Saturday, January 09, 2016

Businessman Fleeced Of Over $300,000 By Now-Disbarred Lawyer Obtains Some Relief, Collects $175K From State Attorney Ripoff Reimbursement Fund

In New Haven, Connecticut, The Connecticut Law Tribune reports:
  • A longtime former attorney who recently completed a two-year prison sentence for a larceny conviction is the subject of a new disciplinary action.

    The state Office of Chief Disciplinary Counsel recently filed a presentment in Superior Court in New Haven against Benson A. Snaider, 78, of Stratford, accusing him of misconduct. A hearing is scheduled for Feb. 25.

    Snaider was a New Haven-based lawyer who frequently handled land use cases. A prior disciplinary action resulted in Snaider being barred from applying for readmission to the bar for 12 years, or until 2025.

    One count of the latest presentment stems from Snaider's representation of former client Jonathan Zuckerman's company, Phoenix Housing of Shelton LLC, in a civil action arising from an eminent domain case involving the city of Shelton, court documents show.

    Around December 2007, a check for $175,000 was made payable to Phoenix Housing and Snaider, according to the presentment, which was filed in November.

    Snaider deposited the money into his Citizen's Bank escrow account and then in November 2011, he admitted to Zuckerman that he had spent the money, the presentment alleges. The state Client Security Fund has paid $175,000 to Zuckerman on this claim,(1) the presentment states.

    "(Snaider) has committed professional misconduct in that he has misappropriated client funds for his own personal use," the presentment alleges.

    In a separate count, the presentment also claims misconduct in Snaider's representation of another Zuckerman company, Shelton Yacht & Cabana Club Inc. Snaider put $220,000 in two escrow accounts in connection with civil litigation filed against Shelton Yacht by David Boyarsky and Precision Mechanical Services Inc.

    In December 2004, the court awarded Precision $47,806. In May 2009, the Boyarsky case settled for $77,500. The award and settlement totaled $125,306.

    According to the presentment, Snaider still owes Zuckerman the balance between the $220,000 and the $125,306, or $94,694.
For more, see Former Attorney Hit With New Disciplinary Action.
(1) The Client Security Fund is a fund established by the rules of the Connecticut Superior Court to provide reimbursement to individuals who have lost money or property as a result of the dishonest conduct of an attorney practicing law in the State of Connecticut, in the course of the attorney-client relationship. The fund provides a remedy for clients who are unable to obtain reimbursement for their loss from any other source.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Despite Lack Of Dishonest Motive, Florida Supremes Discipline Two Attorneys For Their Sloppy Handling Of Their Clients' Money

The Florida Bar, the state's guardian for the integrity of the legal profession, recently announced that the Florida Supreme Court in recent court orders disciplined 15 attorneys – permanently disbarring one attorney, revoking the license of one attorney, suspending eight attorneys and publicly reprimanding six. Four attorneys received more than one form of discipline.

Among those disciplined were the following two lawyers (one was hammered; the other got his hand slapped) who received discipline for the sloppy handling of their clients' money, despite a lack of a dishonest motive, according to the respective consent judgments:
  • John Richard Geiger, suspended for 45 days effective 30 days from a Nov. 5 court order. Further, Geiger is placed on probation for two years. (Admitted to practice: 1994) A Bar audit found that Geiger was not in substantial compliance with Bar rules governing trust account [Editor's Note: in connection with the investigation, the Bar requested "trust records including bank statements, deposit slips, canceled checks (front and back), journals, ledger cards, monthly comparisons, and reconciliations, as well as other supporting documentation for the period March 1, 2009 to February 23, 2015." ]. At times during the audit period, Geiger improperly commingled his trust funds with personal funds. (Case No. SC15-1886)

    Richard Sam Lehman, to be publicly reprimanded following an Oct. 22 court order. (Admitted to practice: 1969) Lehman commingled funds. While acting as ancillary personal representative for a deceased client, he withdrew funds from the client’s estate account and transferred them into his operating account. Lehman then used the funds to pay the estate expenses from his operating account, thus violating Bar rules. (Case No. SC15-1011)
For the entire gossip sheet, see Supreme Court Disciplines 15 Attorneys.

Ind. Supremes Disbar Lying, Thieving, Out-Of-Control Attorney; Among Bad Acts: $150K Client Trust Account Heist; Refusal To Refund Unearned Fees, Intimidating/Retaliatory Conduct; Told Staff To Inflate Billable Hours; Ex-Office Manager Blows Whistle To Disciplinary Commission After Lawyer Brandished Gun While Firing Her; Court: "The Seriousness, Scope, & Sheer Brazenness Of [His] Misconduct Is Outrageous!"

In Indianapolis, Indiana, the Indianapolis Business Journal reports:
  • An Indianapolis lawyer has been disbarred for stealing about $150,000 from his clients, “disclosing client confidences for purposes of both retaliation and amusement, threatening and intimidating his office staff (and) lying pervasively to all comers,” according to the Indiana Supreme Court.

    David J. Steele had been under emergency interim suspension since Sept. 4, when he tendered an affidavit consenting to discipline for eight counts alleging violations of rules of professional conduct. In a court opinion issued [last month], justices adopted the allegations in the Disciplinary Commission’s complaint and concluded "without hesitation that (Steele) should be disbarred.”

    Steele operated Steele Legal Group LLC, a family law practice with an office at Keystone at the Crossing. He had been licensed to practice since 2003 and had no prior disciplinary history.

    The court identified 16 rule violations from charging an unreasonable fee to lying to the commission. Aside from cheating clients, justices wrote Steele brandished a gun while he fired an office manager about whom he concocted wild stories concerning the staff member’s sexual orientation.

    The seriousness, scope, and sheer brazenness of (Steele)’s misconduct is outrageous," justices wrote. "He stole approximately $150,000 from his clients, threatened and intimidated his staff, disparaged and mocked virtually everyone around him, lied to all comers, and obstructed the commission’s investigation. Perhaps most disturbingly, (Steele) repeatedly and fundamentally breached the duty of confidentiality that lies at the heart of the attorney-client relationship.”

    The court found Steele misappropriated the client funds from his attorney trust account. He “redirected most of these unearned fees into his personal or operating account although he sometimes ‘peel(ed) off a few hundred dollars’ to give to his employees as a ‘spot bonus.’”

    Steele also typically charged clients a deposit of $2,500 to $3,500 at the beginning of a representation, then “vigorously enforced” non-refundable fee provisions. He “instructed his office staff to inflate billable hours and rates by a variety of means,” justices wrote.

    Numerous clients requested refunds of unearned fees,” the opinion says, “which (Steele) was unable to provide because he had stolen virtually all the funds contained within his trust account.”(1) In other cases, Steele refunded portions of client fees with advance payments collected from other clients.

    Much of the evidence against Steele came from his office manager, referred to in the opinion as JD.

    Steele “attempted to persuade JD and others to go along with these practices and frequently reminded JD that (Steele) had fired the prior office manager when that person had questioned” his unethical conduct.

    Steele fired JD after just two and a half months, at which time JD reported his former boss to the Disciplinary Commission. Steele retaliated in threatening texts, including one in which he wrote, “No one will ever hire you if (I) get disbarred for something you told them. You think lawyers want someone in their office who tried to get their last boss disbarred?”

    Justices wrote Steele also lied to the commission by telling them JD was fired for having sex with another man in the office and for using “the firm’s website to post disparaging comments about the gay community."

    “Additionally, (Steele) brandished a handgun when he terminated JD’s employment, and … instructed an associate attorney who witnessed this incident to lie about this fact to the commission,” the order says.

    Steele also told his staff to “lie to all comers” about his whereabouts and other matters, justices wrote, including falsely telling opposing counsel he was in a hospital waiting room watching a loved one die of cancer or that his dog had just died.

    “Respondent made false statements to the commission during its investigation that, by (Steele's) own description, were ‘virtually pathological in frequency and scope,’” justices wrote.

    In other counts, Steele was found to have incentivized positive client reviews on his profile and punished people who posted negative reviews by disclosing confidential information. He is also accused of recording conversations of clients and potential clients for his amusement, sharing them with staff and relatives.

    He “openly mocked these recorded individuals in his conversations with others and in a meeting with the commission,” the opinion says.
Source: Justices disbar lawyer for $150K theft, other misconduct.

For the Indiana Supreme Court ruling disbarring this attorney, see In re David J. Steele, No. 49S00-1509-DI-527 (Ind. December 1, 2015).
(1) Clients found to have been victimized by a theft by an Indiana attorney may be able to seek some reimbursement for being screwed over by turning to the Clients’ Financial Assistance Fund of the Indiana State Bar Association, which manages and distribute money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.
For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Ill. Attorney Disciplinary System Recommends Minimum 6-Month Bar Ticket Suspension For Lawyer Who (Among Other Things) Screwed Over Two Homeowners Seeking Help Avoiding Foreclosure; Suspension To Run Indefinitely Until $2K In Unearned Fees Returned To One Client; State Supremes To Have Final Say

In Chicago, Illinois, the Chicago Daily Law Bulletin reports:
  • A lawyer accused of neglecting legal matters and accepting unearned fees should be suspended for six months and have to repay the fees, a lawyer-discipline review panel urged.

