Entries in Developer (11)
NC Attorney General prosecutes in alleged real estate investment scam
Friday, June 15, 2007 at 09:02PM In the following press release it was announced that North Carolina Attorney General Roy Cooper won a court order to stop a real estate venture that sold overpriced lots in the North Carolina mountains by promising consumers they could make a profit without having to invest any of their own money.
The defendants’ complicated investment scheme used inflated appraisals and phony second mortgages as down payments to entice consumers to borrow millions of dollars to purchase property in the Village of Penland development in Mitchell County.
“These developers squandered more than $100 million in financing, leaving consumers stuck with property that isn’t worth what they owe on it,” said Cooper. “We’re putting a stop to this scheme before any more consumers get caught up in it.”
Wake County Superior Court Judge Michael Morgan on Wednesday ordered a group of developers behind the Village of Penland project in Mitchell County to stop using misrepresentations to encourage consumers to take out loans to purchase lots. Cooper is also asking the court to permanently stop the developers’ deceptive practices and to order them to pay refunds to consumers to satisfy consumers’ loans on properties sold by the developers.
Developers involved in the Village of Penland project and named in Cooper’s complaint include:
Peerless Real Estate Services, Village of Penland,
MFSL Landholdings, Communities of Penland,
COP Land Holdings,
PG Capital Holdings,
West Side Development, all of Spruce Pine.
Also named as defendants are the following individuals connected with these companies:
Frank Amelung,
Richard Amelung
Michael Yeomans of Florida;
J. Kevin Foster of Georgia;
Anthony Porter and Neil O’Rourke of North Carolina.
A. Greg Anderson, a licensed appraiser in North Carolina, is also named as a defendant.
Cooper asked the court to appoint a receiver to take control of these companies. On Wednesday, Judge Morgan appointed Joseph W. Grier III of Grier, Furr & Crisp in Charlotte as receiver.
According to Cooper’s complaint, around 2002 the defendants purchased at least 1,200 acres of land in Mitchell County and subdivided it into more than 2,000 lots to create the Village of Penland development. The developers set up the companies listed above and have since received more than $100 million in loan proceeds by marketing the lots to consumer investors. The developers have failed to complete any part of the project and instead used the money to fund other failed projects in South Carolina and St. Thomas and to pay for trips such as a cruise of the Greek isles and a ski trip to Switzerland.
As alleged in the complaint, the defendants sold most lots in the development for $125,000 based on inflated appraisals by Anderson even though the lots had tax values of $20,000 or less. Many of the lots could not realistically be used to build homes because none of the lots included water and sewer systems, and many were too small to support a septic tank or a well.
Cooper alleges that the defendants promised consumers that they would profit from the Village of Penland without ever having to invest any of their own money. The developers used several different schemes to entice consumers to use their credit to purchase lots. In one scenario cited in Cooper’s complaint, the developers told consumers to apply for credit to buy ten lots for a total of $1.25 million and promised to buy back the lots at the same price within three years. Consumers were told that these ten lots would then be developed and that they would receive $100,000 when each home sold. In other cases, developers asked consumers to buy 20 lots for $2.5 million. The developers promised to buy the lots back in two years and deed consumers an additional 20 lots plus a house, which the companies said they would then rent from the consumer for $280,000 a year as a model home.
Cooper alleges that consumers who agreed to invest in the Village of Penland were told by the developers to fill out four or five loan applications. Without most consumers’ knowledge, the defendants sent all of the loan applications to different lenders at the same time so that the lenders were unaware that the consumers were taking out multiple loans. The developers provided illusory second mortgages to cover the down payments on these loans through a company related to one of the defendants. These second mortgages were not shown on required closing statements that instead showed deposits of earnest money which the consumers did not make.
On May 30, 2007, defendant Anthony Porter notified some of these consumers that the developers would not be able to make the monthly mortgage payments as promised, leaving consumers stuck with large debts and no way to sell their lots for enough money to cover the loans.
According to Cooper’s complaint, the defendants also failed to register the project with the US Department of Housing and Urban Development, which requires developers to provide a disclosure statement outlining how housing developments will be completed and how services such as water and sewer systems will be provided. This same law, the Interstate Land Sales Full Disclosure Act, also provides protections for consumers by giving them a period of time to cancel their purchase in the development.
