Some weeks ago I received a phone call from a Bay
Area investor, Andy Narraway, who had lent
Jim McConville
$1,875,000 in five second trust deeds, all of which
together with $760,000 in accrued interest, are now in
trouble. Narraway had read my blogs about McConville's
scams up and down the state and wondered if I could
expose the bank fraud that occurred in the refinancing
of his loans which would help him recover his money.
Through a mortgage broker, Mr. Narraway had made five loans
on five separate properties to McConville totaling $1,875,000 over a two-year
period, December 2003 to October 2005.
As I began looking into Mr. Narraway's loans it quickly became
obvious that fraud was committed by the banks not on the
banks. The frauds could not have
been done without bank connivance. The escrow process
was used for the very opposite purpose from what it is
intended. The bank fraudsters struck at the very heart of
real estate - the escrow.
Escrow is the process by which parties to a real estate
transaction (buyer and seller, borrower and lender),
deposit documents and monies with a neutral third party
(a licensed escrow or title insurance company), which
documents and monies are then delivered to the
appropriate parties
upon fulfillment of certain conditions (e.g. a grant
deed for the purchase money), as set out in a written
agreement called the escrow instructions.
The entire system depends upon the escrow officer
faithfully carrying out these instructions. Can you
imagine handing an escrow officer a signed grant deed
for your house, expecting to get paid when the escrow
closes, only to find that the escrow agent recorded the
grant deed but did not pay you the purchase money? Well that's what
happened to Andy Narraway in three separate
transactions. He provided a "reconveyance" deed but did not get paid.
To understand what happens in a real estate transaction where
a new
loan replaces an old loan (as happens in nearly every
real estate transaction) it is necessary to
understand a "reconveyance" deed.
A "reconveyance" is the instrument commonly used to
record the fact that an "old" loan has been paid off. In
a sale or refinance transaction the "old" lender gives a
signed "reconveyance" to the new lender
through escrow with a "demand" to pay all
outstanding monies at close of escrow.
Standard language in every deed of trust binds the
beneficiary/lender contractually to
provide a "reconveyance" upon payoff. But in the case of
private lenders, such as Narraway, all an escrow
has to do is promise to pay off the loan. See this
typical
request/promise from Stewart Title escrow to Mr.
Narraway.
This is because, unlike institutional lenders, private
lenders, as a condition of the new lender obtaining title insurance, are required
to provide the "reconveyance" before getting
paid.
Narraway therefore had no choice but to provide a "reconveyance"
before getting paid and the banks as the new
lenders took unconscionable advantage of that fact. They
knew exactly what they were doing. They exploited the
system.
On each refinance, Narraway was requested by
the escrow officer,
to provide a deed of "reconveyance" into escrow with
a promise of getting paid at closing. But
in each case the escrow officer gave the money to Jim McConville
instead! Coincidence?
Imagine Mr. Narraway's shock when he realized
escrow had recorded his "reconveyance" but he was not
going to get paid. That strikes at the very heart of
the system. The banks used escrow as an instrument of
fraud on behalf of a favored borrower, Jim McConville.
There are built-in safeguards to prevent this from
happening. Unfortunately they rely mainly on the fact
that a new lender has a duty to ensure that any deed of trust
recorded prior to theirs is paid off and
"reconveyed". (In some rare occasions a
"subordination agreement" may be recorded). Each new lender is
therefore expected to protect its lien position by including in its "escrow instructions" a requirement
that a "reconveyance" be obtained from any "old" lender in
exchange for being paid off and to ensure that "escrow
instructions" are carried out exactly.
The key to the whole system is the final "settlement statement"
from escrow. It will
confirm that the payoff was made. If
the "settlement statement" does not show a payoff to the
"old" lender, the new lender will know that its
escrow instructions were not complied with.
To that end most lenders require a certified estimate "settlement
statement" prior to funding and a certified final
"settlement statement" within 72 hours of
closing. Both the new lender and the escrow sign off on
that final "settlement statement". It is usually placed
at the very top of each transaction file. Everybody
involved in lending knows its primary importance.
It is
impossible therefore for a "reconveyance" to be
recorded without the "old" lender being paid off i.e. without fraud
being committed on the "old" lender, either negligently
or deliberately. It is impossible for an escrow officer
not to notice that it has all that money left over in
its trust account. We licensees are required to keep a
separate trust account for each transaction and balance
each at the close of escrow. I know from personal
experience that it would be impossible for me to balance
my trust account if I "forgot" to pay off an "old" loan.
Was it fraud or negligence on the part of the banks in
the case of Narraway's three refinancings by McConville? If
it were just one case and somebody other than Jim McConville
involved, it might possibly be negligence or oversight. But all
three! With McConville as the borrower!
Mr. McConville appears to have had a lot of bank and
escrow officials in his pocket. Something as fundamental
as three "settlement statements" not complying with
their "escrow instructions" simply cannot
happen without collusion. Lightning doesn't strike the
same place three times.
23-29 Abbey St., San Francisco. Here is
Mr. Narraway's
deed of trust dated May 12, 2004 securing his loan
of $345,000 to Jim McConville
as
Sapphire Park House Corp. Here is a
deed of trust to Sequoia Mortgage for $1,085,000
dated February 7, 2005.
On
April 4, 2008
McConville refinanced the Sequoia loan with a new
deed of trust to Wachovia Mortgage. This is when the
lender-escrow fraud took place.
Here is the "request
for demand" from the escrow holder. As you can see the
request contains a promise that his loan will be paid
off through escrow. That did not happen, despite Mr.
Narraway having executed and returned the "reconveyance"
provided by escrow.
It should be noted that an "old" loan holder is not a
party to the escrow. Nor are they covered by any title
insurance involved. They are entirely relying on the new
lender who, acting through its escrow agent, is entirely
responsible for their agent's
actions.
The new "lender's
closing instructions" clearly stated that no
secondary financing was permitted. Furthermore, on page
3 of the Wachovia
deed of trust the borrower, Jim McConville promised
that there would be no other deeds of trust, no
secondary financing, recorded or unrecorded.
Yet here is the "settlement
statement" showing a payoff of the old 1st loan of
$1,085,000 to Sequoia Mortgage but no payoff of the old
2nd loan of $345,000 to Mr. Narraway. Clearly Wachovia's
"lender's instructions" and Wachovia's "settlement
statement" did not agree. It is impossible for Wachovia's
officials not to have noticed that. It is
fraud by Wachovia on Narraway through its agent
the escrow holder.
Wachovia is now foreclosing on McConville who owes
Wachovia $36,267.24 in back payments as of July 21,
2009. Here is the
NOD. Can Wachovia give clear title
to a subsequent purchaser? Can it ignore the
lender-escrow fraud? Mr. Narraway still has not been
paid. If so we have lost our real estate
escrow system. This case will ultimately be decided
by a judge.
3050 Fruitvale Ave., Oakland. Here is
Mr. Narraway's
deed of trust dated December 30, 2004 securing his
loan of $300,000 to Jim McConville as
Sapphire Park House Corp. It was in second place
behind a first
deed of trust to Marin Capital for $1,425,000 dated
October 16, 2003.
On January 12, 2006 McConville
refinanced the Marin Capital loan with a new
deed of trust for $1,960,000 to LaSalle Bank. Again, this is when
the lender-escrow fraud took place.
As with 23-29 Abbey St. in San Francisco Mr. Narraway
provided escrow with a "reconveyance"
relying on a promise that his loan would be paid off in
escrow.
The "reconveyance" was recorded
but Mr. Narraway never received his $300,000.
Again, LaSalle's "lender's instructions" and LaSalle's
"settlement statement" did not agree and it would be
impossible for LaSalle's officials not to have noticed
it. Therefore it is fraud by LaSalle on Narraway
through its agent the escrow company.