    The Illinois Attorney Registration & Disciplinary Commission Review Board’s report filed earlier this month affirms a Hearing Board report that recommended Forest Park attorney Joseph P. Harris receive a half-year suspension and remain suspended until he repays a client $2,000 in unearned legal fees from a mortgage modification that never happened.

    Harris, 80, a lawyer since 1965 who was previously disciplined after committing perjury in 1999, did not challenge the alleged misconduct during his hearing in August 2014.
    In a 2011 case, Patricia Banks retained Harris to modify her mortgages on a home and two investment properties she and her husband owned. Upon receiving forensic audits from Banks to identify whether any errors existed in the mortgages, Harris suggested the reports provided a basis to seek modifications.

    Banks paid Harris $3,000 to perform the suggested work. However, Harris failed to take any “meaningful action” on Banks’ behalf, the hearing board found, and failed to take or return any of her phone calls.

    Harris later testified that he learned Banks’ investment properties weren’t eligible for modification because they were commercial. He also conceded he owed Banks a $2,000 refund but had not made any payments as of his hearing date.

    In yet another case, in February 2012, Harris agreed to represent Carolyn Whitehurst in a foreclosure action but failed to file an appearance or answer in the matter until September 2012. During that time gap, a notice of sale was issued, the court granted a motion approving the sale and entered an order for possession of Whitehurst’s property.

    Whitehurst learned Harris failed to make appearances in her case when she came to court in mid-September 2012, when she received a notice that the sheriff’s office sought to enforce the possession order.

    She tried to reach Harris about the matter but failed. He filed a motion about a week later to stay the court’s orders, but the court denied the motion.
    ARDC hearing boards act as trial courts in the attorney disciplinary process, while the review board functions as an appellate tribunal. The Illinois Supreme Court has the final say in most disciplinary cases.

    Both sides have until Jan. 22 to file exceptions on the matter, In re Joseph Preston Harris, 2013 PR 00114.

Friday, January 08, 2016

Atlanta-Area Foreclosure Bid-Rigging Racket: Feds Say Auctioneers Conducting Sales Facilitated Scam In Many Instances; Non-Judicial Sale Process In Georgia = No Court Supervision

In Atlanta, Georgia, the Atlanta Journal Constitution reports:
  • An ongoing federal investigation has nabbed two more local real estate investors who rigged bids at foreclosure auctions here. Paul Chen was part of a ring of conspirators in Fulton County, while Ira Eisenberg was part of a DeKalb County ring, the Justice Department says.

    About a dozen people here have been convicted in local schemes, which went on for years. But so far, apparently all those convicted were buyers – not those “criers” who conduct the sales on behalf of the mortgage holder.

    One of the men who pleaded guilty in a Gwinnett County bid-rigging scheme suggests that “criers” at least knew about bid-rigging. Kevin Shin told the court that after attending a number of auctions, he noticed that a group of purchasers he called insiders seemed to know one another and the criers conducting the auctions. That group seemed to control who won many of the auctions, and then would reconvene on the side afterward and hold a second auction amongst themselves.

    The criers facilitated this in many instances by allowing an insider to attend these second auctions rather than immediately paying for the property” as others were required to do, according to a sentencing memorandum for Shin. Frustrated by the process, eventually Shin accepted the invitation of an insider to participate in the second auction. In November, he was sentenced to 45 days in federal prison.

    Some critics have told Watchdog that the foreclosure auction process in Georgia needs an overhaul to prevent abuse. Sales are conducted on the courthouse steps, which were crowded with bidders after the real estate crash. But multiple sales by multiple parties can occur simultaneously, making it difficult for anyone to figure out what’s going on. There is no court supervision, because Georgia has a nonjudicial foreclosure process.

Already Serving Four Years In Federal Pen For Pocketing Palm Grease, Ex-Judge To Now Take 'No Contest' Plea To Unloading Home Belonging To Deceased Stepmom, Using Contract For Deed To Collect Monthly Payments While Failing To Pay Existing Mortgage, Leaving Unwitting Buyer-Couple Facing Foreclosure After Having Made At Least $20K In Payments

In Las Cruces, New Mexico, KVIA-TV Channel 7 reports:
  • Former El Paso County Judge Anthony Cobos is expected to plead "no contest" to fraud charges stemming from the sale of property to a Chaparral couple.

    According to a complaint affidavit, Cobos sold the couple property that belonged to his deceased stepmother.

    The couple made monthly mortgage payments totaling $20,000 or more to Cobos, who allegedly stopped paying his mortgage on the property. It wasn't until the couple got a foreclosure notice on the home that they suspected they were possible victims of fraud.

    Cobos, who is already serving a four-year federal prison sentence after admitting he accepted a bribe when he was county judge, originally pleaded not guilty to these new fraud charges.

    According to a spokesperson with Judge Marci Beyer's office, Cobos will plead no contest to a second-degree felony count of fraud over $20,000 with a possible maximum sentence of nine years in state prison.

    Cobos was in district court this morning for a pretrial status conference. A no contest plea is legally the same as a guilty plea, only it can't be used as evidence against him in a civil trial.
Source: Cobos to plead 'no contest' to fraud charges in Las Cruces (Ex-county judge allegedly sold deceased stepmother's land, stopped paying mortgage).

After Already Coughing Up $2 Billion, JP Morgan Chase Gets Clipped By Banking Feds For An Additional $48 Million For Its Dubious Loan Servicing Practices That Screwed Over Homeowners In Foreclosure

The New York Times reports:
  • JPMorgan Chase will pay an additional $48 million to settle remaining issues stemming from missteps in its handling of mortgage servicing accounts after the 2008 financial crisis.

    The bank already paid $2 billion in a 2013 settlement with the Office of the Comptroller of the Currency, but did not meet all the obligations of that earlier settlement. The new penalty, announced by the regulator on Tuesday, resolved remaining problems.

    Several other banks have been forced to clean up their mortgage servicing processes under orders by regulators last year because they also had failed to meet the terms of that 2013 settlement, which ultimately included 15 banks that paid about $11 billion.

    Other banks that have resolved issues and are no longer subject to regulator-imposed restrictions on their servicing activities include Bank of America, Citibank, PNC, One West and EverBank. In EverBank’s settlement, also announced on Tuesday, it will pay $1 million.

    Four banks remain under restrictions until they fix lingering issues, including HSBC Bank USA, Santander Bank, U.S. Bank and Wells Fargo.

    A JPMorgan spokeswoman said, “Our mortgage employees have worked very hard over the last several years to make changes that will further enhance the customer experience and we’re pleased by the outcome of the O.C.C.’s assessment of our work.”

    Big mortgage servicers had gotten into trouble for mishandling loan processing, including using so-called robo-signing to endorse foreclosure affidavits. JPMorgan had been scrutinized for inaccurate payment change notices, untimely filings and inaccurate credentials on those filings.

    The comptroller office said that from December 2011 to November 2013, JPMorgan’s payment change notices in bankruptcy court didn’t comply with bankruptcy rules and were “unsafe or unsound” banking practices.

BC Court Of Appeal Leaves Lender Holding The Bag In Homeowner Refinance Transaction, Saying It Bears The Loss Where Notary/Escrow Agent Absconded With Proceeds

In Vancouver, British Columbia, The Vancouver Sun reports:
  • A lawsuit that resulted from an $8-million notary fraud case is rippling through B.C.’s legal community over the question of whether it sets a precedent in trust relationships between parties in real estate transactions.

    In the case, Hsui-Wen Lin and Min Sheng Tang hired notary Agatha Chung in 2013 to handle a refinancing of the mortgage on their home.

    According to court documents, Lin and Tang sought financing from CIBC, which hired its own notary, Timothy Ko, to handle its half of the transaction.

    However, when Chung disappeared with the money forwarded to her to pay out the previous mortgage, along with more than $8 million from 41 other clients, it touched off a legal battle over who holds the loss, Lin and Tan as borrowers, or their lender, CIBC, and whose insurance should cover it.

    On Dec. 18, the B.C. Court of Appeal upheld the trial decision of B.C. Supreme Court Judge John Steeves that the loss belonged to CIBC.

    His ruling was that since Lin and Tan hadn’t received the benefit of mortgage money that had been forwarded to Chung, the bank still “owned” the funds and the mortgage was void, although the notary had completed all the other necessary steps in the transaction.

    Now, lawyers in real estate practice argue that the decision could have wider repercussions if they can’t rely on the undertakings that professionals make to one another to establish liability.