“Do your homework carefully when investing in real estate,” Cooper cautioned consumers. “Watch out for offers that promise high profits with little or no investment.”
Maryland AG alleges builder took deposits but failed to deliver homes
Monday, November 27, 2006 at 12:43PM The Division found that Zahrey, Ely, and their companies collected substantial advance payments from at least 25 consumers toward new homes, failed to protect those advance payments as required by Maryland law, failed to begin or complete construction of the homes, and failed to pay refunds to any of the consumers. The order bars Zahrey, Ely, JAE Developers, and JAE Homes, Inc. from acting as a home builder in the State of Maryland unless they meet requirements set by the Division in order to be registered as a home builder under Maryland’s Home Builder Registration Act, requires payment of restitution of the $1,099,194.71 they received from consumers for new homes that were never completed or built, payment of civil penalties in the amount of $854,000, and payment of costs in the amount of $7,702.86.
“Before paying any money, consumers need to protect the biggest investment of their lifetime by ensuring that their home is being built by a registered home builder and that any deposits they make are protected by an escrow account, bond or letter of credit,” said Attorney General Curran. Curran said that home builders are required to give consumers a pamphlet prepared by his office that discusses consumers’ rights under the law and steps consumers can take to protect themselves.
Consumers can check whether their builder is registered and how the builder protects deposit money by contacting the Home Builder Registration Unit at (410) 576-6573 in Baltimore or toll free at (877) 259-4525, or check whether a builder is registered on the Attorney General’s website: www.oag.state.md.us/homebuilder.
Real estate developer given 2 years for fraud
Friday, May 5, 2006 at 05:04PM Mische also must serve three years on supervised probation after his release and settle unpaid taxes with the IRS, the judge ruled. The IRS has 180 days to determine how much restitution Mische owes for unpaid taxes. Mische’s attorney, Robert Hoy, said it will be determined later whether his client will serve time at a halfway house or at the federal prison in Duluth, Minn.
Mische managed 10 apartment complexes in Fargo and Grand Forks through his company, Mische Properties Inc., for investors from Fargo and Alexandria, Minn., where he once lived. He owned a percentage of each complex.
Court papers say he gave himself advances and loans from the properties’ proceeds between 1997 and 2002, then transferred money between bank accounts to cover up the transactions. Mische also failed to pay the mortgage, insurance and real estate taxes for each of the 10 complexes, court papers say.
Court records show Mische filed for bankruptcy last fall, claiming $2.5 million in debts and $143,400 in assets. Payments to investors, along with unpaid taxes and numerous credit cards, were among the debts listed.
Man convicted on mortgage fraud and firearms charges
Friday, June 24, 2005 at 07:35AM Gregory A. White, United States Attorney for the Northern District of Ohio, announced today that Donald E. Simmons, was sentenced to 27 months imprisonment, followed by 3 years of supervised release, for his convictions on conspiracy to commit bank and wire fraud (involving a mortgage fraud scheme), filing a false tax return, and being a felon in possession of firearm. The sentence was imposed by United States District Judge Ann Aldrich, who stated a restitution order will be issued within 90 days, requiring Simmons to pay $148,000 to financial institutions incurring losses from the mortgage fraud. Simmons, who resided in Shaker Heights at the time of the offenses, previously pleaded guilty pursuant to a written plea agreement to a one-count indictment charging the firearm offense, and two counts of an information charging the tax and mortgage fraud offenses.
According to Simmons’s plea agreement, his offenses involved the following conduct:
Simmons entered a conspiracy, devised and led by others, the objects of which were to induce mortgage lenders to provide mortgage loans in amounts based upon documentation fraudulently inflating the apparent purchase prices for the properties and for some of the conspirators to obtain the personal benefit of a portion of the loan proceeds purported to be used for repairs and improvements to the properties. Simmons admitted that he was aware of and helped carry out the second object.
