “mortgages” on their timeshares.

    The VO Group claimed that the timeshare owner could pay off the mortgage balance at a substantially reduced amount – often by as much as 50 percent of the amount of the owner’s original mortgage [...].

    The VO Group representatives also persuaded timeshare owners to send the VO Group money purportedly to have timeshares cancelled or sold. Rather than paying off the timeshare owner’s mortgage, cancelling the owner’s timeshare, or selling the timeshare, the conspirators kept the timeshare owner’s money for their personal use.

Co-Owner Of Telemarketing Racket That Bilked $6M From Timeshare Owners Looking To Dump Their Units Gets Nine Years

From the Office of the U.S. Attorney (East St. Louis, Illinois):
  • [L]eandro Velazquez, 36, of Kissimmee, Florida, was sentenced in the U.S. District Court for the Southern District of Illinois [...], to 108 months in federal prison for his role is a conspiracy to commit mail and wire fraud.

    In February 2014, a grand jury returned a one-count indictment charging Velazquez with conspiracy to commit mail fraud and wire fraud in connection with telemarketing. The indictment alleged that Velazquez, and others were engaged in an extensive telemarketing scam which operated in Orlando, Florida, that bilked thousands of victims of approximately $6 million dollars, victimizing consumers throughout the United States and Canada. There were victims in seven of the thirty eight (38) counties comprising the Southern District of Illinois.

    According to documents filed with the Court in connection with his guilty plea(1) and sentencing, Velazquez was a co-owner of National Solutions and related companies located in Orlando, Florida. The scheme operated under more than a dozen business names including Bluescape Timeshares International, Country Wide Timeshares, Countrywide Timesharesales, and Landmark Timeshares, among others.

    Evidence provided to the Court established that Velazquez' participation in the scheme began on or about December 5, 2007 and continued through July 13, 2011. Telemarketers for National Solutions placed cold calls to timeshare owners and then falsely represented that their company had actual buyers for the owners’ timeshare property.

    Telemarketers then solicited advanced fees of up to several thousand dollars from each victim in purported closing costs that they promised would be refunded to the owner once the closing on the property occurred. Many timeshare owners were told that their closings were scheduled within a number of days. Despite collecting fees from these victims, these companies were not successful in selling a single timeshare unit, according to testimony from the U.S. Postal Inspection Service.

    The Federal Trade Commission investigated the National Solutions businesses and brought a civil complaint in the United States District Court for the Middle District of Florida in Orlando. In that action the FTC seized the offices and records of National Solutions on July 13, 2011 pursuant to Court Order.
Source: Florida Timeshare Resale Co-Owner Sentenced For Role In Multi-Million Dollar Scam.

For the indictment, see USA v. Velazquez.

(1) The fact that Velazquez copped a guilty plea (see Florida Telemarketer Pleads Guilty To Timeshare Resale Scam) to this crime, saving the Feds from expending the time, money and aggravation of a trial, may explain (in part, at least) why he was hit with only 9 years in prison. Contrast this case with a similar timeshare racket (albeit prosecuted by a different U.S Attorney's office) where the lead scammer forced a prolonged trial, lost, and was subsequently belted with three times as much slammer time (Racket Leader Who Rolled Dice On 7-Week Trial & Lost Gets Belted w/ 27 Years For Peddling Phony Consulting Services To Hapless Consumers Saddled w/ Crappy Timeshare Investments Looking To Unload Them Or Obtain Discounted Mortgage Payoffs).

Telemarketer Cops Guilty Plea For Role In $10M Ripoff That Targeted 3,000+ Timeshare Owners Anxious To Unload Their Units; Racket Bled Victims For Thousand$ That Were Purported To Be "Prepaid Closing Costs" On Deals That Ultimately Were Never Consummated

From the Office of the U.S. Attorney (East St. Louis, Illinois):
  • [P]atrick A. Nosack, 34, of Henderson, Nevada, pled guilty in federal court [...] to conspiracy to commit mail and wire fraud in connection with telemarketing. Nosack faces maximum penalties of 25 years in federal prison, a $250,000 fine, five years of supervised release, and a $100 special assessment. Nosack is being held without bond pending his sentencing, which is set for Thursday, September 17, 2015.

    The charge arose out of a telemarketing scam which operated in Las Vegas, Nevada, which bilked over 3,000 victims of approximately 10 million dollars.