    “We have a system in place for dealing with undertakings to rely on (property) title in either mortgaging real property or transferring real property,” said property lawyer Brent Clark.

    “And what the court’s done is sort of turn that upside down and said, ‘You can’t rely on that system anymore’,” said Clark, a partner in the commercial lending practice at the firm Miller Thomson.

    Clark wasn’t a party to this dispute, which is referred to in court documents as Lin v. CIBC, but as counsel who often represents lenders, he said that upon reading the decision he and many of his peers are rethinking how they should fund mortgages.

    “It’s uncertain what we’ll have to do to avoid this risk,” Clark said.

    The lawyer for Lin, however, argued the case was a matter of determining from whom the funds had been stolen, and it doesn’t represent a wider precedent.

    “It was a property question,” said Karen Carteri, a lawyer with the firm McMillan LLP in Vancouver.

    In an interview Tuesday, she said this case is an aberration to the usual relationship between parties in a transaction.

    “Normally, these promises and undertakings are central to transactions and can be trusted,” she said. “Here, the undertaking failed.”

    In the case, notaries Ko and Chung completed the required documents for the $520,000 new mortgage from CIBC and Ko forwarded funds to Chung’s notary practice trust account with an undertaking that she would pay out Lin’s previous mortgage with Scotiabank, putting the CIBC loan with first claim on the home’s property title.

    Chung, however, disappeared along with the money before the process was complete.

    The CIBC mortgage was registered on Lin’s property title second to the Scotiabank mortgage, and they continued paying off both loans.

    In May of 2014, Lin filed suit in B.C. Supreme Court and won a civil claim on the argument that property law applied to the case, which meant it was a matter of determining who owned the money at the time it disappeared to establish the loss.

    CIBC appealed the decision, however, arguing it was an error to decide the case under property law instead of agency law and determining whether the borrowers held liable for the actions of Chung.

    After the fact, Clark wonders why the Society of Notaries Public(1) hasn’t stepped in to cover the loss, and is considering insisting on dealing just with lawyers on transactions in the future.

    “Which would be bad for the notaries,” he said.

    However, the lawyer for the notaries argued that Lin v. CIBC is not unique to notaries and its circumstances would have applied equally if lawyers were involved.

    To date, the society has paid out $8.6 million in the case, said Ron Usher, general counsel to the society, and no innocent party in the case will be stuck with a loss.
Source: Notary fraud case causing legal waves in B.C. courts.

For the British Columbia Court of Appeal ruling, see in Lin v. CIBC Mortgages Inc., 2015 BCCA 518 (December 18, 2015).
(1) Apparently, the position of Notary in the Canadian province of British Columbia is unique in North America, whereby it is considered as a member of one of the branches of the legal profession and is sanctioned and safeguarded by law, providing non-contentious legal services to the public. Reportedly, the professional work of a British Columbia Notary is covered by an insurance plan that protects the public.

Thursday, January 07, 2016

Antitrust Feds Bag Owner Of Heir Locator Service For Price-Fixing Violations; Admits To Collusion w/ Another Outfit To Eliminate Competition For Business Of Locating Inheritance-Entitled People Having A Relative Who Died Without A Will

From the U.S. Department of Justice (Washington, D.C.):
  • The president and CEO of a California-based heir location services provider and his firm have agreed to plead guilty to allocating customers with another heir location firm, announced Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.

    Bradley N. Davis, president of Brandenburger & Davis, and his firm will plead guilty to conspiring between 2003 and 2012 to eliminate competition in the heir location services industry. Heir location services firms identify people who may be entitled to an inheritance from the estate of a relative who died without a will. The heir location services firms then help heirs secure their inheritances in exchange for a contingency fee paid out of the inheritances they are due to receive.

    The defendants conspired for nearly a decade to enrich themselves at the expense of beneficiaries,” said Assistant Attorney General Baer. “Heirs of relatives who died without a will deserve better. Working with the FBI and our other law enforcement partners, the Antitrust Division will continue to hold the leaders of companies that corrupt the competitive process accountable for their crimes.”

    Brandenburger & Davis has agreed to pay an $890,000 criminal fine for its role in the conspiracy. In a separate plea agreement, Davis and the Antitrust Division have jointly agreed to allow the court to determine an appropriate criminal sentence. In addition, both the company and Davis have agreed to assist the government in its investigation. The charge was filed [] in the U.S. District Court of the Northern District of Illinois. The terms of the plea agreements are subject to approval of the court.

    [This] charge is the first to result from an ongoing federal antitrust investigation into customer allocation, price fixing, bid rigging and other anticompetitive conduct in the heir location services industry, being conducted by the Antitrust Division’s Chicago Office and the FBI’s Salt Lake City Division, with assistance from the U.S. Attorney’s Office of the Northern District of Illinois.

    Anyone with information concerning the focus of this investigation should contact the Antitrust Division’s Chicago Office at 312-984-7200, visit or call the FBI’s Salt Lake City office at 801-579-1400.
Source: First Charges Brought in Investigation of Collusion Among Heir Location Services Firms (President and Company to Plead Guilty for Agreeing Not to Compete).

Debt Vulture vs. Debt Vulture: Delinquent Mortgage-Buying Bankster Sues Delinquent HOA Fees-Buying Funding Company, Accusing It Of Same Conduct Homeowners Generally Accuse Both Of Engaging In: Giving Its Victims The 'Illegal Squeeze'

In Tampa, Florida, Legal Newsline reports:
  • A full-service bank has filed a class action lawsuit against a specialty financing company that buys delinquent receivable accounts from condominium and homeowners associations, alleging the company’s practices are illegal.

    Plaintiff Wilmington Savings Fund Society, FSB, as trustee of the Primestar-H Fund 1 Trust, sued Business Law Group PA, or BLG; LM Funding LLC, or LMF; and Bruce Rodgers, who is set to become chairman of the board and CEO of LM Funding America Inc. and will remain a substantial stock owner after the company goes public.

    Wilmington Savings filed its class action in a Florida circuit court Oct. 28.

    The bank, which does business in Hillsborough County and in the state of Florida, purchases notes and mortgages securing residential properties in the state. According to the bank’s lawsuit, it then improves and sells the residential properties.

    Plaintiff is in the business of purchasing distressed assets, which include the notes and mortgages on properties either in default or currently in foreclosure,” the lawsuit states. “Plaintiff then receives an assignment of the note and mortgage and prosecutes the foreclosure action.”

    LMF, which is based in Hillsborough County along with the other defendants, buys delinquent receivable accounts from condominium and homeowners associations.

    A delinquent account occurs when an owner within an association fails to pay the monthly assessments required for membership. In exchange for funding each of its association clients, LMF receives an assignment of the delinquent receivable, which includes rights to collect the receivable and which is secured by a super priority lien against the unit or parcel.

    According to Wilmington Savings’ complaint, LMF earns most of its revenue by collecting or recovering the interest, late charges and fees on the outstanding assessments, rather than the outstanding assessments themselves.

    In Florida, condominium and homeowners associations are governed by state statutes, which grant particular protections to first mortgagees and their successors and assignees who obtain a judgment of foreclosure against an association member who defaulted on his or her mortgage and assessments.

    Specifically, even though an association’s lien is generally superior to a first mortgage, state statutes limit a first mortgagee’s or its successors’ or assignees’ liability to an association to an amount known as the “safe harbor.”

    “Despite their knowledge of the ‘safe harbor’ limitation, Defendants, as a matter of course and consistent with their business model, demand sums in excess of the ‘safe harbor’ from first mortgagees and their successors and assignees,” Wilmington Savings alleges in its 24-page complaint.

    The defendants’ practice essentially holds first mortgagees and their successors and assignees “hostage” because they cannot obtain clear title and dispose of a property until they satisfy the association’s lien, the bank contends.

    “Defendants’ practice is ‘illegal’ and results in Defendants being ‘unjustly enriched’ at the expense of first mortgagees and their successors and assignees,” Wilmington Savings alleges.

    The proposed class is defined as follows:

    “All first mortgagees and their successors or assignees who joined an LMF Association client in a foreclosure action in Florida, obtained title to the property at issue through a foreclosure judgment or deed in lieu of foreclosure, and to whom BLG, on behalf an LMF Association client, provided an estoppel certificate claiming entitlement to more than the limit” provided by two sections of Florida statutes, on or after Oct. 28, 2011.

    Wilmington Savings, in its complaint, says the exact number of class members is unknown at this time; however, there are “likely hundreds or perhaps thousands” that fit the proposed definition of the class.

    The proposed class seeks to enjoin the defendants’ practice and recover damages sustained as a result.

    Kenneth G. Turkel and Brad F. Barrios of Bajo Cuva Cohen Turkel in Tampa and J. Daniel Clark of Clark & Martino PA, also in Tampa, are representing Wilmington Savings.