Pursuant to the conspiracy, a realtor (“the Realtor”) would locate properties to purchase and would negotiate the sales prices with the sellers. The Realtor would have the seller sign a purchase agreement reflecting a higher sales price than agreed, along with a separate “addendum” stating that the seller would receive only the agreed sales price, less expenses, and generally authorizing payment of the remaining proceeds from the higher sales price to a designated third party, typically a business entity owned by Simmons under the name “Simmons Construction Company,” purportedly to pay for repairs or improvements to the property. One or more co-conspirators would arrange for the purchasers to apply for and obtain mortgage loans for the purchases of the properties, based upon the inflated purchase prices reflected on the purchase agreements, without disclosing the addendums or actual sales prices to the lenders.
The escrow agent would be instructed pay a portion of the loan proceeds to Simmons Construction, or on occasion to the purchaser, generally in the amount specified in the purchase agreement “addendum.” Only a small portion of the funds deposited to the Simmons Construction bank account, however, would actually be used for repairs and improvements to the purchased properties. Immediately or shortly thereafter deposit, most of the funds would be withdrawn and distributed to the Realtor, the purchaser, and/or others. In some instances the withdrawn funds would be used to obtain official bank checks and cash to be provided to the various recipients.
As a result of the foregoing, the lending institutions and other financial institutions which acquired the mortgages incurred or are expected to incur losses resulting from the mortgage payments going into default due to the fact that the properties had actual values less that the inflated purchase prices on which the loans were based. The exact total loss is still unknown but was estimated to be $296,000 at the time of Simmons’s guilty pleas.
During 1998 through 2000, Simmons received income as compensation for security and property management services he rendered for a real estate company and as compensation for services he rendered for a numbers wagering business operated by another person. Simmons received his payments from the real estate company by checks payable to another person, who negotiated the checks and provided him the cash. Simmons and his wife filed joint income returns for those years, which did not report his income. His wife caused the returns to be prepared and filed, reporting only income and losses attributable to her, due to the fact that Simmons misled her into believing that he was unemployed and had no income during that time period. The returns failed to report Simmons’s income of approximately $31,100 from the real estate company and an unknown amount of income from the wagering business. Simmons also failed to file a tax return for the year 2001, on which he was required to report approximately $10,000 of income.
Prior to July 25, 2000, Simmons had been convicted in the Court of Commons Pleas of Cuyahoga County, Ohio, of a number of crimes punishable by imprisonment for a term exceeding one year, including a conviction in August 1998 for having a firearm under disability. On July 25, 2002, he knowingly had in his possession in the master bedroom of his residence in Shaker Heights, Ohio, the following firearms and ammunition, all of which had been manufactured outside of and transported to the State of Ohio – a Browning Arms, Model Hi-Power, 9 millimeter semiautomatic pistol, approximately twelve rounds of A-Merc 9 millimeter ammunition, a Jennings, Model J-22, .22 caliber semiautomatic pistol, approximately six rounds of Remington .22 caliber ammunition, and approximately one round of CCI .22 caliber ammunition. The firearms and ammunition were discovered by agents of the Internal Revenue Service, Criminal Investigation Division (IRS-CID) during the lawful execution of a federally-issued search warrant.
Benton man faces long prison term for forging appraisals
Saturday, March 26, 2005 at 12:57PM The Chalotte Observer - March 26, 2005
In an extract from an article in the Charlotte Obersever it was reported that Paul Robertson, 31, is set to serve 15 years in an Arkansas prison for manipulating real-estate appraisals on properties in Benton, Ark. Robertson used appraisal software to defraud lenders to grant home loans on empty lots, according to Robert Herzfeld, prosecuting attorney for the Saline County Prosecutor’s office. To orchestrate the scheme, Robertson purchased new appraisal software and gave it to an appraiser he contracted to work with him.
Click here to read the Court Docket Sheet
According to Herzfeld, Robertson, who owned and operated a Benton home construction business called PAR Homes, made copies of the software on his own computer so he could alter the appraisals before sending them off to lenders.
"He’d alter it on his copy of the software. In some instances, he’d literally cut and paste a picture of the home and put it on a (picture of) a vacant lot," Herzfeld said.
By forging the market value of homes and sometimes nonexistent houses, Robertson caused some victims to end up with a mortgage worth more than their home’s real value while others were left with nothing or fell into foreclosure.