    Consumers were victimized in all fifty states, the District of Columbia and Puerto Rico, all ten Canadian provinces and the Northwest Territory of Canada, as well as Australia, Israel and the United Kingdom. There were at least twelve victims in nine of the thirty-eight counties comprising the Southern District of Illinois. The scheme operated from December 5, 2006, until January 24, 2012.

    Nosack was a telemarketer at a telemarketing company, called Vacation Max, which operated a timeshare resale scam. The company purported to be a Georgia corporation located in Delaware, but actually operated in Las Vegas, Nevada. The company falsely represented that they had found corporate buyers interested in acquiring blocks of timeshare units including the consumer's timeshare unit for purported business and tax purposes.

    The company solicited fees of up to several thousand dollars from each timeshare owner in purported pre-paid closing costs and related expenses. Like all such scams, none of the purported sales occurred and Vacation Max did not successfully sell any consumer’s timeshare interest except a relatively small number at fire sale prices.

    This prosecution is one of nearly 100 timeshare resale fraud prosecutions brought in the Southern District of Illinois over the past four years. The case is part of an ongoing investigation by the St. Louis Field Office of the Chicago Division of the United States Postal Inspection Service.

Monday, July 06, 2015

S. Jersey R/E Operator Cops Guilty Plea In Combined Foreclosure Rescue/Ponzi Scam; He Duped 25+ Unwitting Underwater Homeowners Into Signing Over & Vacating Their Homes, Then Pocketed Rents From Subsequent Tenants While Stiffing Bank On Mortgage Payments - All While Using Properties As Bait To Illicitly Reel In Over $3 Million In Investor Funds For Add'l Pocket Money

From the Office of the U.S. Attorney (Camden, New Jersey):
  • A Woolwich Township, New Jersey, man [] admitted scamming distressed homeowners into giving him their houses and then soliciting fake real estate investments from private investors – secured by those same properties – that netted him more than $3 million in illicit profits, U.S. Attorney Paul J. Fishman announced.

    Randy Poulson, 44, pleaded guilty before U.S. District Judge Renée Marie Bumb in Camden federal court to Count One of an indictment charging him with mail fraud.

    According to documents filed in this case and statements made in court:

    Poulson owned and operated Equity Capital Investments, LLC and Poulson Russo LLC and was the former president of the South Jersey Real Estate Investors Association. Paulson gave speeches, seminars, monthly dinners and various private tutorial sessions, purporting to teach real estate investing tips to individuals who paid fees to attend.

    Poulson engaged in a two-pronged scheme.

    First, he promised to pay the mortgages of distressed homeowners facing foreclosure if they sold their homes to him. Using this method, Poulson obtained the deeds to more than 25 distressed homeowners’ residences, causing them to vacate the homes so renters could move in.

    Afterwards, Poulson then stopped making the monthly mortgage payments, causing those mortgages to go into foreclosure without the distressed homeowners’ knowledge.

    In the second part of the scheme, Poulson solicited seminar attendees and other private investors to invest in Equity Capital Investments, which purportedly bought and sold real estate. Poulson told the investors that their money would be used to acquire and rehabilitate a property, which Poulson claimed he would rent out and then sell for a 10 to 20 percent return on the investment.

    The properties for which Poulson solicited the investments were those he acquired in the first part of the scheme. Although Poulson claimed that he would use funds to acquire and rehabilitate those properties, Poulson spent the money on personal expenses and to repay other investors.(1)

    As a result of the scheme, Poulson was able to fraudulently obtain more than $3 million from investors.
Source: Gloucester County, New Jersey Man Admits Operating Mortgage Foreclosure Rescue, Real Estate Ponzi Scheme.

For the indictment, see USA v. Poulson, and go here for the original Criminal Complaint.

(1) Using money raised from new investors to make lulling payments (ie. payments designed to dupe/lull investors into a false sense of confidence that their money had been used in legitimate, income-generating deals) to earlier investors in an attempt to avoid the detection or unraveling of this type of racket is the hallmark of a Ponzi scheme.

Office Temp For Lennar-Owned Title Company, Co-Conspirator Cop Pleas For Roles In Identity Theft Victimizing 250+ Would-Be Homeowners; Purloined Personal I.D. Information Scavenged From Escrow, Loan Documents Used To Obtain Credit Cards

From the Office of the U.S. Attorney (Los Angeles, California):
  • A brother and sister from the Inland Empire have pleaded guilty to federal charges of conspiring to steal identities of hundreds of would-be homeowners from North American Title Company and using those stolen identities to obtain credit cards from major national retailers.