On March 17, 2006 a strange thing happened. McConville's
daughter, Nicole McConville, recorded an unsolicited "deed
of trust" in favor of Narraway for $300,000. But she
signed on behalf of another McConville company,
Diamond House Development Corporation,
that did not own 3050
Fruitvale Ave. Was she trying to put right the damage
done to Narraway? Did she think he would accept a new
(flawed) deed of trust instead of getting paid off?
It should be noted that
anybody can record a deed of trust against a property
they own (or do not own for that matter) in favor of anybody in the world. The grantee
does not have to be asked and may not even know about
it. Narraway was not asked. Again, that is our system.
An even stranger thing happened recently.
Jack Thomas,
the person who signed the LaSalle
deed of trust on January 12, 2006 as CEO and Secretary of McConville's
company Sapphire Park House Corp., handed Mr. Narraway
an affidavit saying that he never was CEO or Secretary
of any of McConville's companies or any other company for that
matter. Mr. Thomas was employed as a general handyman by
Jim McConville and says that McConville routinely threatened him
with dismissal if he did not sign papers and that he had no
idea what the papers he signed were.
Despite full knowledge of the LaSalle escrow not having
paid off Narraway at the LaSalle refinance, Wells Fargo
Bank, claiming to be the current owner of the LaSalle
loan, is now foreclosing on McConville who, according to
this
NOD dated August 21, 2009, owes
Wells Fargo $285,754.10 in delinquent payments, in
addition to the original sum of $1,960,000. Did
McConville ever even make a payment? Was the whole thing
just a bank present of $1,960,000 to McConville?
Can Wells Fargo now blithely wipe out Narraway and give
clear title
through a foreclosure sale to a subsequent purchaser? Can it ignore the
lender-escrow fraud which it has purchased? Mr. Narraway
still has not been paid! If so we have lost our real estate
escrow system. As with Abbey St., this case will ultimately be decided
by a judge.
126 Belle Ave., Pleasant Hill. Here is
Mr. Narraway's
deed of trust dated August 12, 2004 securing his
loan of $130,000 to Jim McConville as
Sapphire Park House Corp. It was in second place
behind a first
deed of trust to Marin Capital for $322,000 also
dated August 12, 2004.
On March 10, 2008 McConville sold
the property to a person he has used extensively up and
down the state as a "straw buyer". The "straw buyer" obtained new finance from the
Bank of America, a 1st
deed of trust for $417,000 together with a new 2nd
deed of trust for $53,800 also from BofA and on the
same date.
Again, Mr. Narraway provided a "reconveyance"
upon a promise of being paid off in escrow. The escrow
closed but he was never paid off. Here is the "settlement
statement".
I noticed that there were no payoffs shown on the
settlement statement, so I did a search for a
"reconveyance" of the Marin Capital deed of trust for
$322,000 dated August 12, 2004. I was surprised to find
that it had been
reconveyed, presumably paid off, on January 1, 2007.
I checked to see if there was a related sale or refinance at
that time. There was none. Why did Marin Capital get
paid off but Narraway did not?
Following payoff of the Marin Capital loan on January 1,
2007, Narraway's August 12, 2004 loan for $130,000 was
now in first position. It is clearly shown as Item
9 on the
Preliminary Title Report
dated February 20, 2008, a short time before close of
escrow on March 10, 2008. It is impossible for
the Bank of America not to have known about Mr.
Narraway's loan. What did they think happened to it? It
was not shown as a payoff on the "settlement statement".
There is a clear pattern here. Three institutional
banks, one a direct lender, the Bank of America,
cooperated with McConville in turning a blind eye to the
fact that Mr. Narraway's loans were reconveyed but did
not appear on the "settlement statements" as having been
paid off. McConville could not have pulled off these frauds
without the cooperation of the banks.
It is clear to me that
McConville did
not act alone - the banks were his accomplices.
Does the Federal Government have a conflict of interest
with regard to bank fraud?
Fraud is defined as "an act of
deliberate deception with the intent of securing
something by taking unfair advantage of another." The
banks practiced deliberate deception in creating and
selling mortgage loans and took unfair advantage of both
borrowers and investors with these loans.
I have investigated mortgage fraud in several projects
throughout California. In all cases it is clear that the
fraud was top-down not bottom-up. Fraud was committed by the banks not on the banks.
It is impossible to believe that the bank officials who
approved hundreds of these fraudulent loans were unaware
of the fraud involved.
An honest banker does not fund multiple "owner-occupied"
loans to one person in one day when that person lives in
a different part of the state and is in the military.
They even made loans to people who were not employed and
now blame the borrower. To my knowledge none of these
crooked bank officials have been arrested or charged.
Instead of prosecuting them the U.S. Government gave
them hundreds of billions of taxpayer dollars. But this
"bailout" money did not go to the investors who
purchased the bad loans, it went to the banks who
created them! Those banks had already received full
value for those loans from pension funds and other
investors. That is a government handout, not a bailout.
It is corruption on a scale never before imagined.
Most of these crooked loan officers are now senior loan
officials with the big banks that took them over. The
Bank of America took over Countrywide, Chase took over
WAMU, Wells Fargo took over Wachovia etc. They are still
there because Obama and Geithner want them there.
Do these two Cabinet Secretaries
therefore have a conflict of interest?
Tim Geithner
- Treasury
Eric Holder -
Justice
Can Secretary Holder take away what
Secretary Geithner has given? Holder can hardly send in
the FBI to arrest former Countrywide loan officers, now
top executives with the Bank of America, a bank to which
Geithner has given tens of billions of dollars. You see
the problem.
Now read
this article in the New York Times. The SEC has
given
former Countrywide officials a license to practice
their former trade in a new
publicly quoted company, buying up for pennies on
the dollar the fraudulent loans they created while
working for Countrywide. It is like staffing a city fire
department with known pyromaniacs.
By rewarding the bank fraudsters Geithner has
emasculated the Federal securities laws to the point
where mortgage-backed securities are now "backed
by nothing but the blue skies of Kansas" i.e. we
are back to the days of "blue sky" laws before the
Securities Act of 1933.
Obama is further diverting attention from the SEC by
having Holder go after the CIA for its interrogation
methods, instead of having Geithner go after the banks
for securities and mortgage fraud. How Obama handles
this financial nuclear bomb will define his presidency,
not health care, not Afghanistan. If he continues to
reward this internal fraud it will cause the world
community to lose confidence in our currency. A collapse
of the dollar would collapse America's power quicker
than any terrorist act.
America's power is based, not upon arms, but upon
confidence in the dollar. The world is therefore far
more interested in how we deal with our internal fraud
problem than how we deal with "enhanced interrogation"
of alleged foreign terrorists. The threat to America is
far greater from within than from without. The greater
danger is not in Afghanistan, it is in Wall Street.
From what I have seen, as just one individual, we need a
full-blown government investigation into mortgage fraud.
It has devastated our public pensions and poisoned our
financial securities. These fraudulent banksters are
worse than mere bank robbers, they have all but
destroyed the American financial system. And they are
still there!
The plight of the 112 unit Sommerset Villas condo
project in Escondido, raped and left for dead by a
veritable gang of institutional lenders and ruthless
developers, calls into question the ability of our law
enforcement and media establishment to deal with the
massive fraud that fueled the real estate bubble. The
following is a progress report on my ongoing
investigation into real estate and loan fraud up and
down the state.
Bob Chemaly is CEO of Ralph Giannella's condo conversion
business,
Premier Coastal Development Inc, a Delaware
Corporation, located at 1010 Turquoise Street Suite 200, San
Diego, CA 92109. Bob lives with his wife Linda in a nice
3,305 square feet house in La Costa which they bought in
July 2001 for $580,000.