    Earlier this month, the defendants filed a notice of removal in the U.S. District Court for the Middle District of Florida, Tampa Division.

    In their seven-page notice, filed Dec. 10, they argue the federal court is the more appropriate venue because: 1) the number of members of the proposed plaintiff class is more than 100; 2) at least one member of the proposed plaintiff class is a citizen of a state different from at least one of the defendants; and 3) the matter in controversy exceeds the sum or value of $5 million, exclusive of interest and costs.

    Tampa-area law firm Trenam Kemker Scharf Barkin Frye O’Neill & Mullis PA is representing the defendants.

After Snitching On Landlord For Peddling Apartments As 'Night-To-Night' Rentals On Airbnb, Long-Time (25-Years) Tenant Gets Hit w/ Eviction Notice When Responding City Inspectors Discover That Entire Premises, Once A 4-Family Home, Had Been Illegally 'Bootlegged' Into 8-Unit Building

In Los Angeles, California, the Los Angeles Times reports:
  • Worried that their new landlord was trying to turn their Venice apartment building into a kind of illegal hotel, Phyllis Murphy and her neighbors wrote a letter to city officials.

    The residents complained that some of the units were being rented out to tourists for short stays, bringing a revolving door of strangers into the complex on a tranquil stretch of Third Avenue. Murphy said her landlord once asked her, not-so-subtly, what it would take to get her out of the building.

    The landlord denies saying that. He also said that a tenant, not he, was responsible for the rentals. But the city housing department nonetheless ordered him to make sure they came to a halt.

    So it was a shock when Murphy — a plucky 67-year-old with reddish hair and an easy laugh — abruptly found herself facing eviction.

    City inspectors said they spotted the rentals that bothered Murphy. But they also concluded that only four of the eight units in the building had been legally permitted, according to city documents.

    Elena Popp, executive director of the Eviction Defense Network, a nonprofit law firm that assists tenants, says it is a scenario she has seen before in a city rife with illegal housing: A renter has a complaint. She goes to the city for help. But when city inspectors come calling, they find that the apartment itself is illegal. And that ultimately means tenants can be booted out.

    More than 1,700 such "bootlegged" apartments have been shut down in the wake of city inspections since 2010, according to the housing department. Many are discovered through routine inspections of rental housing, but they can also be detected when city inspectors react to complaints about an apartment being used for an illegal purpose, like the one that Murphy and her neighbors lodged with the city.

    In a bid to save some of those units, Councilman Felipe Fuentes has proposed an amnesty for illegal units that meet safety standards, one that would relax other city requirements that often block legalization in exchange for creating affordable housing. That idea has united both tenant and landlord groups, but the proposal still must be vetted by city lawmakers.

    In the meantime, city officials say landlords can either try to legalize bootlegged units or simply shutter them and evict tenants.

    Murphy said she first realized what was happening when paperwork from the city housing department arrived in the mail, offering her help with her upcoming move.

    "The housing department is supposed to be maintaining affordable housing," Murphy said one Sunday afternoon at her apartment, just a few days before her scheduled eviction date. "And instead, they're making four less apartments here — and they're allowing Airbnb."
    Before the tenants asked the city for help, inspectors had never spotted any problem with extra units in their apartment building.

    Housing officials say that the building had been inspected before, but they don't check a building's original paperwork during those routine inspections unless something makes them suspicious. After the residents raised concerns about illegal rentals, the department took a look at its files. City inspectors say four apartments at the Venice building were converted into eight by walling off bedrooms.
    Murphy decided to stay and fight. Her unit was not one of the ones that were specifically deemed illegal by the city. [Amanda] Seward, her attorney, eventually persuaded the housing department to rescind its approval for two of the evictions, including the one facing Murphy. But by then, Seward and Murphy said, the other tenants whose eviction had been rescinded had already moved out.
    Now Murphy is the only tenant remaining at the apartment building. She was grateful that her attorney had helped her stay in her beloved bit of Venice, but frustrated that her call to the city had ended up putting her through a legal odyssey and "an emotional roller coaster." Seward said it was "shocking" that the city hadn't cracked down on night-to-night rentals, yet insisted on enforcing the rules on illegal yet habitable units.

    "It's a cautionary tale," Seward said. "Now when people call me and ask, 'Should I report this to the city?' I hesitate. I have to wonder how much help they're going to get."

Could Detroit's Ambitious Blighted Home Demolition Project Be Creating Health Hazard From Uncontrolled Toxic Lead Dust From Old Paint? Some Say Contractors Fail To Follow Agreed-Upon Procedures; Some Residents Say The Place Is A Mess!

In Detroit, Michigan, the Detroit Free Press reports:
  • Detroit’s ambitious demolition program, which has been razing thousands of unsightly and unsafe houses and other structures per year to fanfare and criticism, may be replacing one danger in neighborhoods with another: toxic clouds of lead dust from old paint.

    The city, which already has one of the country's worst rates of blood-lead poisoning in children, also has some of the oldest housing stock of any major U.S. city. And most of the houses being taken down contain lead-based paint, which the nation banned in 1978.

    Scientific study of similar, smaller housing demolition projects in Chicago and other cities shows the potential for debris and dust clouds containing elevated levels of lead particulates to spread up to 400 feet from demolition sites, depending on the steps taken to contain it and on the weather.

    Detroit officials have made blighted-house demolition a centerpiece of the city’s resurgence, and cite safer, better neighborhoods with increasing home values as a result. Mayor Mike Duggan in October said rising per-house demolition costs partly are a result of the environmental safeguards his administration added to the process.

    But the Free Press found multiple instances of contractors not following contract specifications designed to protect the public and the environment, such as failing to adequately wet houses and debris during demolition and removal to reduce dust; failing to remove debris promptly, and failing to notify those living near the projects and provide them with lead-safety recommendations.

    Even if demolitions followed city specifications perfectly, scientific studies show those methods still cause lead dust to spread from a demolition site. And the huge scale of Detroit’s demolitions, combined with construction crews failing to use the strictest standards to control lead dust, is likely spreading unsafe levels of toxic metal across neighbors’ yards — and, in some areas, into parks, playgrounds and other public places — based on the results of scientific research elsewhere.
    Terms made, then broken

    Detroit officials worked with the Environmental Protection Agency and the Michigan Department of Environmental Quality on developing a plan to control dust during house demolitions. They agreed to wet a house with a hose as it is demolished, then spray water on the building debris as it’s loaded out. Called “wet-wet demolition” because of its watering during both processes, the method significantly reduces — but does not eliminate — the spread of lead paint dust contamination, according to scientific studies.

    The EPA endorses the process. “We feel fairly comfortable with the process the city is currently using for the demolition activities,” said Rick Karl, director of EPA’s Superfund program for the agency’s region that includes Michigan.

    But the problem is not all contractors are following the process.

    Despite contracts requiring removal of debris within 48 hours, at many sites, it has remained piled for days or weeks and becomes sun-dried, with dust allowed to scatter to the wind.

    Yetivia Adams said she was “ecstatic” that the city razed blighted houses on either side of her home on Lee Place in late May.

    “One was burned out,” she said. “They were falling down, dangerous.”

    The debris from the demolished house on one side was picked up within a day. But the dusty materials from the razed house on the other side of Adams’ home sat in a huge pile behind an orange, synthetic fence for weeks, less than 10 feet from her house.

    I can’t even come outside,” said Adams, 58, who along with her husband, Robert, is a retiree. “It’s getting all on my porch. I thought once they tore it down, they would come and get it.”

    The debris pile was finally removed June 24 — exactly a month after demolition — after the Detroit Building Authority, which is spearheading blighted-home razing in the city, learned Adams had spoken with the Free Press, authority spokesman Craig Fahle confirmed.

    “The 30 days was completely unacceptable,” Farkas said. “We’ve suspended contractors for being out of spec,” he said, referring to them not following agreed-upon demolition specifications in their contracts.

    The environmental standards called for in the city's blighted-house demolition contracts "in many, many cases are not being followed by the contractors,” Thompson, of the Center for Urban Studies, said.

    “There are a lot of cases where you go and see a hose sitting there not being used, or a hose not being pointed where the demolition is going on, or where a single stream is pointed where the excavator is going, and that’s not going to make any difference with the dust plume that’s going in a dozen other directions.”

    Even with sufficient hoses and water supply, a house requires a lengthy soaking to prevent dust during demolitions that just isn’t occurring, Westcott, of Environmental Testing and Consulting, said.

    “Having a hose or two hoses is going to make a very minimal impact on dust — that’s not a matter of opinion; it’s a fact,” he said. “You can’t wet it enough unless you are there hours before a demolition.”

    At a home demolition on Dolphin Street, a worker sprayed water from a hose on the house’s first floor while the second floor was demolished. Dust could be seen migrating off-site.