    Charlie Rickie Jackson III, 43, of Corona, and Bridgette Lenet Jackson, 45, of Riverside, both pleaded guilty [] to conspiracy to commit access device fraud. Charlie Jackson also pled guilty to possession of 15 or more unauthorized access devices (credit cards).

    In late 2013, Bridgette Jackson was a temporary employee at North American Title Company’s office in Temecula, where she was responsible for processing escrow documents and copying loan documents. Simply put, Bridgette Jackson allowed Charlie Jackson to come and take documents from the office when no other employees were around. According to court documents, the Jacksons stole personal identifying information belonging to well over 250 would-be homebuyers that was found in the North American Title Company documents.

    Using the would-be homeowners’ personal identification information – including social security numbers, dates of birth, and bank account numbers – Charlie Jackson opened credit card accounts from major national retailers, and he used the unauthorized access devices to purchase goods online. Jackson then pawned the purchased items in exchange for cash, netting him tens of thousands of dollars.

    During the course of the investigation, Charlie Jackson twice was caught in possession of hundreds of stolen identities, according to his plea agreement. The first time, in February 2014, he had hundreds of title documents from North American Title Company, sensitive medical documents containing personal identifying information, and credit cards he opened in the names of victims. In July 2014 he was caught with scanned copies of the stolen North American Title Company documents as well as a spiral notebook with personal identification information of other victims.

    North American Title Company provides real estate settlement services and is a subsidiary of Lennar Homes, a national home builder. Lennar Homes has sustained thousands of dollars in losses due to the payout claims for victim homebuyers who experienced identity theft due to the breach of the secure documents.

    The Jacksons pleaded guilty [] before United States District Judge Jesus G. Bernal, who is scheduled to sentence both defendants on August 31.

Sunday, July 05, 2015

Philly Feds Bust Payday Lending Operator For Allegedly Charging Illegally High Interest Rates; Accused Of Using Federally-Insured Bank & Indian Tribe As Paid Cover In Attempt To Cloak His Outfit With Their Exemption/Immunity From State Usury Laws

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania) (via Public Citizen's Consumer Law & Policy Blog):
  • Adrian Rubin, 58, of Jenkintown, PA, has been charged with participation in a racketeering conspiracy for the operation of a “payday lending” business that allegedly violated the usury laws of Pennsylvania and other states, announced United States Attorney Zane David Memeger. Rubin is charged with one count of conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (“RICO”), one count of conspiracy to commit mail fraud and wire fraud, and two counts of mail fraud and aiding and abetting mail fraud. It was investigated by the FBI, the United States Postal Inspection Service, and IRS Criminal Investigations.

    According to the information unsealed [], between 1998 and 2012, Rubin owned, controlled, financed, and/or worked for multiple businesses that issued short-term loans, commonly known as “payday loans.” Rubin allegedly conspired with other people to evade state usury laws and other restrictions on payday loans by engaging in a series of deceptive business practices that included:

    (a) paying a federally-insured bank, which was not subject to state laws, to pretend that it was the payday lender;
    (b) relocating his operations to a state considered “usury friendly;” and
     (c) paying an Indian tribe to pretend that it was the actual payday lender as part of a scheme to have the tribe claim that “sovereign immunity” prevent application of state usury laws and other regulations.

    Rubin and his co-conspirators also allegedly went to great lengths to hide Rubin’s personal involvement in the payday lending business because he had a criminal record. It is further alleged that Rubin, with the knowledge of his co-conspirators, incorporated his payday businesses in the names of his father-in-law and a family friend and then forged the signatures of those people on company documents. In total, it is alleged that Rubin and his co-conspirators reaped tens of millions of dollars from the defendant’s payday lending activities, much of which stemmed from the collection of fees that were usurious in Pennsylvania and elsewhere.

    Pennsylvania law makes it a crime to collect interest, fees, and other charges associated with a loan at a rate in excess of 36 percent per year. Payday loans are short-term loans of relatively small amounts of money, usually a few hundred dollars, which borrowers promise to repay out of their next paycheck or regular income payment, such as a social security check. Some loans have finance charges or fees of between 10 and 30 percent of the amount borrowed. Given the short-term nature of these loans, those charges can translate to annual percentage rates of interest (“APR”s) of 260 to 780 percent.
Source: RICO Conspiracy Charged In Payday Lending Case.

