ESTATE


Beazer Homes settles federal securities fraud case for $30.5 million
2009/05/11, 6:48 pm
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The national homebuilder admitted no wrongdoing but agreed to settle the case that alleged it misled investors about its lending practices. On Friday, Beazer Homes reported a loss of $114 million for the quarter ended March 31, including losses related to a federal investigation of its lending.

 

 

By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published May 11, 2009

National homebuilder Beazer Homes, which has communities in the Charleston area, has agreed to settle a securities class action lawsuit that alleged the Atlanta-based homebuilder misled investors about its home financing and business practices.

The $30.5 million settlement, if approved by the court, would end the case originally filed in March 2007 in the U.S. District Court for the Northern District of Georgia.

In the settlement agreement, Beazer Homes admitted no wrongdoing.

In the consolidated lawsuit, lead plaintiffs Glickenhaus & Co. and Carpenters Pension Trust Fund for Northern California claimed that Beazer artificially inflated its stock price by presenting false statements about its business success.

The lawsuit claimed that Beazer had been making improper loans to low-income buyers, some of whom would not be able to pay for them. Meanwhile, the homebuilder issued overly optimistic financial outlooks, the lawsuit said.

Beazer’s lending practices prompted an investigation by federal officials and critical news stories in The Charlotte Observer, both of which caused stock prices to fall, the lawsuit said.

Beazer stock reached a high of $48 per share in December 2006, the lawsuit said. Today, the homebuilder’s stock is trading at $3.09 per share.

The class in the lawsuit includes purchasers of the company’s common stock between Jan. 27, 2005, and May 12, 2008.

On Friday, Beazer Homes reported a loss of $114 million, or $2.97 per share, for the quarter ended March 31. In the same quarter last year, Beazer lost $228.7 million, or $5.93 per share.

In its earnings statement, the homebuilder said an investigation by the U.S. Attorney for the Western District of North Carolina is ongoing, and the company recognized a total of $13 million for the quarter in expenses related to the investigation.

The company said homebuilding revenue declined 53.2% for the quarter because of a 48.1% decline in home closings and a 9.9% decline in the average selling price of homes closed compared with the same period of the prior year.



Regulators struggle to contain foreclosure fraud
2009/04/08, 5:56 pm
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Distressed homeowners fall victim to scams promising to save their homes
The government is struggling to hold back a wave of foreclosure “rescue” scams arising from the growing number of homeowners facing the loss of their homes. It may be fighting a losing battle.

On Monday, Treasury Secretary Timothy Geithner declared war on the con artists who prey on borrowers desperate to find a way to keep their homes.

“American homeowners have been through enough in the past few years,” Geithner said, adding that the last thing they need is to get scammed as they struggle to keep their homes.

“These predatory scams callously rob Americans of their savings and potentially their homes,” he said. “We will shut down fraudulent companies more quickly than before. We will target companies that otherwise would have gone unnoticed under the radar.”

But as the problem spreads, regulators and prosecutors seeking to crack down on these scams seem to be fighting a forest fire with a garden hose.

Some 3 million households have already lost their homes to foreclosure. As of Jan. 30, 2.9 million people were 60 days or more past due on their mortgages, one out of 10 were delinquent, according to the government’s Hope Now Alliance. Another 6 million households are expected to face foreclosure in the next several years, according to private estimates.

The Federal Trade Commission has sent warning letters to 71 companies it says were running suspicious advertisements and has filed five new civil cases to halt illegal loan modification scams. Attorney General Eric Holder says the FBI is investigating about 2,100 mortgage fraud cases.

“If you discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes, we will find you, and we will punish you,” Holder said.

Over the past year homeowners have been flooding state attorneys general with complaints about for-profit loan modification consultants. While some of these outfits are legitimate, authorities say many are con artists.

Potential victims are easily identified: various filings, including “pre-foreclosure” notices, are public records, providing all the details a would-be scammer needs to target fraud victims. Many snare victims via Web sites promising quick fixes over the phone.

The scams take several forms but usually involves payment of an upfront fee in exchange for a promise to resolve a pending foreclosure. Some of these foreclosure “counselors” simply pocket the fee, usually a month’s mortgage payment, with little or no further contact with the distressed homeowner. Others compound the fraud by convincing the homeowner to sign over the deed or present forged documents purporting to show the foreclosure has been set aside.

Some scammers will file a bankruptcy in the homeowner’s name without consent or knowledge. While bankruptcy usually stops a foreclosure temporarily, this form of the scam adds insult to injury by leaving the homeowner with additional legal costs and the burden of a credit record that will make it difficult to buy or rent a new home for up to 10 years.