    'They should have ... warned us'

    Watching from across the street, about 50 feet away, were nearby residents Katie Pravic and neighbor Shawna Hansen-Ross. Pravic’s 2-year-old son, Corey Keegan, and Hansen-Ross’ siblings, Dezmond Belanger, 5, and Nevaeh Belanger, 4, played nearby.

    Both Pravic and Hansen-Ross said they received no advance notification of when demolition would occur and no special instructions to protect the children from potential lead-dust exposure. They were not provided with HEPA vacuums, nor were they informed to keep doors and windows shut, they said.

    After learning of the potential for lead-paint dust to spread and the effects it can have on children, Pravic said, “They should have come around and warned us.”

    “At least the houses closest to it,” Hansen-Ross added.

    Crews should have informed residents, Farkas said. The city’s policy requires hanging notifications about impending demolition, protective information and where to call to learn more on doorknobs of homes on either side of a house to be demolished, as well as at homes across the street, he said.

    It was a similar story on Manor Street — no advance notice, no special instructions, no special vacuums, according to residents near a demolition site.

    “They just came. We just saw the trucks coming up,” said Tamika King, who lives across the street from a city-demolished house. King has three children at home with her, ages 12, 9 and 5. Her mother, Dorothy King, also lives with her.

    “They didn’t tell nobody nothing,” Dorothy King said. “When they were knocking it down, they were wetting it, but when they were taking the stuff out, they didn’t. There was stuff flying all over. They should have told us something.”

    Mendota Street resident Gary Watson said crews also wet materials only during the demolition of a nearby house, and not during debris removal.

    “My nephew is next door, and his daughters are 6 and 14,” he said. “It ain’t good.”

    Even a demonstration video of a Detroit home demolition put on YouTube by Adamo, the leading contractor for Detroit’s blighted-house removals, as an advertisement for its services appears to show uncontrolled dust and limited wetting.

    When shown the video, Farkas said, “I did see them using water. That’s what our contract calls for.”

    He had a similar reaction to video of a home demolition from the Islandview Village neighborhood on the city’s lower east side from last year. It also showed dust billowing away from the site.

    “This contractor is following our specifications for using the wet demo(lition),” Farkas said. “I would add, this house sitting there as it is, unaddressed, creates its own public health issue.”
For more, see Could home demolition program be spreading lead dust? epa environmental protection agency

Wednesday, January 06, 2016

Antitrust Feds' Attack On Bid-Rigging Real Estate Investors Continues As Two More Cop Guilty Pleas For Roles In Atlanta-Area Foreclosure Auction Racket

From the U.S. Department of Justice (Washington, D.C.):
  • Two Georgia real estate investors pleaded guilty [] for their roles in bid-rigging and mail fraud conspiracies at public real estate foreclosure auctions in Georgia. Paul Chen and Ira Eisenberg each admitted that they agreed not to bid against others at certain public real estate foreclosure auctions and that they conspired to defraud mortgage holders and homeowners using the mail system.

    These individuals unlawfully rigged home foreclosure auctions, and then used payoffs and private side auctions to divide among themselves money that should have gone to mortgage holders and homeowners,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “Together with our FBI colleagues, the division will bring to justice unscrupulous investors who scheme to rob unsuspecting mortgage holders and homeowners.”

    “Incidents of bid rigging at public real estate auctions continue to be an issue in Georgia and elsewhere in the United States, and the FBI would like to remind the public that such matters are violations of federal law,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office. “The FBI will continue to work with the U.S. Department of Justice’s Antitrust Division in identifying, investigating and prosecuting those individuals engaged in such activities.”
    These charges have been filed as a result of the ongoing investigation being conducted by the Antitrust Division’s Washington Criminal II Section, the FBI’s Atlanta Division, and the U.S. Attorney’s Office of the Northern District of Georgia, in connection with the President’s Financial Fraud Enforcement Task Force. [...] Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 888-647-3258, or visit
Source: Two Georgia Real Estate Investors Plead Guilty to Rigging Bids at Public Home Foreclosure Auctions (The 11th and 12th Defendants Charged in Ongoing Investigation).

Not-So-Merry Xmas For 'Rookie' Winning Bidder At Foreclosure Sale Who Shelled Out $300K For Property Despite Never Having Done Satisfactory Title Search/Other Due Diligence; Woefully Discovers Premises Comes 'Fully Equipped' w/ Unforeseen Existing 1st Mortgage; Courts On Buyer's Mistimed, Post Hoc Effort To Protect Its Interest: Take A Hike!

In Miami, Florida, the Daily Business Review reports:
  • The Third District Court of Appeal ruled against a Coral Gables-based investor who found out too late that a property it purchased in foreclosure came with more strings than anticipated.

    Residential buyer Thriving Investments LLC was a third-party buyer in a judicial foreclosure sale. It paid about $300,000 for the real estate in Miami's garment district but later learned it did not own the property free and clear and was subject to a pre-existing debt.

    It turns out the final judgment only foreclosed a second mortgage, leaving a superior claim on the property.

    The new buyer moved to set aside the final judgment that paved the way for its foreclosure purchase.

    "These people just didn't do their due diligence," Hollywood attorney Louis Charles Arslanian told the Daily Business Review. His client, FVZ Inc., holds a mortgage on the property.

    "Even if they had standing, the problem is when you buy in foreclosure you need to know whether you're buying second, third or first," he said. "You've got to do your homework."

    Thriving Investments' attorneys—Aliette Rodz, Stephen Maher and Alfredo Gonzalez Jr. of Shutts & Bowen—argued that as the successful bidder at the foreclosure sale, their client had standing to challenge the underlying judgment. They argued the foreclosure should never have been finalized because the foreclosing plaintiff, as holder of an inferior mortgage, lacked standing to foreclose in the first place. They also contended the underlying motion for summary judgment contained factual errors and that the judgment awarded too much interest.

    But FVZ's attorney, Edward Holodak of Plantation, countered that the bidder had no right to challenge the outcome.

    A successful bidder "can only raise issues as to the sale, and in this case there was no question that the sale was conducted properly," Holodak said.

    Miami-Dade Circuit Judge John Schlesinger agreed, as did the Third DCA, which dismissed the case. Holodak said his client plans to seek attorneys' fees for the appeal.
Source: 3rd District Court of Appeal Rules Against Coral Gables Investor in Foreclosure Sale.

For the court ruling, which was issued two days before Christmas, see Thriving Investments, LLC v. Chao, No. 3D15-1599 (3rd DCA December 23, 2015).

Use Of Guardianship System To Legally 'Kidnap' Elderly Couple Left Them w/ No Home, Property, Or Personal I.D. Documents & Drained Bank Accounts; Victims Describe Their Experience w/ Out-Of-Control, Private For-Profit Guardian

In Las Vegas, Nevada, KTNV-TV Channel 13 reports:
  • Imagine having nothing. Not one single piece of paper to prove who you are. That's the situation a private guardian put a local couple into.

    That guardian is under police investigation and has been censured by the Center for Guardianship Certification, but the damage has already been done. And it's irreversible.

    It's ironic, meeting Bill and Kathy Mesloh at the Boulder City Library. When we interviewed them, the couple couldn't even get a library card because they couldn't prove who they were.

    "Our independence has been stolen," says Bill.

    Kathy's lifetime career was in law enforcement. Bill traveled the world for business. And the couple has been married 40 years. But once the court put them under guardianship, they say they lost everything. They had no cell phones. No birth certificates. No passports. No marriage license. No driver's licenses. No social security cards.

    In Bill's wallet, which is also gone, "I always had a picture of my wife and myself on our wedding day in the backseat of the limo," Bill says as he fights back tears.

    All of it taken, they say, by private, for-profit guardian April Parks, who came into the couple's life in the fall of 2013. "We were vulnerable at the time," says Bill.

    Bill is legally blind, but mentally all there. Multiple health problems put him in the hospital and then rehab, leaving Kathy alone at home with early signs of dementia. Health care workers called Parks, who had Kathy declared incompetent by a doctor from the CareMore Care Center -- a place Parks uses frequently for her guardianship cases.

    All it takes is a two-page form, a few check marks in some boxes and a signature. Shortly thereafter, Bill was declared incompetent not by a doctor, but a physician's assistant named John Reyes. When Parks took Kathy out of the couple's house and put her in a group home, Bill says she wouldn't tell him where his wife was.

    The memory brings Bill to tears. "Not having contact with my wife, I don't know where she is, I pray for her every day, I don't know if she's dead or alive."

    After months, they were finally reunited. But Bill had to explain the bad news to Kathy.

    "First thing she says to me is, 'Bill, I want to go home.' There is no home. 'I want my pets. I want my dog. I want my Trudy.' How do you deal with that?"