"There will be repercussions on this for the next several years — having a significant impact on this community for a long time," Herzfeld said.
Updated - AG Pappert announces fraud charges against Monroe County home builder
Tuesday, March 1, 2005 at 07:25AM March 1st 2005 - update
David Pierce of the Pocono Reocrd reports that District Judge John D. Whitesell has retired to consider the cases against the defendants and will adjudicate whether or not they should be sent for trial.
Read the full article on the Pocono Record here.
February, 27, 2005 Update
Matt Birbeck of Mcall.com reports that a former Eagle Valley Homes employee turned government witness testified Friday that the Brodheadsville company routinely forged customers’ signatures on fictitious sales agreements that inflated the purchase price of homes.
Dana Kleintop, who oversaw mortgage applications for Eagle Valley, said customers believed they were buying a home for one price, but their signatures were transferred to unseen sales documents listing a higher price by either ”photo copy, tracing them or having someone sign them.”
Kleintop, a ”cooperating witness” granted immunity by the state attorney general’s office, testified during a preliminary hearing at the Monroe County Courthouse in Stroudsburg for Lauren Erb, 45, a former bookkeeper for Eagle Valley Homes charged with forgery and perjury.
PA Attorney General Press Release - Thursday, January 6, 2005
Defendant Pictures and a Poster
In an excellent Press Release Attorney General Jerry Pappert today announced that agents of his Bureau of Criminal Investigation have filed charges against two owners and three employees of a Monroe County home builder and mortgage brokerage company. They are charged with theft, real estate fraud and predatory lending practices. The whole release is reproduced below as it shows clearly how the scheme developed. I would recommend that all of us read and learn
Pappert said charges have been filed against Donald Kishbaugh and Steven Parisi, the owners of Eagle Valley Homes and its affiliates, P&K Developers and Eagle Mountain Mortgage, which later became Nations First Mortgage.
Additionally, Pappert said, three employees of Eagle Valley Homes have been charged for their alleged participation in the financial fraud scheme. Also charged is settlement agent Anita Peterson, the owner of Mountain Valley Abstract.
The charges allege that from 1997 through 2003, the defendants, on at least a dozen occasions, demonstrated a pattern of racketeering to defraud lending institutions by submitting fraudulent documentation on potential home buyers. The defendants allegedly used deceptive means, such as tampering with public records, to defraud mortgage companies for the benefit of Eagle Valley and its affiliated businesses.
“B” Level Consumers
Pappert said the grand jury found that Kishbaugh and Parisi typically targeted first-time home buyers lured by advertisements of affordable housing in the Pocono region. Many of the consumers were not qualified to purchase a home at the inflated prices that Eagle Valley was selling homes, which was approximately $190,000.
The grand jury found that most of the Eagle Valley home buyers were classified as “B level” consumers because they had previously filed for bankruptcy and had questionable credit ratings. Pappert explained that financial institutions put a greater obligation on B level consumers to prove income, assets and debt satisfactions. Also, most B level consumers are required to deposit at least a 20 percent down payment.
The grand jury found that Eagle Valley employees allegedly told potential home buyers that any sales agreement would be conditional upon the home buyer obtaining adequate financing for the purchase of the property. Despite their poor credit histories, potential home buyers were also told that large down payments, such as 20 percent of the sales price, would not be necessary.
The grand jury found that the sales person would proceed to fill out a purchase order and a preliminary sales agreement with the home buyer, quoting a set price. Additionally, an Eagle Valley sales person allegedly took a minimum deposit from the home buyer, sometimes as low as $500 on the house and $500 on the lot.
Creative Financing
The grand jury found that at this point in the sale the home buyer met with Parisi, who was originally brought in by Kishbaugh as sales manager, and was known as “the closer.”
The grand jury found that Parisi would meet with each home buyer to solidify the transaction and explain to the home buyer how the deal would be made to work. Questions and concerns the home buyer may have had regarding financing and their ability to afford the home were addressed by Parisi who told the home buyer of his use of “creative financing.”
To aid in the “creative financing” process, Pappert said the grand jury found that Parisi required home buyers to sign sales agreements that reflected inflated sales prices to account for the down payment money that could not be paid.