Chemaly has done the heavy lifting for Giannella on
several of his condo conversion and sale projects.
Sommerset Villas are the units featured in a
number of news stories about "straw buyers"
recruited by
a Bay Area scam artist named Jim McConville.
I have discovered that Giannella was using "straw buyers" in the
Escondido project long before McConville came on the scene. In fact
his own CEO, Bob Chemaly, was a
Giannella straw buyer on one unit. Chemaly pulled a
$321,090
owner-occupied loan out of it on August 31, 2006 (go
to page 6 for the owner-occupied part). He
has now put the property
into escrow
for $119,900
as a "short sale" i.e. when a lender accepts less than it is
owed to pay off the loan.
Chemaly's
real home
in La Costa
Chemaly's
"owner occupied" condo in Escondido
Chemaly took title and arranged the mortgage in his own
name in order to get an owner-occupied rate. Here is the
2006
grant deed and the 2006
mortgage. He then
switched ownership from himself to
Chanel Partners LLC, one of the many LLCs located in
Giannella's office, 1010 Turquoise Street Suite 200, San
Diego, CA 92109. Giannella sold it to himself.
Chemaly signed most of the grant deeds for the 112 units in Sommerset Villas
on behalf of Giannela's
company,
North Coastal LLC. But in the case of his own
contribution to the scheme he had somebody called Eric
Gregory, an "authorized signer", sign on behalf of
Broadway Coastal LLC,
another Giannella corporation located at 1010
Turquoise Street. There is no record of Broadway Coastal
LLC ever owning the unit. But Giannella's lenders and
title companies didn't seem to worry much about which of
Giannella's many LLCs owned which properties. They liked all those loan
points and all those fat title fees.
Chemaly is now able to arrange a short sale instead of a
foreclosure. Not every borrower is given that
opportunity. Here are the
short sales to date in the Sommerset Villas project.
Note that $1,392,515 has already been written off on seven
units ($198,930 per unit), not including Chemely's short
sale not yet closed.
Here is the full
original sale list of the 112 condo units, starting
on January 4, 2006 and ending on July 18, 2008. The
first purchase by a McConville "straw buyer" was
not until March 27, 2008. Here is
that first
grant deed to Michael Hernandez showing McConville's Hayward address,
signed by Bob Chemaly. The
next 32 "purchases" are all by McConville's straw buyers.
All
32 grant deeds were signed by Chemaly for North Coastal LLC.
But what about the first 80 units? Were they all sold to
genuine buyers? I got copies of the recorded loans. They
are all "owner-occupied". They are all at the same
price as similar units sold to McConville's buyers.
I visited the condo complex last week and studied the
units very carefully. I wanted to see if there
was any sign that the 80 pre-McConville "owner occupied"
purchases were genuine. I
spoke to some of the few remaining tenants. They readily
admitted that they no longer pay rent to anybody
and are enjoying a free ride while they can. I could not
find one owner occupier. The complex looks like a ghost
town.
I was able to gain entry to several of the vacant units on lockboxes, including Chemaly's "owner occupied" unit at
1425 N. Broadway #D (now in escrow as a short sale).
The water and gas was turned off and the grass was waist
high in the patio area.
If the units sold to McConville's buyers were
the only problem, the complex might have survived the
swindle. 80 clean deals might have absorbed 32
dirty deals. But it is clear that the "Staggering
Swindle" reported by the Voice of San Diego started long before McConville. The Voice of San Diego investigated this story
following a tipoff from a suspicious Escondido realtor.
The tipster called TV 7/39, the San Diego NBC
affiliate, who passed it on to its media partner, the Voice of San Diego, which
published a story in April 2009. It reported that McConville pulled off the swindle on
the unsuspecting
developer, Ralph Giannella.
The Voice reported that McConville purchased 32 units at a
discounted bulk price from Giannella and then sold them
on to straw buyers. I researched the titles and
discovered that McConville had
never taken title to any of the units. Each unit was transferred directly from a Giannela LLC
to each buyer. That made me suspicious.
I contacted three of McConville's buyers who eagerly
told me their stories. I asked one of them, Vicki
Jenkins, who appears to be the leader, about some
closing documents the Voice had published on
April 10, 2009 under the
title "Payments
Sent to McConville's Company".
She sent me this
explanatory email. She also sent me
minutes of the McConville's meeting on January 10,
2008 at her house.
She told me that the first she and her two friends
learned of the so-called "Addendum
to Purchase Agreement" (that was part of the closing
documents I was interested in) was when Will Carless
from the Voice of San Diego
contacted Frances Greenspan on March 4, 2009, who
referred him to Ms. Jenkins. I asked how Carlesshad gotten
hold of these closing documents. He got them, she said,
from Giannella's
attorney.
Ms. Jenkins then sent me this
summary she had previously prepared for law
enforcement and had also sent to Carless on March 9,
2009, a month before he published his "Staggering
Swindle" story on April 10, 2009.
In it Ms. Jenkins explains that the first two mortgage
payments were made by McConville, April 1st and May 1st
2008, but none after that. She tells of how for several
months she was in denial. She did not want to believe
that any of this was happening. She wanted to believe in
the goodness of people. She clung to the belief that
McConville would put the whole thing right, as his staff
were assuring her he would.
Jenkins' memo for law enforcement and the lenders makes
it clear that these three McConville buyers at least,
were doing everything possible to alert the lenders and
law enforcement that fraud had been committed. These
three buyers at least, wanted no part in the fraud that
was still unfolding. That is not what they signed on
for, they said.
Will Carless and the Voice of San Diego should
have seen right away that the real fraudsters were the
developers and the lenders.
Look at the
original sale list. Then look at the
foreclosure list. Some of the 80 units sold by
Giannella were already being foreclosed before
McConville came along to make quick work of the
remaining 32. That's what he was hired to do. Yes, this was indeed a "staggering
swindle", but it was a very different swindle from the
one reported by the Voice of San Diego.
The Voice put the spotlight on McConville and his straw
buyers, avoiding mention of the 80 units already sold by Giannella
at similarly inflated prices to similar straw buyers.
The
original sale list
shows that the total sales value of the 112 units was
$38,870,240 and the total value of the loans was
$35,392,409. The acquisition
and development loan to be paid off was
only
$6,256,000 originally loaned by Irvine-based
Berkshire Mortgage, a privately held
commercial mortgage lender, now owned by
Deutsche Bank, headquartered in Frankfurt Germany.
Mark
Gleiberman
was the borrower on that original
(still outstanding?) acquisition and development
$6,256,000 Berkshire Mortgage loan. Presumably he
is still involved with Giannella as an owner of the
units even though he
deeded some of them from his
MG Woodlands Townhomes LP to North Coastal LLC on
April 4, 2005.
A separate declaration accompanying that
grant deed at recordation declared it a "full value"
sale for $6,325,000. That is only $69,000 more
than the loan he put on it on September 19, 2000. He
could not have taken back a note as no new liens were
filed. Nor did the supposed purchaser, Giannella,
assume the existing loan of
$6,256,000. If that were the case the County transfer
tax would have been $75.90, not $6,957.50 as actually
paid. Also, par. 21 of the
Deed of Trust has an acceleration clause which
requires lender's consent for an assumption.
For the above grant deed to be genuine, i.e. not
fraudulent as to its declaration and county transfer tax
paid, Gleiberman would have literally given the complex
away to Giannella. In my experience developers don't do
that.
The fundamental question then is this: who received the
$32,614,240? How was it divvied
up? Did the conspiracy between developers, loan
officers, title officers, escrow officers, appraisers
and notaries amount to racketeering? This is far greater
than a one man scam by McConville.