    During the guardianship process, the couple lost everything, including their beloved pets. The court never questioned any of it until after Contact 13 got involved. Bill was freed from guardianship and allowed to take over Kathy's care. But the Meslohs believe the entire system failed them, from Parks to every hearing master and judge who sanctioned and allowed her actions.

    They say Parks drained their bank accounts. Their house, clothes, jewelry, keepsakes and treasures from a 40-year marriage are mostly gone.

    "Our Christmases were unbelievable!" Bill recalls. "We were one of those houses that lit up the block."

    They lost cameras, home movies, "even our dentures," says Bill.

    And even Kathy's parents' ashes which were on the mantle of the home April Parks sold.

    "We were her property once she became our guardian," Bill explains. "No different than a slave would have been. She owned and controlled anything and everything."

    Parks sold the Mesloh's home for $130,000. They say they never saw a dime of that money. Court records show everything in the house, from furniture to fixtures, was valued by Parks' appraisers at just under $6,000 and sold at a loss.

    Parks and her attorney charged the couple nearly $50,000 in guardianship and legal fees. Charges include $500 a month for filing, mail and paying bills.

    Before the house was sold, Parks charged the couple $100 to take out the trash and $100 more to bring the cans back inside the next day.

    Bill was even charged $20 when he had to call Parks to ask her to put money in his group home account after she had let it run dry.

    Picking up the pieces of a life lost, Bill and Kathy Mesloh have little more than memories.

    "This is not what the golden years should be," says Bill.

    April Parks did not return calls for comment on this story. After Contact 13 began investigating this case and after Bill spoke to the detective investigating Parks, a box appeared at the couple's group home with all their identification documents inside.
Source: Elderly couple fights guardianship system.

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' the elderly, infirm and vulnerable, usually as part of a money grab by relatives, professional guardians, government agencies, and other assorted lowlifes seeking an easy payday. granny-snatching racket

More On Warren Buffet-Linked Outfit Accused Of Pursuing, Then Baiting Unwitting Poor Homebuyers Into Costly Subprime Loans Through Mobile Home 'Traps'

From an investigative report by The Seattle Times and BuzzFeed News on the alleged pattern of deceptions employed by the Warren Buffett-controlled, mobile home peddler Clayton Homes and its in-house lender, Vanderbilt Mortgage, to allegedly fleece billions from poor customers around the country — particularly people of color:
  • The company is controlled by Warren Buffett, one of world’s richest men, but its methods hardly match Buffett’s honest, folksy image: Clayton systematically pursues unwitting minority home buyers and baits them into costly subprime loans, many of which are doomed to fail, an investigation by BuzzFeed News and the Seattle Times has found.

    Clayton’s predatory practices have damaged minority communities — from rural black enclaves in the Louisiana Delta, across Spanish-speaking swaths of Texas, to Native American reservations in the Southwest. Many customers end up losing their homes, thousands of dollars in down payments, or even land they’d owned outright.

    Over the 12 years since Buffett’s Berkshire Hathaway bought Clayton Homes, the company has grown to dominate virtually every aspect of America’s mobile-home industry. It builds nearly half the new manufactured homes sold in this country every year, making it the most prolific U.S. home builder of any type. It sells them through a network of more than 1,600 dealerships. And it finances more mobile-home loans than any other lender by a factor of more than seven.

    In minority communities, Clayton’s grip on the lending market verges on monopolistic: Last year, according to federal data, Clayton made 72% of the loans to black people who financed mobile homes.

    The company’s in-house lender, Vanderbilt Mortgage, charges minority borrowers substantially higher rates, on average, than their white counterparts. In fact, federal data shows that Vanderbilt typically charges black people who make over $75,000 a year slightly more than white people who make only $35,000.

    Through a spokesperson earlier [last] month, Buffett declined to discuss racial issues at Clayton Homes, and a reporter who attempted to contact him at his home was turned away by security.

    Clayton and Berkshire Hathaway did not respond to numerous requests for interviews with executives, delivered by phone and email, as well as in person at Berkshire Hathaway’s headquarters in Omaha. The companies did not answer any of 34 detailed questions about Clayton and its practices. Nor did they respond to an extensive summary of this article’s findings, provided along with an invitation to comment.

    On its website, Clayton says that it seeks to “treat people right” and “preserve our integrity above all else.”

    (After publication of this article, Clayton issued a press release, accusing the reporters of “activism masquerading as journalism” and stating: “We categorically and adamantly deny discriminating against customers or team members based on race or ethnicity.” For two specific categories of loans, the company said, minorities pay the same or slightly lower interest rates than whites.)(1)
    Clayton’s practices are part of a corporate culture that has condoned racism, including black employees fired while white workers used discriminatory slurs and kept their jobs, and phone collectors casually insulting borrowers with racist stereotypes.

    For an earlier story detailing Clayton’s widespread abuse of borrowers, a Clayton spokesperson said that the company helps customers find homes within their budgets and has a “purpose of opening doors to a better life, one home at a time.”(2) Buffett later defended the company, telling Berkshire Hathaway shareholders he makes “no apologies whatsoever about Clayton’s lending terms.”

    For this story, BuzzFeed News and the Seattle Times analyzed hundreds of internal company documents, thousands of legal and regulatory filings, more than 40 hours of internal company audio recordings, and federal data on hundreds of thousands of mobile-home loans over a decade. Reporters conducted interviews with more than 280 customers, employees, and experts, including some Clayton insiders who said they were appalled by the company’s practices.

    Meanwhile, in the first nine months of this year, Clayton generated more than half a billion dollars in profit, up 28% from the same period last year.

    “It’s a perpetual system of people who are never able to get themselves out of the hole,” said Gwen Schablik, who worked as a collector and handled borrowers’ bankruptcies at Clayton’s Maryville, Tennessee, headquarters from 2011 until she quit in 2014.

    “I felt, ethically, I couldn’t continue working there,” she said.
For more, see Warren Buffett's Company Wants To Sell You A Mobile Home (Note To Minority Buyers: You Pay Extra).
(1) See Reporting Mischaracterizes Clayton Homes’ Treatment of Customers and Employees (Company Serves Underserved Markets, Making Homeownership Affordable).

(2) See Warren Buffett's mobile home empire preys on the poor (Billionaire profits at every step, from building to selling to high cost lending).

Tuesday, January 05, 2016

Lawsuit: Several Metro-Detroit Municipalities Illegally Snatched & Flipped Title To Tax-Delinquent Homeowners' Property Through Foreclosure In Conspiracy With Developers; 18 Victimized Families Request Class Action Status

In Wayne County, Michigan, The Detroit News reports:
  • Eighteen families [] sued the Wayne County Treasurer’s office and several Metro Detroit cities in U.S. District Court, arguing their properties were illegally foreclosed on and sold to developers.

    The families are asking a judge to grant a temporary restraining order to prevent the developers from evicting them from properties in Garden City, Dearborn, Lincoln Park, Redford Township and the city of Wayne.

    Attorney Tarek Baydoun, who represents the families, alleges the treasurer’s office led owners to believe they still had time to save their homes before the county foreclosure auction, while county officials worked with the cities to illegally take the homes.

    Baydoun says the treasurer’s office failed to send out foreclosure notices by first-class mail, as it has in past years. And the contractor tasked with making personal visits to the homes to notify residents of the impending foreclosure never showed up, the complaint alleges.

    Baydoun also says the county blocked his clients from signing up for payment plans that would have removed them from the threat of auction.

    County defendants recklessly, knowingly and/or maliciously engaged in a conspiracy to withhold the required notices and deny payment plans in a manner that was neither lawful nor rational,” the complaint states. “As a result, the plaintiffs and similarly situated individuals lost record title to their properties.”

    The lawsuit names the cities of Garden City, Dearborn, Lincoln Park, Redford Township and Wayne, saying officials in each “illegally bid, purchased and sold the properties.” In addition to the county treasurer, the lawsuit names retired Treasurer Raymond Wojtowicz and former Chief Deputy Treasurer David Szymanski.
    An official from Dearborn declined comment [], saying the city hadn’t been served with the lawsuit. After pleas to the City Council, the city resold several occupied tax-foreclosed homes to former owners this fall with restrictions.

    A growing number of Wayne County suburbs are buying tax-foreclosed homes and selling them to developers, saying they want to prevent blight and discourage absentee landlords from acquiring the properties through the auction.

    The auction is held in September and October for properties typically owing three years in unpaid taxes, but cities can take properties in July by exercising their right of first refusal. Taylor bought 106 properties; Lincoln Park, 90; Redford Township, 76; Dearborn, 35; and Garden City, 28, according to county records.

    But many homeowners, who were on payment plans, said they weren’t aware the properties were sold until served with eviction notices from developers. Some acknowledged missing required payments but said county staffers led them to believe they had more time to save their homes.

    Baydoun said he believes more than 1,000 property owners could have had property taken illegally by the county and given to cities. He is asking the U.S. District Judge Judith E. Levy to designate the case as a class action.