 

Monday’s joint announcement by the Treasury, The Department of Justice, the Department of Housing and Urban Development, the Federal Trade Commission and the Illinois Attorney General provided homeowners with a high-profile warning to avoid foreclosure rescue scams and a pledge to better coordinate government efforts to stop them.

The government’s Financial Crimes Enforcement Network reported in February that banks and other lenders filed some 62,000 so-called Suspicious Activity Reports relating to a wide variety of mortgage frauds during the 12 months ended in July, 2008. That’s a 44 percent increase over the preceding year.

Despite the widespread publicity and broad economic damage inflicted by mortgage fraud over the past several years, efforts to thwart scams have fallen far short. Part of the problem lies in the fractured regulatory structure tasked with combating mortgage fraud. Of those 62,000 reports of possible mortgage fraud, the Office of Thrift Supervision handled 47 percent, The Office of the Comptroller of the Currency handled 36 percent and the rest went to the Federal Reserve, the Federal Deposit Insurance Corp. and the National Credit Union.

 

The Federal Trade Commission also enforces various consumer protection laws as part of a broad portfolio of regulatory oversight that includes unfair trade practices and antitrust reviews. Over the years, its staffing has not kept up with the overall growth of the economy and population. The agency’s new chairman, Jon Leibowitz, recently testified that the FTC has about 1,100 full time employees, down from about 1,800 in 1980.

While Washington’s attention recently has focused on a broad overhaul of financial regulations, efforts to tighten consumer protection laws against mortgage fraud have moved slowly. Last year, Sen. Herb Kohl, D-Wis., introduced a Senate bill to protect victims of foreclosure rescue scams. The bill died in the Senate Banking Committee.

The surge in foreclosure rescue fraud mirrors the ongoing rise in foreclosures, a trend that has proved stubbornly resistant to public and private efforts. Over a year ago, the Bush administration established the Hope Now Alliance to prod lenders to negotiate voluntary loan modifications with troubled homeowners. Though the group says it has helped several million homeowners work out new terms and payment plans, the results have been disappointing. In some cases, monthly payments increased under these new payment plans. In December, the Office of the Comptroller of the Currency issued a report noting that more than half of those modifications left homeowners facing foreclosure again within six months.

But the national attention provided a boon to foreclosure rescue scammers. Last month, the FTC shut down a New Jersey-based company called Hope Now Modifications that claimed affiliation with the widely publicized Hope Now Alliance. According to the complaint, callers to the company’s telemarketers were promised loan modifications and told they could avoid foreclosure in return for a “mitigation escrow fee.” After paying the fees, consumers either didn’t hear back or were told negotiations with lenders were proceeding smoothly. Some homeowners later found out their lender hadn’t been contacted. Those who complained to the company and asked for a refund didn’t get their money back, the FTC said.

But the case demonstrates the difficulty regulators and prosecutors have shutting down these operations. A New Jersey judge issued a restraining order against Hope Now Modifications and the site was shut down. But later that day, Leibowitz told a congressional hearing last month, the site “popped up again under a Web site registered in Germany” and was shut down again.

“So we have a little long-arm problem in terms of asserting our jurisdiction,” Leibowitz said.

Some of those offering to help distressed homeowners are former brokers, agents and appraisers who’ve seen their previous business evaporate after the housing market collapsed under an avalanche of rogue lending many of them participated in. Some foreclosure consultants offer legitimate services. But it’s not clear whether paid advice is more effective than the help available to homeowners from nonprofit credit counselors who also work with lenders at no charge.

Some scammers have successfully tricked victims by mimicking those non-profit counseling organizations. Others have become adept at Web search marketing, buying keywords representing legitimate counseling organizations.

 

Neighborworks America, a national housing advocacy group, filed two trademark complaints last month with online search engines to prevent companies from using the group’s name and logo to promote foreclosure rescue schemes.

One company offering referrals for a variety of financial services is riding the coattails of the  Treasury’s Web site, www.financialstability.gov , which Treasury Secretary Geithner touted in Monday’s announcement. The official site is devoted to the government’s various efforts to bail out the financial system and help homeowners avoid foreclosure. Web surfers who navigate to the unrelated www.financialstability.org are referred to dozens of links purporting to help consumers “Get out of Debt,” “Stop Foreclosure Now” and get “Payday Loans in 1 hour.”

According to Whois.net, financialstability.org is registered to Admin Search Marketing, Ltd, based in Tortola in the British Virgin Islands. A company representative was not immediately available for comment.