The 112 units sold for a total of
$38,870,240 with only $6,256,000 to
be paid off ($38,870,240 -
$6,256,000 = $32,614,240). Lenders contributed
$35,392,409
of this
cash bonanza. Only
$3,477,831 was put down by 112 borrowers i.e. an average
of 91% loan-to-value ratio or an average of only 9%
down. And it is probable that even that was only on
paper.
That
is the "staggering swindle" that needs to be
investigated, not the gullibility of three women who
knew nothing about real estate and "got in their own
way" as Vicki Jenkins so poignantly put it.
I asked the three McConville buyers if they were
aware that they had applied for several owner-occupied
loans at the same time (a particularly sensitive point
for me). They seemed totally unaware that the loans were
in fact owner-occupied loans. They said they had never
seen the closing documents, much less had them explained
to them. This seemed to stir them to even greater levels
of indignation at how they had been duped and were still
being duped by attorneys and the media. They are now a
force to be reckoned with.
In her memo to law enforcement and the Voice,
Vicki Jenkins explained that McConville put in 20% of his own
money (she now wonders where that money came from). But
that had been the clincher for her and her friends. Why
would he risk approximately $70,000 of his own money on
each condo? To them, McConville was
the real investor and they were merely small co-investors,
putting up nothing but their own good credit.
Reading and re-reading Jenkins'
summary to law enforcement and her
explanatory email to me, I concentrated on the part
where Carless got
these documents from Giannella, presented them to
the three buyers and then published them
under the title "Payments
Sent to McConville's Company".
I wondered why the Voice would report that
McConville purchased units at a bulk price and then
re-sold them to his straw buyers at a vastly inflated
price, when Giannella's own
letter and "Addendum
to Purchase Agreement" clearly described Giannella
as the seller, who "made payments" to
McConville's company? This was contradictory.
And what was this all about? Vicki Jenkins wrote:
"Will had requested a dated signed
statement from us on March 18, 2009 to give to Ralph
Gianelli's attorney, that it was okay to release the
information to him." Why would Giannella's
attorney want a signed statement from the three buyers,
releasing his own closing statement to him? It could
only mean that he wanted proof that these buyers had
finally seen the forged closing papers.
The Voice had become a messenger boy for
Giannella. Will Carless had procured a receipt from a
buyer for a so-called closing document that the escrow
officer to whom it was addressed had never seen. Vicki
Jenkins told in her
explanatory email how
she immediately contacted Donna, the escrow officer at
Stewart Title, for an explanation:
"I called Donna back on 3/20/09 (I
have our conversation documented.) and said, "Donna, you
gave me just the buyer's side. She stated that legally
she could only give me the buyer’s side. I then said
then why do I have an addendum to escrow with a letter
directed to you that states that you must disclose both
the sellers and the buyer’s side and the 3-MAC addendum
to me. She declared, "What are you talking about?" I
have never seen such a document. Would you send me a
copy of this document?" I did and then I called her back
and asked her if she received it. She said, "I just
don't care anymore." I said okay and then she hung up."
The Voice knew these closing documents were
forged. Will Carless, who got the documents from
Giannella's attorney, also spoke to Donna the escrow
officer and got the same response - she knew nothing
about them. Yet he went ahead and reported that
"McConville
agreed to pay a discount price for the condos and then
sold them for higher prices to the buyers he'd rounded
up",
and that: "The
developers of the projects were under pressure from
banks to make sales and pay back their loans. The banks
agreed to consider selling the units at a discount price
if an investor was willing to buy in bulk, said Rob
Chemaly, a Premier representative."
The Voice had become hopelessly trapped in
Giannella's web by now.
As for "pressure from banks", the only bank involved was
Deutsche Bank, most of whose modest loan of
$6,256,000 would already have been
paid off from the massive $27,975,240 sales
proceeds Giannella and his partners had already raked in
by selling the first 80 units at vastly inflated prices
to straw buyers. Look again at the
original sale list.
According to San Diego County Tax records at least 6 of
the 32 McConville "sales" have already been quitclaimed
back to Giannella's LLC. Here are the latest
Tax records on those
units. Giannella and the banks are not out of the
woods if Vicki Jenkins and her two friends have anything
to do with it. They said they will continue to challenge
the prosecutorial system and the media to do its job. I
will support them by continuing my investigation into
who pocketed the Sommerset Villas $32,614,240.
Up and down the State of California lenders and title
companies have been conspiring with developers to bilk
people out of hundreds of millions of dollars. This
lawsuit recently filed in San Luis Obispo tells a
story that is happening all over California. I have
investigated several situations that parallel almost
exactly what happened in San Luis Obispo.
Professionals within the title and escrow
community used their positions
to commit unrestrained fraud. The damage to the real
estate system, particularly to the concept of title
insurance, will take years to reverse. Public confidence
in the integrity of title insurance, escrow and loan
origination may be irreversibly damaged.
Imagine being the holder of a second deed of trust on a
property and being asked, as part of a refinance escrow
by the property owner, to put a reconveyance (a release
of your lien) into escrow in the certain knowledge of
receiving a payoff check when escrow closes. Imagine
your shock when you discover that the title/escrow
company stole your money by clearing title for a new
loan and pocketing your payoff.
Imagine your shock when you report this crime to your
local District Attorney only to receive a letter telling
you that they were too busy and do not have the
resources to investigate. Your life savings is gone and
you have no money for private attorneys. That is just
one example of some true-life tragedies I have recently
documented from the Bay Area to San Diego.
The mainstream media must stop writing "shaggy dog"
stories about the
"straw buyers" involved in McConville's scams, while
ignoring the real crooks, the developers, the lenders
and the title companies who took the money and still
have it, while the straw buyers and many others are left
with ruined lives. The real story is how the developers,
the banks and the title companies conspired together to
commit massive fraud.
Most of the McConville straw buyers I talked to, and I
talked to quite a few, had no real estate knowledge
whatsoever and had no idea what they were getting into. They
genuinely thought they were co-investors. They were
reinforced in that belief by the fact that Jim McConville put 20% down on each loan and actually paid
that money into escrow, or at least according to the
escrow companies' settlement statements. I saw several
of these buyers' settlement statements, all of which
were only received a year after closing and only under
subpoena.
The first time many buyers saw their Deeds of Trust,
with owner occupancy clauses, was when I provided them
with copies from the County Recorder. They never saw
their final loan documents because they were signed "on
their behalf" by a McConville employee. Yet the lenders
and the title companies accepted all those legal
documents without question. It is hard to believe that
these professionals did not know what was going on. It
is hard to believe they were not complicit.
There is an old saying in real estate: to form the ideal
real estate partnership you put together somebody with
money and somebody with experience. But when the deal is
done and the dust settles, the partner with the
experience usually has the money and the one with the
money usually has the experience. Jim McConville's
co-investors now have the experience while his
co-conspirators, the developers, lenders and title
companies have the money. This cannot stand. Society
must react. Both law enforcement and the media must come
to the public's rescue.
"McConville's
Check Clears". I was amazed to read that piece of
news in the Voice of San Diego yesterday, so I
made a few phone calls to see if it was true. It is not.
The Voice wrongly reported that James McConville
wrote a check to Najarian Loans Inc., to settle
this
lawsuit.
The Voice quoted Edward F. Cullen, attorney for
two of the defendants,
Jack Thomas and Mariam Rasuli, as follows:
"I'm pleasantly surprised" the
check came through, Cullen said. "[Najarian] received
money from Mr. McConville and that money was accepted as
a release of Mr. McConville and the defendants who were
named in the lawsuit."
I spoke to Mr. Cullen and he denied having told the
Voice that anybody had received money from
McConville. He told me that all he knew was that the
case had been dismissed. I checked with the Superior
Court of California, Contra Costa County and got
confirmation that the case had indeed been dismissed
without prejudice on May 14, 2009.