For a recitation of the formal charges, see USA v. Rubin.

Heads Of Philadelphia-Area Usurious Lending & Wagering Enterprise Get Stiff Sentences; Use Of 'Arm-Twisting' & 'Leg-Breaking' Threats To Enforce High-Interest Street Loans Among Milder Forms Of 'Self-Help Remedies' Employed To Squeeze Hapless Debtors; Seven Others Await Sentencing

From the U.S. Department of Justice (Washington, D.C.):
  • The leaders of a violent loan sharking and illegal gambling ring that operated out of several Philadelphia businesses were sentenced [] to serve 168 months and 147 months in prison, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania.

    Ylli Gjeli, 49, and Fatimir Mustafaraj, also known as Tony, 42, both of Philadelphia, were previously convicted following a six-week jury trial of engaging in a racketeering conspiracy, collection of unlawful debts, extortion and illegal gambling. Two other defendants were convicted of various related charges in the same trial and are scheduled to be sentenced at a later date. ...

    According to evidence presented at trial, the defendants’ enterprise used businesses in Philadelphia, including the Lion Bar & Grill, Blackbird Café and Ylli’s 2 Brothers, to conduct the illegal loan sharking and gambling activities. The enterprise generated money by making and collecting on loans with usurious rates of interest, and making loans to customers whose debts were incurred through the enterprise’s illegal gambling business. The evidence established that from October 2011 to 2013 alone, the enterprise extended 125 usurious loans totaling $1.78 million with annual interest rates ranging from 104 percent to 395 percent. Further, the evidence established that from February 2007 to August 2013, the organization’s online sports betting website contributed more than $2.9 million in gross profits.

    The evidence showed that members and associates of the enterprise cultivated their reputations within the organization by threatening customers with dangerous weapons such as firearms and a hatchet, threatening to kill, assault or “break the legs” of delinquent customers if they did not pay their debts, and physically assaulting subordinate members and associates who stole from the organization.

    According to the evidence presented at trial, Gjeli was a “boss” of the multi-million dollar criminal organization. Mustafaraj served as “muscle” to forcefully collect debts owed to the organization.


    The evidence also demonstrated that the defendants attempted to conceal the existence and operations of the enterprise from law enforcement by limiting their discussions of criminal activities when on the phone, using cryptic and coded language to describe criminal activities, conducting pat-downs and body searches of customers to check for weapons and recording devices, and conducting the enterprise’s transactions primarily in cash.

    Five co-defendants who previously pleaded guilty are awaiting sentencing.

Pair Cop Guilty Pleas For Roles In Bogus Debt Relief Outfit That Purported To Be Nationwide Law Firm, Scamming Victims Out Of 1st Six Months Of Payments As Undisclosed Upfront Fees; Three Other Co-Conspirators Await Trial On 22-Count Indictment

From the U.S. Department of Justice (Washington, D.C.):
  • Two individuals pleaded guilty [] for their roles at fraudulent debt relief services companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service (USPIS) announced.

    Athena Maldonado, 30, and Christopher Harati, 31, both of Orange County, California, pleaded guilty to a one-count information alleging conspiracy in connection with debt relief companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).

    According to the information filed in the case, the defendants and their co-conspirators portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors. Clients made monthly payments expecting the money to go toward settlements. The companies instead took an amount equal to at least 15 percent of clients’ total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees.


    Maldonado admitted that she acted as the “legal department” for both companies, and used multiple aliases when responding to complaints submitted by state attorney general offices, the Better Business Bureau and private attorneys. Maldonado admitted that, after Nelson Gamble changed its name to Jackson Hunter, she responded to consumer complaints by falsely stating, among other things, that the two companies were not related and that Jackson Hunter could not refund money paid to Nelson Gamble.

    Harati admitted that he worked as a client relations manager for the companies and handled complaint calls from clients. He admitted he told customers that Nelson Gamble and Jackson Hunter were separate companies, falsely stated that Jackson Hunter was a nationwide law firm with years of experience and made other misrepresentations designed to convince customers to stay with the company.


    On Dec. 3, 2014, a grand jury in Santa Ana, California, returned a 22-count indictment charging Jeremy Nelson, Elias Ponce and John Vartanian, all of Orange County, for mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in the same fraudulent scheme. The trial in that case is scheduled to begin on Feb. 16, 2016, in Los Angeles.