In some instances, the charges allege that the home buyer’s signature was either forged or transposed onto the inflated agreement from existing documents.
The grand jury found that Eagle Valley employees wrote and sent fraudulent letters to Princeton Mortgage Company stating that Eagle Valley placed down payment funds in escrow from the home buyers, when in fact the home buyers never deposited the money with Eagle Valley.
Fraudulent Employment
Pappert said the grand jury found that in order to approve a loan, lending institutions required documentation and verification of income and employment. The charges allege that if a homeowner did not have employment or sufficient income, Parisi instructed Eagle Valley employees to write fraudulent employment verification letters with forged signatures.
The grand jury found that at least on a few occasions, when a home buyer had his own business, the home buyer allegedly was told by Eagle Valley employees to inflate their income on payroll checks or other documentation that they submitted to the lending institution.
On two occasions, Pappert said, the grand jury found that wives of business owners were placed on their husbands’ companies’ payroll despite the fact that they did not work for their husbands’ companies. Eagle Valley employees allegedly told them that this fraud was necessary because the wives had better credit scores than the husbands and the husbands would not qualify for a mortgage. In another instance, a wife needed to show income to qualify for a loan.
Money Order Scheme
Pappert said that the grand jury learned about another creative finance scheme by Parisi involving money orders. The charges allege that approximately 10 times, Parisi instructed Eagle Valley employee Lauren Erb and other employees, to obtain money orders from the post office and fill out the money orders paying off outstanding debts of a particular home buyer. The charges allege that Erb photocopied the money orders and sent the photocopies to lending institutions days prior to settlement closing so that it would be nearly impossible to verify whether or not the debts had actually been paid.
Erb, or other Eagle Valley employees, allegedly returned the money orders to the post office and cashed them and used the money to continue the scheme for the home buyer.
Pappert said the grand jury found that in other instances Parisi and Kishbaugh loaned home buyers money to be used as the down payment on the purchase of a home while not revealing to the lending institution that the home buyer had borrowed a portion of the down payment.
Second Mortgage Scheme
In some circumstances, the grand jury found that this loan arrangement was accomplished through the use of a second mortgage owed directly back to Parisi, Kishbaugh or one of their companies. The alleged second mortgages were not revealed to the primary lending institution.
Closing Costs
Pappert said that just as many of the home buyers could not afford a down payment; likewise, they could not afford the closing costs or cost of settlement. He said the grand jury found that when this occurred, the settlement agent allegedly would be instructed by employees of Parisi and Kishbaugh to subtract the amount of the closing costs from the amount disbursed as earnings to Eagle Valley Homes or P & K Developers.
The grand jury found that when it came time for the home buyer to pay the settlement costs, Rose Perdue, one of the defendants, allegedly would state that the home buyer had paid Nations First and that, in turn, Nations First would pay the closing costs so that the settlement agent got their money.
Settlement Sheets
Additionally, the grand jury alleges that settlement agent Anita Peterson, who owns Mountain Valley Abstract, prepared and signed fraudulent settlement sheets stating false down payment figures of home buyers. Pappert explained that settlement sheets are public records used by the government. Pappert said the grand jury also found that Peterson allegedly destroyed evidence from the settlement files that were subpoenaed by the grand jury.
The grand jury also found that the sales price recorded on the settlement sheet was often the inflated sales price, not the initial price quoted to the home buyer by the Eagle Valley sales person. After the sale was completed, the settlement agent recorded the deed at the inflated sales price, causing an increase in the tax liability for the home buyer.
Pappert said the defendants are scheduled to surrender in Monroe County. They will be prosecuted in Monroe County by Deputy Attorney General Kelly Kline of Pappert’s Criminal Prosecution Section.
Below is a list of the defendants and the charges against them, photographs of the defendants can bee seen here
- Donald Kishbaugh , 69, 16 Beechwood Road, Blakeslee, is charged with five counts of deceptive or fraudulent business practices, five counts of securing execution of documents by deception, five counts of theft by deception, one count of participating in corrupt organizations, one count of criminal conspiracy and three counts of forgery.