    The controversy over the foreclosures exploded in November in Garden City when seven families, who wanted to plead their cased before its city council, were blocked from speaking at a public meeting. Mayor Randy Walker would later say he cut the meeting short because officials had a pizza party planned after that council meeting.

Town Zoning Enforcement Officer Cops Plea To Shaking Down Homeowners For Cash Payments To Purportedly Resolve Code Violations

From the Office of the U.S. Attorney (Bridgeport, Connecticut):
  • [F]RANK BIANCUR, JR., 41, of West Haven, waived his right to indictment and pleaded guilty [...]in Bridgeport to seeking and receiving illegal payments while employed as a Zoning Enforcement Officer for the Town of East Haven.

    According to court documents and statements made in court, BIANCUR was employed as the Town of East Haven’s Planning and Zoning Administrator/Zoning Enforcement Officer. In pleading guilty, BIANCUR admitted that he sought and received payments from at least five individuals in exchange for official acts he rendered as the Zoning Enforcement Officer.

    In May 2015, a resident of East Haven contacted the East Haven Police Department and the FBI with information that he/she had been extorted by BIANCUR since approximately October 2012 and, as a result, had made cash payments to BIANCUR.

    On May 19, 2015, BIANCUR called the victim and informed the victim that BIANCUR had to inspect an addition to the victim’s residence. Although BIANCUR stated that he was “fighting” for the victim, he also required a payment of $200 or he would make the victim tear down the addition. On May 21, 2015, the victim engaged in a consensually-recorded meeting with BIANCUR at BIANCUR’s office in East Haven Town Hall. During the meeting, the victim gave BIANCUR $200 in cash, which BIANCUR put in his pocket.

    In pleading guilty, BIANCUR also admitted that he sought and received $500 cash payments from two additional East Haven residents in order to resolve zoning violations.

    BIANCUR pleaded guilty to one count of theft of honest services mail fraud, which carries a maximum term of imprisonment of 20 years. A sentencing date has not been scheduled.

    BIANCUR has been released on a $20,000 bond since his arrest on May 27, 2015.

    Prior to his employment by the Town of East Haven, BIANCUR was employed by the City of West Haven and the City of Bridgeport.

    This matter is being investigated by the Connecticut Public Corruption Task Force and the East Haven Police Department.

Ex-Legal Aid Lawyer Among Attorneys $uccessfully $queezing NYC Developers For Million$ On Behalf Of Rent-Regulated Tenants Seeking Hefty Buyout$ Of Their Leasehold Rights; Contingent Fee Arrangement Makes His Legal Services Affordable To Potential 'Lottery Winners'

In New York City, The New York Times reports:
  • Tishman Speyer Properties, one of New York City’s most active real estate developers, had bought two parcels of land on the Far West Side of Manhattan to clear the way for a 2.8-million-square-foot office tower planned for Hudson Yards.

    Standing in the way, though, were the occupants of two apartments on the site. So this year, the developer turned to a lubricant that can be counted on to ease New York City tenants out of their rent-regulated units — a buyout, in this case, for $25 million in total to three tenants.

    In New York’s exceptionally lucrative real estate market, multimillion-dollar buyouts are becoming more common, lawyers who negotiate for tenants and property owners say.
    Mitchell Posilkin, general counsel to the Rent Stabilization Association, a landlords’ group, said suggesting owners are willing to pay “was akin to suggesting a payment in response to extortion is a voluntary one.”

    But for the people in the path of the highest-priced projects, a buyout can be like winning the lottery (complete with taxes). Lawyers for some tenants now look down at anything under $10 million for a single resident.

    There are cases where I’ve made it clear to the developers that in order to start negotiations the settlement has to be in the eight figures per tenant,” said David Rozenholc, a lawyer who negotiated the Tishman Speyer deal on behalf of the tenants and has made such buyouts his signature practice.

    Most buyouts are much smaller. Some are just a few thousand dollars, and are sometimes used to coerce poor, vulnerable tenants to leave. There are not many projects like Hudson Yards, Sherwin Belkin, a lawyer for Tishman Speyer, said. “This is a unique site,” he said. “That’s what drives numbers like these.”
    Tenants, of course, argue that they have the right to fight for their homes or at least for fair compensation. The landlord, they note, is asking them to surrender apartments that afford tenants protections against eviction and large rent increases.

    “What I’m giving up is so valuable to me,” said Veronica Sofio, 60, a preschool teacher who refused an offer of $700,000 from her landlord to leave her one-bedroom on the Upper East Side where she has lived for 35 years. “I raised my children here. We fought for parks in this neighborhood. We’re part of this neighborhood.”

    Mr. Rozenholc, who represents Ms. Sofio and five other holdouts in two buildings owned by the same landlord, has staved off the owner’s eviction efforts for at least the last eight years.

    A former Legal Aid Society lawyer, he has a reputation for patience. He works on contingency, taking a third of the buyout money.

    Lawyers who negotiate such buyouts reject the notion that they are shaking down developers.

    “That’s what the market is,” Samuel J. Himmelstein, another tenant lawyer who negotiates expensive buyouts, said. “People make an economic decision to pay because they’re still going to make a tremendous amount of money. My heart doesn’t bleed for them.”

    Indeed, on the other side of the table, lawyers like Mr. Belkin make their own calculations and draw up battle plans before deciding whether to break out the checkbook.

    They hire private investigators to identify tenants who are violating rent regulations. That gives the owner a legal right to evict or a way to induce to leave with a low buyout. They go to tenants with offers of relocation.

    And there is always the hope that the tenants will cave, perhaps fearful of a long, unpleasant fight.

    “Both sides play chicken,” Mr. Belkin said. “Who’s going to blink first? If they blink at the same time, you have a deal.”

Unit Owners In Decaying, Federally Subsidized 31-Unit Co-Op Suspect Possible Land Grab In Their Management Company's Plans; Suspicious Residents Say Outfit Sent Xmas Gift Baskets As Incentive To Cajole Them Into Signing Management's Self-Serving Petition In Effort To Snatch Complex

In New Haven, Connecticut, the New Haven Independent reports:
  • The management company that oversaw the destruction — then partial rebuilding — of Alice Ashe’s apartment complex asked her to sign a petition the other day. She wasn’t buying.

    The petition was drawn up by Carabetta Management, the company that runs Antillean Manor, a decaying federally subsidized 31-unit complex on Day Street between Chapel Street and Edgewood Avenue.

    The petition calls for the dissolution of a tenant cooperative that has owned the complex since 1984 but hasn’t met in years. The petition also asks that ownership of the property be transferred to Carabetta. Carabetta officials have been circulating the petition to tenants, asking them to sign it.

    I’m not signing no petition!” Ashe declared []. Carabetta let the development continue to fall apart when it took over management in 2011, Ashe said—until this October, when the city issued an emergency order to fix death-defying balcony cracks and mold-producing leaks. Conditions have grown so bad that both the city and Carabetta agree it needs eventually to be torn down. Carabetta responded quickly to the city order, making major repairs, which continue this week.

    Meanwhile, the company has been negotiating with the federal Department of Housing and Urban Development (HUD)—which holds the $759,200 mortgage to the property (pictured), and which subsidizes all the rents through $330,942 in Section 8 payments—on a plan for the property’s future.

    Carabetta seeks to buy the property, tear down the existing complex, house tenants at another property (with HUD help), and build a new mixed-income complex on the property. (A similar scenario to Church Street South, another Section 8-subsidized complex where the owner allowed to deteriorate it beyond repair and now hopes to build a more lucrative development there.)

    Ashe, a retired food packer at the old Matlaw’s plant in West Haven, has lived at Antillean Manor for over 20 years. She once served on the now-defunct cooperative board, when it functioned. She said that until recently, every time she called about rundown conditions at the complex, she couldn’t get a call back from Carabetta, let alone repairs. But she did hear from them when her check was a little late, she said—she immediately was hit with eviction papers, then charged the cost of the papers and sheriff’s service.

    “Why they so kind of all of a sudden?” she said she wondered about Carabetta. The company even sent her a present for Christmas.

    They had nerve sending me a fruit basket. I’m throwing it out,” Ashe said. “They ain’t done nothing for me. I ain’t falling for it. I’m fed up with it.” She spoke inside her second-floor apartment, where she was filling boxes with her belongings. She hopes to move out soon once her son finds a job in Camden, S.C.

    Carabetta’s petition drive drew the attention of New Haven Legal Assistance Association,(1) which represents some Antillean tenants in disputes with Carabetta. NHLAA helped the tenants form the coop back in 1984.

    “It might be that down the road it makes sense for Carabetta or another developer to buy the property and put something else” up there, NHLAA attorney Shelley White said in a conversation []. But “it’s a big decision” to dissolve the cooperative and turn the property over to Carabetta, she continued. “Tenants should be able to discuss it collectively, not one on one with the entity that wants to be the buyer.”