I then called David E. Harris attorney for the
Plaintiff,
Najarian Loans Inc. He denied having told anybody that
Najarian had ever received a check from McConville, let
alone waited for it to clear. I told Harris that a Bay
Area investor, who has a judgment against McConville,
told me that he intended to subpoena the check. That
creditor had failed to discover any bank account
controlled by McConville. Yet here was the Voice
reporting the existence of a McConville check therefore
a bank account.
Attorney Harris assured me that the Bay Area creditor
would be wasting his money subpoenaing any alleged check.
I told him that I took that to mean that a McConville check never
existed let alone cleared. He did not disavow me of that
belief and told me that that was the best he could do
within the confines of attorney-client privilege. His
frankness probably saved the investor a lot of futile
attorney's fees as I passed that information on to him.
Why in the world would the Voice of San Diego
report such a sensitive matter as a McConville
settlement check as fact when one clearly never existed?
The Voice's named sources, the above attorneys,
both completely deny its
story.
Here are some real facts about the
300-unit condo project in the Kern County town of Ridgecrest,
where
the plaintiff Najarian Loans Inc. made
the loans that were the subject of the lawsuit. The
condo complex is called La Mirada.
On December 19, 2003 Ayyad signed a
Grant Deed
transferring ownership of these 300 units to
1402 Alta Vista Partners LLC. He did not pay any
transfer tax on the Deed, which means that he owned the
LLC or at least part of it. Jeff Greene (see my
blog dated 4/27/09) was also an
owner and a manager of that corporation. Therefore Ayyad
and Greene were partners in the La Mirage condos.
Now for
NL Inc., formerly Najarian Loans Inc., the company McConville is supposed to have settled up with. It is
owned by a real estate broker named Tracey
Lee Hirt, formerly Tracey Lee Najarian. Here is her
personal real estate
license and here is her NL Inc.
license. She seems to
have quite a lot of agents working for her. She even has
two branches here in San Diego, one at 3636 Nobel Drive,
Suite 410, CA 92122 and another at 12275 El Camino Real,
Suite 130, CA 92130.
NL Inc. was
sued by Suntrust Mortgage Inc. for negligence and
misrepresentation in selling
18 fraudulent loans to Suntrust. They were all to
McConville straw buyers. NL Inc. created all 18 as
owner-occupier loans, despite the fact that most of
these straw buyers bought multiple units, which is fraud
on its face. Here are some examples:
NL Inc. tried to blame its misrepresentation on the
straw borrowers. It pleaded that it didn't know for
example that Angela Spangler had bought more than one
unit, when NL Inc. was the lender on all three. So it
had to pretend to go after McConville and the straw
buyers.
The American legal system has degenerated into giving
color of law to illegal acts. First everybody sues
everybody to put the "settlement" under a court mantle.
Suncrest settled with NL Inc. and NL settled with
McConville. The lawyers got paid and the Voice of San
Diego got a story. The last thing lenders Suncrust
and NL wanted was the whole affair aired in open court.
The lawsuit was purely for show. Unfortunately the
Voice, eager for a story, lent it credibility.
No wonder developers/investors like William Ayyad, Ralph
Giannella, Jeff
Greene and Chris Lafornara are laughing at how easy the
whole thing is. They have no fear of being exposed in
the media, at least not in San Diego.
Now rolling in cash, they are buying foreclosure
properties that were the "security" for "securitized" loan bundles during the boom years. Here
is such a property in San Diego. It was recently
bought by the Ayadd family for $142,000 and put back
on the market for
$209,900.
The seller was a "pass-through" (securitized bundle)
created by Countrywide under an exotic name starting
with CWALT, which stands for Countrywide Alternative
Loan Trust. There are $billions in such CWALT bundles yet to come on the market, a veritable treasure trove
for the Ayyads, the Greene's, the Giannellas and the
Lafornaras, loaded down with cash from all their
inflated sales to straw buyers.
The listing agent, Guy Kennedy, is an old friend of the
Ayadd family. He notarized William Ayadd's La Mirada
Grant Deed
to Jeff Greene in 2003.
They are all getting away with it because media
"investigators" like the Voice of San Diego are
straining to give an air of normality to
some very illegal acts. Readers of the Voice are
being told that not only was there a "check in the mail"
but it has now cleared the bank. To cover up fraud you
simply need to file a lawsuit, settle it under the
jurisdiction of the court, call the media who will
obligingly report whatever you tell them, while you
plead attorney-client privilege.
If there is any hope of reestablishing trust in the
American financial system,
the media must be willing to expose fraud
perpetrators, instead of tailoring the truth to make a
good "news" story.
China and Russia wanted a
piece of the American capitalist dream - ordinary
American people lending
their life savings to neighbors to build
their American dream home through a Jimmy Stewart-style small town
American bank.
But we are not in
"Bedford Falls"
anymore. The Chinese and Russians can no longer invest in small town banks,
so Wall Street took
Jimmy Stewart's mortgages, packaged
them up in large bundles and sold them to gullible Chinese and Russian
investors as true American "mortgage-backed securities" (MBS).
These foreign investors trusted Wall
Street and got taken to the cleaners. Now Obama is
trying to bail the whole thing out. Maybe he is afraid
that the Chinese and Russians will retaliate
if he does not. At the very least, they will never trust
Wall Street again.
Creating MBSs, known as "securitization", used to be the
sole privilege of government-backed agencies like FNMA (Fannie
Mae). Now anybody can do it. That is at the heart of
the global financial meltdown.
It is not that our American banks became deregulated, they
simply chose to become unregulated brokers for foreign
investors and created all kinds of unregulated
investment instruments for them.
They had discovered that every time a mortgage is
wrapped or bundled new money is created.
The American Government
thus lost control of the money supply.
The printing of American
money had been effectively privatized. Previously only
regulated banks could create money by making regulated
loans. It was called fractional-reserve banking.
Michael Strauss, former Chairman and CEO of
American Home Mortgage (AHM),
now in bankruptcy, typifies the rogue loan
originators who took advantage of all that foreign
money. Chris Lafornara
of Kearny Mesa Townhomes typifies the many developers/sellers
who were the main recipients of that easy money.
Lafornara was able to sell his condos for three times
their normal value and pocket the profits.
Here's how it worked. A straw buyer aggregator, like
James McConville of Fremont in the Bay Area, agreed to
provide Lafornara with all the straw buyers he would
need. In the case of Kearny Mesa Townhomes there were 42
units so Lafornara would need 42 straw buyers.
Veronica Padilla is a good example. On November 29, 2006 Lafornara signed
her up, a married woman with an address in Fremont, for
the purchase of four of his units. He sold her three 2 bedroom, 900 square
feet units (numbers 13, 25 and 26) for $355,000 each and
one 1 bedroom, 644 square feet unit (number 35) for
$305,000.
All the deals were signed and notarized on the same day.
All
her loans were owner-occupier i.e. all four units were
to be her "primary residence", even though she lived
with her husband in
northern California. AHM funded her four purchase loans
of $319,500 each, a
first of $248,500 and a second of
$71,000 on each unit. They didn't even bother
to read the paperwork - they made a
loan of $319,500 on the 644 square feet unit that sold for $305,000.
Meanwhile Lafornara had "corporate" cover.
He appointed McConville's daughter
Nicole, as a "manager" of his corporation,
Kearny Mesa Townhomes. Here are the two
documents he filed at the California Secretary of State:
the
original 2005 filing and the
2006 change adding
Nicole McConville as a manager. She was added in
addition to the two original managers, Chris Lafornara and
David Hurwitz. There was no change of ownership of the
corporation.