In most cases, prosecutors who catch foreclosures rescue scammers opt for civil actions aimed at recovering money for bilked consumers. Few cases result in criminal penalties.

That may be changing as state attorneys general begin gearing up to go after the latest wave of mortgage fraud. This year, Arizona Attorney General Terry Goddard brought three cases charging felony theft, fraud and money laundering. Two defendants pleaded guilty; a third case is pending. California’s attorney general won convictions last year against three people who stole more than $700,000 in upfront fees of $1,500 to $5,000; those sentences ranged from probation to six years in prison.

 



Real Estate Marketer Gets Jail for Ponzi Scheme
2009/02/27, 8:22 pm
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A Denver judge Friday sentenced Frederic “Rick” Dryer, founder of the now-bankrupt Mile High Captial Group, to 132 years in prison for masterminding a $34 million Ponzi scheme that duped 1,250 investors.

Dryer also was ordered to pay $3.43 million in restitution.

He and his two associates were indicted last summer. They were charged with consipiring to persuade investors to put down earnest money on duplexes, most of which never were built.

They never told investors that their company didn’t own the land on which the condos were supposed to be build. Among the victims is a woman who

Dryer and his associate Richard Darrow have been previously convicted of felonies.

Source: The Associated Press (02/21/09)



15 Charged in Philadelphia Home Sales Fraud
2009/02/17, 7:08 pm
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Fifteen people have been charged with fraudulently selling more than 80 Philadelphia row homes. Most of the properties were in the Kensington neighborhood.

The suspects forged and recorded deeds to uninhabited homes, transferred the titles to their own names and then sold the properties to unsuspecting buyers.

The scam was motivated by “breathtaking, bold and unapologetic greed,” District Attorney Lynne Abraham said at a news conference. “What they were buying was, essentially, nothing,”

Abraham said the suspects were able to carry out the fraud because of poor regulation of notaries and state laws that require the city’s deeds recorder to file ownership transfers with little or no verification.

The investigation has been underway since September 2004 when a homeowner first complained that his property had been fraudulently transferred.

Source: Associated Press, Kathy Matheson (02/12/2009)



Go on take the $ and run
2009/02/12, 3:27 pm
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California mortgage fraud fugitive caught with $70,000 in shoes
By Don Thompson, Associated Press Writer
SACRAMENTO — An international fugitive in a $100 million mortgage fraud scheme has been caught at the Canadian border with $1 million in Swiss bank certificates and $70,000 stuffed in his shoes, authorities said Wednesday.
Christopher J. Warren also was carrying four ounces of platinum valued at more than $1,000 an ounce when he was arrested while re-entering the United States at Buffalo, before midnight Tuesday.

Warren is the second of three fugitives to be caught in the ongoing investigation of Loomis Wealth Solutions, a Roseville, Calif.-based investment company, and several related companies.

Court documents say they defrauded investors and mortgage companies of $100 million since 2006. The fraudulent deals involved 500 homes and condominiums in California, Florida, Nevada, Illinois, Colorado and Arizona, according to Internal Revenue Service affidavits.

Until last week, the 27-year-old Sacramento man had been cooperating with investigators.

But Warren abruptly chartered a private jet for $156,000 to take him to Ireland, acting U.S. Attorney Lawrence Brown said Wednesday.

He then traveled to Lebanon and Toronto, Canada, before he was caught late Tuesday. He was carrying two fake passports in the name of Anthony Kim, Brown said. Authorities previously said he had obtained a passport in the name of Mark A. Seagrave and indicated he planned to go to Mexico.

Warren flew to Ireland Feb. 3 after posting a document on the Internet in which he blamed himself and his colleagues for helping cause the nation’s financial meltdown by creating hundreds of millions of dollars in fraudulent mortgages that went bad.

A day later, Warren flew to Lebanon, Brown said. Lebanese police searched his hotel room and seized some of his belongings, but by then Warren was gone.

He flew to Toronto, then took a late-night taxi to the border at Buffalo. Immigration officials were on the lookout for him and made the arrest.

After he fled, prosecutors charged him with conspiracy, fraud and conducting a continuing financial crime, which could bring him a life prison sentence.

He is expected to have an initial court appearance in New York on Wednesday, Brown said.

Don Heller, Warren’s lawyer, was not immediately available for comment.

On Tuesday, authorities announced that a second suspect in the case, Garret Griffith Gililland III, 27, of Chico, had been apprehended in Spain in October. He is fighting extradition to the U.S.

They are still looking for Scott Cavell, 25, of Sacramento, who they say fled the country last week a day after Warren left.

Contributing: Associated Press Writer Carolyn Thompson from Buffalo

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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