    White made the same argument in a letter sent Monday to HUD officials.

    It is disturbing, to say the least, that the entity seeking to purchase the property would have its employees directly solicit approval of the sale (and dissolution of the tenant cooperative) from tenants whose leases are overseen by Carabetta (several of whom are currently under eviction and trying to work out reinstatement arrangements with Carabetta) and who widely perceive Carabetta as already owning Antillean Manor ...” White wrote to HUD.
Source: Tenants Wooed In Land Grab.
(1) New Haven Legal Assistance Association provides free legal services to individuals and groups unable to obtain legal services because of limited income, age, disability, discrimination and other barriers.

Monday, January 04, 2016

DA Dismisses Felony Charges Against Ex-Con Who 'Stole Home' Against San Diego Padres By 'Walking' Into County Recorder's Office, Then Filing Forged Deed Hijacking Title To $539 Million Baseball Stadium; Judge: 'Base-Stealer' Not Mentally Competent To Be Prosecuted; Legal Title To Petco Park Remains Clouded By 'Wild Deed'

In San Diego, California, The San Diego Union-Tribune reports:
  • With many wondering whether the Chargers are leaving Qualcomm Stadium for Los Angeles, San Diego’s other major sports venue — Petco Park — has become the subject of a bizarre ownership controversy sparked by a mentally ill man who filed a simple document.

    Derris Devon McQuaig took legal title to the downtown ballpark away from the city and the Padres two years ago by walking into the San Diego County Recorder’s Officer and submitting a properly filled-out deed transfer.


    County and city officials have been quietly trying to remedy the situation ever since, but a felony fraud case against McQuaig was dismissed last week after a judge ruled he’s not mentally competent to be prosecuted.

    Because no actual sale or transaction took place, government officials and real estate experts say there’s essentially no chance of McQuaig taking control of the property, which was recently appraised at $539 million and is slated to host its first All-Star game in July.

    But McQuaig has created a legal and bureaucratic nightmare that could be perpetrated on any property owner if someone decides to target them by casting doubt on their title in this way.

    Jeff Olson, chief of assessment services for the San Diego County Assessor’s Office, said county officials are required to record all properly submitted documents and make them part of the public record even when they are obviously bogus.

    "I don’t think in any way it would be deemed credible because it’s pretty clearly just a ‘wild deed’ that has no legal sufficiency," Olson said. "But it could cause headaches for someone down the road."

    Those headaches, which some compare to being the victim of identity theft, include hassles and delays in trying to sell or refinance property.

    "If the report shows that this goofball over here put his name on your property, the bank is not going to lend you money," said Tracy Leonard of Lawyers Title Insurance in Mission Valley. "It’s still your property, but you have to clean up the mess that somebody else made."

    However, the city’s contentions that the bureaucratic mess won’t have a significant impact were supported recently when a refinancing of $125 million in Petco Park debt was approved.

    So-called "wild deeds" often go undetected until a property owner tries to sell or refinance.

    But Olson said county officials were immediately aware that McQuaig’s deed transfer was bogus, primarily because he spent many hours in the County Recorder’s Office beforehand doing research and asking questions about the process.

    So county officials quickly alerted the District Attorney’s Office, prompting a criminal case against McQuaig which, if successful, would have voided his title and wiped it from the public record.

    Steve Spinella, the deputy district attorney who prosecuted the case, said his goals included seeking punishment for a clear case of fraud and rectifying the situation for the city and the Padres.

    "It was a totally erroneous transferring of property," he said.

    Psychiatric examination by Dr. Michael Takamura, however, determined that McQuaig was not mentally competent and that "there is no substantial likelihood that the defendant will regain mental competence in the foreseeable future."

    That prompted Superior Court Judge Steven Stone to dismiss the criminal case on Dec. 16, order McQuaig committed to Patton State Hospital in San Bernardino County, and give psychiatric security personnel there the authority to administer antipsychotic medication against McQuaig’s will.

    Spinella said that decision eliminated any chance of voiding the deed under criminal law.

    "The statute is very specific that a conviction is required," he said. "There’s just no avenue forward. We certainly want to achieve justice for victims, but we can only do so within the confines of our jurisdiction."

    So the City Attorney’s Office has begun exploring a civil remedy, most likely a "quiet title action," which would nullify the bogus claim and reaffirm the city and the Padres as owners of the ballpark.

    Spinella said it seems clear that McQuaig, who was convicted of robbery in Los Angeles County in 1989, had no plans to financially profit from the title transfer.

    Denis Lainez, the public defender who represented McQuaig, declined to discuss the details of the case but said he agreed with Spinella that the title transfer wasn’t part of a wider scheme.

    Court records show that McQuaig, 46, has struggled with his mental health for many years, including at least one previous stay at Patton State Hospital. In early 2014, the city sought a "stay away order" barring McQuaig from the UC San Diego library.

    Olson, the assessor’s office official, said McQuaig was still capable of properly filling out a deed transfer, including entering the correct parcel and lot numbers for Petco Park and its correct address, 100 Park Blvd.

    "As long as he’s crossed his t’s and dotted his i’s and filled in the blanks sufficiently on the grant deed, we’re required to record it," Olson said. “He had no legal authority to transfer Petco Park to himself, but it becomes part of the public record.”

    Leonard, the title company official, agreed. "It’s not their role to police every transaction," she said.

    Leonard said there’s been talk in Sacramento of state legislation that would make it easier to void fraudulent title transfers, but nothing has come forward yet. "For now it’s the same as identity theft," she said. "It causes you nightmares, but you are still you and your property is still yours."

    Padres officials didn’t respond to calls and emails seeking comment.
Source: Bogus title transfer clouds Petco ownership (Mentally ill man’s simple filing creating headaches for city, Padres).

More On Challenge To Massachusetts' New 'Ibanez Defects" Title Clearing Law

MassLive reports:
  • A group of anti-foreclosure activists is trying to repeal a new Massachusetts law that limits the amount of time a person has to challenge a foreclosure and get his home back.

    Grace Ross, coordinator of the Massachusetts Alliance Against Predatory Lending, a coalition of 70 groups that is leading the repeal effort, said the law "essentially tries to sweep illegal foreclosures...under the carpet." "The (title insurance) industry doesn't really care if we have constitutional rights, but we care if we have constitutional rights," Ross said.
    Under current law, someone who believes his home was illegally foreclosed on has 20 years to challenge the foreclosure in court. If the person wins, he could potentially get his home back.

    During and after the 2008 market crash, unscrupulous practices by some banks combined with overly complex transactions made improperly executed foreclosures a major problem nationwide. In Massachusetts, the problem is even more widespread since a 2011 Supreme Judicial Court ruling [ie. U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 673, 941 N.E.2d 40 (2011)] found that practices that were the industry standard, relating to who actually held a title at the time of a foreclosure, did not comply with Massachusetts law.

    As a result of the uncertainty, homeowners who bought foreclosed properties may have trouble selling or refinancing their homes.

    The new law gives the person whose home was foreclosed on three years after a foreclosure or one year after the law was passed, whichever is later, to begin a court challenge to get his home back. After that time, if a court challenge has not been initiated, the person can still sue the bank that foreclosed for monetary damages, but he cannot get his house back.
    The activists say the law is unconstitutional. For one, they say the law's effective date is too early. The state constitution requires a 90-day window before a new, non-emergency law becomes effective, and this law does not have that. More substantively, they argue that the law violates the contracts clause of the U.S. Constitution by altering the terms of existing mortgages. They say the courts, not the Legislature, have authority over title clearing.

    They also argue that the law has a disparate impact on people of color and female heads of households, who were most frequently given subprime mortgages and who were the first to lose their homes to foreclosures. There are an estimated 68,000 Massachusetts residents who lost their homes to foreclosure since 2005, according to opponents of the bill.

    "The colloquial term for these mortgages in the business is 'mud people mortgages,'" said Sarah McKee, a former federal prosecutor from Amherst, who signed the petition to suspend the law. McKee said the fact that minorities and women are disproportionately affected makes the law illegal under the U.S. Constitution's equal protection clause.

    The New England Area Conference of the NAACP and other organizations representing minorities sent the Legislature a letter opposing the bill. They wrote in September that the bill "will codify illegal, racially discriminatory lending practices and cause additional harm to our communities of color."

    Ross said coalition members will challenge the law in court. Meanwhile, they are pursuing a process that allows voters to suspend a law, then vote on it. The group filed a petition with 10 signatures with Secretary of State William Galvin, and the petition is being reviewed by Attorney General Maura Healey to make sure it is allowed by law. The group then has until Feb. 23 to file 43,167 certified voter signatures with Galvin's office. If they succeed, the law will be suspended until voters decide in November whether to repeal it.