To underline that fact, Lafornara signed a "double-flip"
of the units, from the corporation to himself and back
again, on November 30, 2006, the day after the
Secretary of State filing adding Nicole. Nicole started signing grant
deeds on behalf of the corporation on the very day of
the Secretary of State filing, November 29, 2006. Here is her
grant deed for unit number 25 to Veronica Padilla.
The double-flip of the units was to create
false comparables for subsequent appraisals. The units were worth nowhere near
$355,000 each. Unit number 16, a studio with 388 square
feet was sold to Adrianus Schabbing, a McConville straw
buyer with an address in Hayward, for $305,000 and
a loan for $244,000 from WAMU on October 10, 2007.
Nicole's father, Jim, signed the
grant deed himself, even though he was never a
registered officer of the corporation.
WAMU now purportedly owns the
unit through foreclosure. Was Schabbing's mortgage
valid? Did he get proper title from Jim?
The only persons authorized to sign grant deeds for
Kearny Mesa Townhomes were
Chris Lafornara, David
Hurwitz and
Nicole McConville.
If otherwise the
Secretary of State's records mean nothing.
To sum up, developer Lafornara's corporation raked in
approximately $11 million through fraudulent loans on
the 42 units he had converted to condos. He had already
pulled out
$3,450,000 in a refinance deal with La Jolla Bank on
September 12, 2006. That probably covered all his
investment to that date. The balance of $7,555,000 could
then be shared with those who helped in the scheme. The
losses however, will be shared, not by the banks that
originated the loans, but by the foreign investors who
purchased the Wall Street-bundled MBSs in good faith.
As a final demonstration of financial
ingenuity, bankrupt AHM is now
AHMSI,
American Home Loan Servicing Inc. It is making
millions acting as trustee in the foreclosure of
its own bad loans. Two of these foreclosed
units in Kearny Mesa Townhomes are now in the San Diego
MLS. You guessed it: they are two of Veronica Padilla's
owner-occupied units, numbers
13 and
25. We are now entering phase two of this
All-American scam.
Nobody knew better than Los Angeles apartment mogul Jeff Greene
when the real estate bubble would burst. He was one of the main architects of the
fraudulent loans that inflated real estate prices. Then he bet that the
whole edifice would come tumbling down and made a
billion dollars on that bet. He had discovered "credit
default swaps" (CDS).
Watch
him explain to a CNBC reporter how his only regret is not doing "twice as
much":
The star-struck reporter obviously did
not know about Greene's scam of creating bad loans and
then buying the financial instrument (CDS) that bet on
them not defaulting. Every CDS traded was grossly
underpriced because the market did not know how bad the
underlying loans really were. But Greene knew. He was
therefore able to buy low (before the markets realized
the risk) and sell high (after the markets realized the
risk) the oldest trick in the book.
Greene came from a Worcester Mass working-class Jewish
family. He paid his way through Harvard Business School
as a Boston slum landlord.
He moved to Los
Angeles and continued his slum
landlord business in the underbelly of Hollywood. He
befriended people like Hugh Hefner, Oliver Stone and
Mike
Tyson, who was
best man at his wedding, before which he lived with
Heidi Fleiss, the colorful "Hollywood Madam".
He specialized in rundown, rat-infested apartment
buildings in sought-after neighborhoods of Los Angeles
and branched out from there. Somewhere in that shadowy
world he teamed up with Jim McConville and perfected the
"straw-buyer condo-conversion" loan. The beauty of
Greene's scheme was that he could
then buy and sell the credit default swaps (CDS) that "insured"
the very fraudulent loans he created.
Wall Street traders had a traditional believe that bundled real estate loans were
a safe investment, that bundling spread
the risk. But Jeff knew that some bundles were now 100%
fraudulent, the 300 hundred loans on his La Mirage condo
complex for example. He knew that CDSs were a
financial time bomb. He was one of those who had set the clock
ticking.
With this knowledge all he had to do to make a billion
dollars was to purchase enough CDSs at their low-low
2006 price and wait for that price to skyrocket around
2008 when the market would realize the enormity of the
risk these CDSs had been insuring. That is why he and
others were hungry for cash in 2006. They wanted to buy
these CDSs while they were still cheap.
I did an in-depth analysis of his condo conversion
project in the
City of Ridgecrest,
Kern County.
The nearby
China Lake
Naval Weapons Center makes it familiar to many San
Diego families. Some may have lived in the
300-unit
La Mirage complex, the subject of this analysis.
It was formerly called "The Willows". Jeff Greene bought
the complex and changed its name to "La Mirage"
(appropriately named) on October
12, 2004. He took title using a company he had formed on
June 14, 2000, named
1402 Alta Vista Partners LLC. Here is the
full (restated)
CC&Rs document, signed
by
Greene personally and recorded on January 18, 2005
by a company named Millennium Holdings Inc. at 1800 N.
Argyle Ave., Los Angeles, the address given on Greene's
(now expired) real estate broker's
license.
Greene started selling his La Mirage condos on July 14,
2006. His first buyer was a close associate of Jim McConville,
Jack Thomas.
He is the registered straw owner of McConville's much-used
address at 37968 Canyon Heights Drive, Fremont, Ca
94536.
Here is that first
Grant Deed, signed by Greene himself. The purchase
price was $165,000. Here is the
Trust Deed for Thomas's mortgage with New Century
Mortgage for $148,500. It was notarized by another
key member of the McConville team,
Agnes Kantere. The scam was on.
Greene had already sold 189 of these condos before
he
deeded the remaining 111 to McConville on August 15,
2006. Here is the full
attachment showing the legal descriptions of each
condo unit. All subsequent sale deeds were signed by or
on behalf of McConville.
I compiled a list of all 300 La Mirage condo sales from the Kern County
Recorder's Office. Here is a list of those
sold by Greene and here is a list of those
sold by McConville. Many straw buyers are common to
both lists. This means that Greene was familiar with and
actually selling to McConville's buyers before
McConville bought the La Mirage complex.
Did McConville really buy these 111 condo units? Greene
paid $7,840.25 transfer tax on the grant deed,
indicating a sales price of $7,127,500 or $64,211 per
unit. Where did McConville get the money? If the sale
was genuine he must have paid cash because there is no
loan for anything like that amount recorded around that
date.
Did he really buy the 42 units in Kearny Mesa? According
to Chris Lafornara, McConville shelled out another $7.4
million 3 months later, on November 30, 2006, for the 42
units called Kearny Mesa
Townhomes.
There are a few other tell-tales in the public record, Agnes Kantere for example. Not only did both Greene
and McConville use her as a straw buyer, both before and
after Greene sold to McConville, they both used
her to notarize various straw buyer Trust Deeds!
Here is a
grant deed to her signed by Jeffrey Greene dated
August 3, 2006 (Greene deeded the 111 units to
McConville on August 15, 2006) and here is a
grant deed to her signed by James McConville dated
September 9, 2006. Here is her $101,500 "owner occupier"
Trust Deed to American Home Mortgage (a favorite
lender of these scammers) that goes with her August 3,
2006 purchase.
She bought 6 such condo units from Greene on August 3,
2006 and 3 more on August 7, 2006, all with
"owner-occupier" loans. Then she purchased another six
from McConville in September. Meantime she is notarizing
Trust Deeds for other McConville straw buyers like
Jack Thomas and
Heidi Lee. She appears to be the "Notary Madam".
To sum up: the "La Mirage" story describes the sordid
details of the 2000s real estate boom and bust better
than anything I have come across. Jeff Greene straddled
its component parts like a Hollywood anti-hero. The real
life Jeff Greene puts screenwriter Robert Towne's
character Noah Cross (John Huston) in my favorite movie
"Chinatown"
(1974) in the shade. "Chinatown" was considered to have
depicted the ultimate real estate scam. Not any more.