- Kimberly Loffio, 32, 2265 Mt. Laurel Dr., Effort, is charged with one count of perjury, five counts of deceptive or fraudulent business practices, five counts of securing execution of documents by deception, five counts of theft by deception, one count of participating in corrupt organizations, one count of criminal conspiracy and three counts of forgery.
- Steven P. Parisi , 42, RR 3, Box 499, Kunkletown, is charged with five counts of deceptive or fraudulent business practices, five counts of securing execution of documents by deception, five counts of theft by deception, one count of participating in corrupt organizations, one count of criminal conspiracy and three counts of forgery.
- Anita M. Peterson, 49, 730 Monroe St., Stroudsburg, is charged with one count of perjury, two counts of false swearing, one count of tampering with or fabricating physical evidence, 16 counts of tampering with public records or information, one count of hindering apprehension or prosecution and one count of criminal conspiracy.
- Lauren Erb , 45, RR #5, Box 495-Apt. 3-D, Kunkletown, is charged with one count of perjury and one count of forgery.
- Rose Perdue, 43, RR 1, Box 1061, Kunkletown, is charged with five counts of deceptive or fraudulent business practices, five counts of securing execution of documents by deception, five counts of theft by deception, one count of participating in corrupt organizations and one count of criminal conspiracy.
The Editor - Ian Shuter
The Pocono Record reports that a Judge has ruled that Anita Peterson and Lauren Erb will face trial.
The Editor - Ian Shuter
David Pierce of the Pocono Reocrd reports that District Judge John D. Whitesell has retired to consider the cases against the defendants and will adjudicate whether or not they should be sent for trial.
Broker, Flipping, Poconos, Developer, Pennsylvania Connecticut sues lenders for real estate loan fraud
Thursday, February 24, 2005 at 09:57PM Yahoo Real Estate News – February 24, 2005
A Connecticut builder, Realtor and mortgage firm have been slapped with a lawsuit for allegedly scamming first-time home buyers out of thousands of dollars.
Litchfield County Realty, Heritage Builders and Approved Mortgages are being sued for predatory lending practices in the sale of new homes at the Pine Meadow Farms development in New Hartford, Conn.
Connecticut Attorney General Richard Blumenthal, Banking Commissioner John Burke and Department of Consumer Protection Commissioner Edwin Rodriguez filed the suit. The three announced the lawsuit Monday.
The companies “cynically scammed families into purchasing homes they could not afford,” Blumenthal said in a statement. The attorney general will seek money back to the families so they can rebuild their lives, Blumenthal said, as well as penalties and forfeiture of profits.
The three companies conspired to submit false income and credit history information to lenders for mortgages buyers otherwise couldn’t afford, Blumenthal alleges. He also claims that the companies illegally supplemented buyers’ mortgage payments and temporarily deposited funds into the buyers’ bank accounts so they would qualify for loans, then took the money back after closing.
Local Real Estate Developer Charged With Check-Kiting
Tuesday, February 22, 2005 at 09:27AM WISH TV News – February 22, 2005
Mary McDermott reports from Hendricks County that a prominent real estate developer is the subject of a 13-count federal indictment. The charges could land him in prison for years. Some of the homes developed by Eric Tauer include the Harvest Ridge subdivision in the Avon area. Now Tauer is facing facing federal charges of bank fraud, money laundering and conspiracy.
“This is the largest check kiting scheme that this district has seen,” said Susan Brooks, US attorney.
Brooks says Eric Tauer deposited thousands of insufficient-funds checks during a three-month period that added up to more than $217 million. “He would essentially move one check from another from his various accounts, but it was a $217 million check kite,” said Brooks.
The victims were several banks, notably First Indiana Bank, which the US attorney says lost more than $6 million. She says contractors who helped build the homes lost out as well.
Some of the homeowners are also victims. They’ve unwittingly bought houses that have liens on them. Some of the homes have several liens.
“We actually do not know the extent and the number of those individuals. We have been unable to determine how many of those individuals exist,” said Brooks.
Eric Tauer’s attorney calls him a respected builder who got himself into an “unfortunate business situation” that led to federal charges. Tauer is expected to appear in court in March.