In reporting
this story today the Union-Tribune carefully
avoided mentioning the name of local developer Chris
Lafornara, just as the Voice of San Diego
carefully avoided mentioning the name of local developer
Ralph Giannella in a similar story about the
Sommerset Villas condos in
Escondido last week. Why is that? Aren't these
developers the real culprits?
Today the U-T even made it appear that McConville did
the condo conversion at 7555 Linda Vista Rd after
Chris Lafornara "sold" him the 42 unit condo complex on
November 30, 2006:
"Kearny Mesa
Townhomes, at 7555 Linda Vista Road, was converted from
apartments by Diamond House Development, a company
linked to James McConville of Fremont".
Chris Lafornara was still
the principal owner of Kearny Mesa Townhomes on
September 12, 2006. On that date
he signed for a $3,450,000 loan from La Jolla Bank
as "Manager of
Kearny Mesa
Townhomes LLC".
The condo conversion process,
which started back in 2004, was completed on October 17,
2006 with the filing of a final
Condominium Map. This was over
a month
before McConville supposedly "purchased" the units
on November 30, 2006.
I hope today's U-T article will not mislead the public
into believing that the condo conversion was effected by
McConville, as the U-T reported.
With regard to the
"purchase" the U-T wrote:
"A McConville
company bought Kearny Mesa Townhomes in November 2006
for $7.4 million, or about $176,000 per unit,
according to deed records and the previous
owner."
The "deed records" the U-T relied upon to make that
statement were recorded on November 30, 2006 as
documents number 2006-0849881 and 0849882.
The first
purported to transfer title to the 42 condos from Kearny
Mesa Townhomes LLC to Chris Lafornara and John Watmore;
the second purported to transfer title from Chris Lafornara and John Watmore back to Kearny Mesa Townhomes
LLC. It was a concurrent "flip", certainly not an
"arms length" sale.
Filing such an invalid grant deed makes it appear that Lafornara
"sold" the 42 unit condo complex to McConville in order
to establish a "bulk" price of $176,000 per unit that
would support inflated individual appraisals later.
Developers know how to use the media. Lafornara was
careful to ensure that CoStar
picked up the November 2006 "sale" and published it
as a comp for his appraisers to use later. He recently
convinced Mike Freeman that the 2006 "sale" was genuine.
Unfortunately the media believe these guys. They even
protect them by not publishing their names.
In any case the November 30, 2006 grant deed is invalid,
because it did not use the 42 individual legal
descriptions that were created on October 17, 2006 by
the final
Condominium Map. The grant
deed used the legal description before the lot was
subdivided into 42 condos.
I hope today's U-T article will not mislead the public
into believing that a genuine sale took place "according
to deed records", as the U-T reported.
If a change of ownership of more than 25% interest in
the limited liability company (Kearny Mesa Townhomes
LLC) did take place "according to the previous
owner" as the U-T reported, such a transaction would be
detectable by a complete reconveyance (or assumption
agreement) of the
Trust Deed dated September 12, 2006 securing a
loan of $3,450,000 from La Jolla Bank, because it had an
"acceleration" or "due on sale" clause.
Read it. The first associated reconveyance recorded by La Jolla Bank for Kearny Mesa
Townhomes LLC after November 30, 2006 was on January 10,
2007 as document number 2007-0018612.
If a change of ownership of Kearny Mesa Townhomes LLC
did not take place and the November 30, 2006 grant
deed is invalid, the 42 purchases are
invalid, the 42 loans are invalid and the foreclosures
are invalid. You cannot give a lender a security
interest in a property you do not own. Each lender would have
required title insurance, therefore the title companies
are liable for the lenders' losses. Or the title
policies are as phony as the loans!
Anybody want to purchase a 42 unit condo complex? Call
me at (619) 392-8089, I think I know where there may be
one for sale "at the right price" - after I negotiate a
settlement with a few very unhappy lenders and title
companies.
Here is
another San Diego county condominium project owned by
a company at Jim McConville's now infamous address,
37968 Canyon Heights Drive, Fremont. This is the current
owner list. They all appear to be typical McConville
"straw buyers" from northern California. Those units
marked with a red flag are in foreclosure i.e. almost
all of them.
The company that sold the condos,
Kearny Mesa Townhomes LLC, was
formed on September 19, 2005.
CoStar Group, a commercial
real estate information company,
reported the sale of this
apartment complex at 7555 Linda Vista Road, built in
1968, to Kearny
Mesa Townhomes LLC
on December 13, 2006 for $7.4
million. The
seller was
Chris Lafornara. CoStar
does not report the date of the sale, merely that it
took place.
Lavornara was still signing on behalf of Kearny Mesa
Townhomes LLC on September 12, 2006. Here is a
Trust Deed securing $3,450,000 for La Jolla Bank
personally signed by Chris Lafornara as "Manager of
Kearny Mesa Townhomes LLC".
A condo conversion application for the property
was "Deemed Complete" on October 21, 2004 by the City's
Development Services Department. The applicant was
North Park Venture LLC.
The
Planning Commission approved the Tentative Map on
April 21, 2005 under the name "Kearny Mesa Townhomes".
Kearny Mesa Townhomes LLC
was formed by Lafornara on September 19, 2005 . The
required
Public Notice was on the City
Council's docket for July 31, 2006. The conversion was
completed on October 17, 2006. Here is the final
Condominium Map.
Lafornara must
have wanted the transaction made public, which is how
CoStar became aware of it. He would almost certainly be
a CoStar client. They are the "MLS" of commercial real
estate.
The following documents on three of the units are
typical of the others:
All the
grant deeds were signed by Paul Giffin, a Director of
Kearny Mesa Townhomes LLC. All the Trust Deeds contained
an affidavit of owner occupancy and all were for dollar
amounts considerably more than the units were worth.
The default amount for unit # 11 as of February 27, 2009
, is $15,824.26. The last payment was made on August 1,
2008. The default amount for unit # 12 as of January 26,
2009 is $6,645.79. The last payment was made on
September 1, 2008.
Is McConville a "straw seller" who recruits "straw
buyers"? Is he the scammers' scammer, the
"marketer", as he was described in the Escondido scam?
Does he really own thousands of condo units up
and down the state? All we know for sure is that various
LLCs use his Fremont address as do the various "straw
buyers". Until we know the ownership of these LLCs we cannot assume that McConville
is the only scammer.
This
Settlement Statement,
known as a HUD-1, for one of the fraudulent condo sales
in Escondido about which the Voice of San Diego
and the Union-Tribune reported last week,
contains a little gem of information: a commission payment to
"United Equity".
"United
Equity" is a DBA owned by a Rancho Santa Fe CPA and
mortgagee broker named Anton Ewing. Here are
his license details with the California Department
of Real Estate (DRE). He filed the "United Equity" DBA with
the DRE on June 16, 2008, a week before closing the
fraudulent Escondido loan on June 24, 2008.
Below is a picture of his
home (and office) at
18103 Via Ascenso, Rancho Santa Fe. Not bad for a
38-year old veteran of the First Gulf War. Unfortunately
he is only renting it. Here is the
County Tax Assessor's record
showing the owners as
John D. & Dinah C. Watkins who
live and work in China.
This is their loan from Washington Mutual for
$1,500,000 when they purchased the property in
October 2007 for $2,615,000. They certified it as their
primary residence although they are living permanently
in China.
They gave a
power of attorney to Mr. Watkins Sr. in Columbus,
Ohio to sign the loan documents on their behalf. One
wonders how Washington Mutual could make an "owner
occupied" loan to somebody it knew, through employment
verification, to be living permanently in China. Perhaps
they had a broker like Ewing who knew how to get it
done.
Now that we have a connection between the Escondido scam
and the San Diego RICO case, what next?
How many of these people knew each other?
I decided to run a check on the two northern California
addresses associated with Jim McConville. I "Google
Earthed" the properties and found that they are both
single family houses in rundown neighborhoods.
3218 Baumberg Avenue, Hayward is the worst, with
37968 Canyon Heights Drive, Fremont being the best
house on a "so-so" street. This last address is where
Ralph Giannella's
Escondido company sent various "consultant"
fees of $180,454, payable to
a McConville
company,
3 Mac Asset Portfolio.
Did McConville get to keep them all? Very unlikely.
The Hayward house was
deeded to Nicolle McConville by Jim McConville as
Emerald Park House Corporation. The Freemont house
was
deeded to a Jack Thomas
by Nicolle McConville
as
Diamond House Development, a company
involved in condo sales in Fresno
as Stonemark
Homes, associated with
Giannella's partner, William Ayyad, as more fully
described below.
There are
a number of foreclosures in
the McConville/Ayyad company's Fresno condo complex that resemble foreclosures
in the Giannella company's Escondido condo complex. Read
my April 13, 2009 blog on the
Escondido condos.
Let's look at the situation the Linn family in Fresno
now find themselves. It is substantially the same as the
Jenkins family in Escondido: they both participated in a
loan scam for a fee and are now left holding the bag.
The Linns purchased three condos in
Stonemark
Homes from
Stonemark Asset Portfolio, a McConville company. I
have obtained the documents on two of them. They are
worth studying to see the pattern.
Stonemark granted title to the Linns as straw buyers
with a
grant deed for 4875 E. McKinley Ave., #106, and one
one for #117. The "purchase price" in each case was
$225,000, while similar units were selling for $125,000.
The straw buyers then signed First Trust Deeds for
$157,500 each,
one on #106 and
one on #117. Next they signed two Second Trust Deeds
for $45,000 each,
one on #106 and
one on #117. All this took place on the same day,
May 10, 2007.
On September 1, 2008 the straw owners made their last payments. The lender filed
Notices of Default (NOD) on the First Trust Deeds only,
on February 23, 2009,
on #106 and
on #117. The NODs show $6,125.98 owing on #106 and
$6,230.98 owing on #117 as of February 27, 2009. The
Second Trust Deeds will be wiped out in the foreclosure
sale. So will any leasing rights of the renters. Rental
agreements are junior to First Trust Deeds, just like
junior Trust Deeds.
Giannella and Ayyad are well known as owners and sellers
of condo conversions statewide. The "Agent for Service
of Process" for
SSBI Stonemark Homes L.P. is Randy Bailey, a
vice-president of the company Ayyad founded,
United Development Group Inc..
Ayyad's company,
United Development Group Inc., has a longtime presence in Fresno. According to
this article in the Fresno Business Journal dated
November 25, 2005,
"United Development Group
owns several apartment properties in Fresno that they
have purchased during the course of 15 years".
The article explains that under the name "Condos in
Fresno" it converted 220 units called "Villa
Borgata" and 74 units at "Ridgeview". According to
United Development Group's
web site it directly manages "The
Lexington" apartments in Fresno.
This
Reader article, dated May 1, 2003, describes how
ex-City Councilmember Ralph Inzunza's wife Olga, worked
for Ayyad: "Until
recently, records show, Olga worked for an enterprise
run by Willie Ayyad, one of the Barrio Logan area's most
successful developers of multi-unit low-income housing.
His company, Premier Communities, has also developed
upscale condominiums in Chula Vista, Escondido, Bonsall,
La Jolla, and Alpine. In a 1998 county disclosure
filing, Inzunza listed his wife's position at the Ayyad
owned ACDW Inc. as "Accounts Payable." She is now
reported to be spending a large portion of her time
managing the couple's real estate."
According to
Manta,
ACDW Inc. operates an apartment building in Fresno,
called "Villa Hermosa".
Putting all this together and it would appear that Jim
MConville had a prior business relationship with William
Ayyad before becoming the expensive "consultant"
for Sommerset Villas, the Escondido condos sold by a
company apparently owned by his partner, Ralph Giannella.
Anton Ewing provides a connection between the RICO
"straw buyers" conspiracy, for which he and 23 others
were arrested by the FBI on April 7, 2009, and the
fraudulent loans created to sell the Escondido condos
owned by a Giannella company.
It is likely that the Feds will entice Anton Ewing to
"sing". Once the "singing" begins, we may learn
"the rest of the story".
Here is what the Voice
of San Diego did not tell you in its
real estate scam story:
Vicki Jenkins, the buyer, signed five trust deeds
(mortgages) as an owner-occupier on five
different properties. The Voice merely reported
that she had "loaned her identity" for a fee.
This is
the relevant page from one of her trust deeds
showing the "owner occupancy" clause. All five trust
deeds contained this clause. Ms. Jenkins promised to
occupy all five properties as her principal residence
all at the same time! Here are her
five loans. It is fraud to obtain an owner-occupied
loan under a false declaration of occupancy. When you do
it on a federally insured loan it is a federal crime.
Did the Voice of San Diego fail to
report the loan fraud in order to protect the seller who
benefited? They spent three months investigating this
and didn't find out about the owner occupancy fraud? I
spent less than one hour investigating it and discovered
it right away. It is all in the public record.
In reporting this story the Voice never once
mentionedthe seller, Ralph Giannella. Giannella
is well known around San Diego as a major seller of
condo conversions. Using the usual maze of Limited
Liability Companies (LLCs) developers use, he had
purchased Sommerset Villas from Mark Gleiberman,
another well known condo converter. Here is his
subsequent
grant deed to Vicki Jenkins using one of his many
LLCs,
North Coastal.
This maze of LLCs does not excuse the Voice for
failing to include the real seller in their
investigations. They knew who he was. He had signed
this letter, which the Voice itself published.
But they never once mentioned his name in their report,
even though he had signed this
Addendum to the Purchase Agreement,
which the Voice also published.
Giannella used this "disclosure" document in an attempt to normalize a "secret
profit". He unloaded dozens of troubled condos in a
fraudulent scheme and didn't know about the loan fraud?
There was more to this than McConville borrowing the
identities of some gullible straw buyers. It required
them to make false loan statements. It was fraudulent
in its very concept.
It had to be abundantly clear to the Voice that
Giannella knew all about the "secret profits". Yet the Voice report is all about
McConville. The local guy is given a free pass. Look at
this
Settlement Statement known as the HUD-1. It shows a
"marketing fee" of $180,454 to McConville's
company,
3 Mac Asset Portfolio! But
nothing about the seller who paid it. What was
supposed to happen to the "marketing fee" once it
was paid to McConville? Was he meant to keep it all?
"Secret profits" are usually divided up among the
participants. Ms.
Jenkins is still waiting for her cut.
This is not the first time the Voice gave a free
pass to a developer with regard to "secret profits" in
dubious real estate deals. Back in July 2007 I uncovered
a land deal involving a "secret profit" to SEDC's
chairman, "Chip" Owen. Will Carless, the same
Voice of San Diego journalist who "broke" the
Escondido story, told me at the time that he had
investigated what I wrote in
my blog about Owen but could find nothing wrong with
him receiving a "secret profit" of $500,000. He refused
to investigate it further.
Carless now believes that this knowledgeable developer,
Ralph Giannella, knew nothing about the fraudulent loans
that bailed him out of his troubled condos. We are
expected to believe that Giannella gave McConville
approximately $180,000 for eachsale and
didn't suspect a thing. The Voice will probably
seek a prize for this piece of work.
"United
Equity" is a DBA owned by a Rancho Santa Fe CPA and
mortgagee broker named Anton Ewing. Here are
I have never had a lawsuit or an ethics complaint filed against me.
I was trained in the old-school of following "The Golden Rule".
