I knew it was coming and only a matter of time, but real estate investor Don Green has finally been indicted for fraud, money laundering and tax evasion. Going down with him are loan officers and appraisers that helped him in the alleged scam.
In a nutshell, the allegations are that these guys would find people to put up their credit to buy properties at incredibly high prices. The "seller" would agree to contributions back to the buyer for repairs that would never be completed. The appraisers would jack up the values and the LO's would push the paper through. Hmmm, who was supposed to do the repairs?
Last summer Mr. Green also defaulted on about 326 properties that he owned through an LLC. Most were in terrible condition. Over 15 banks took a serious financial hit including a good number of smaller community banks in town. I looked at buying portfolios from the lenders at an average price of $21,000 per property. Loans averaged $45,000 per property. Last year the offer was rejected. Now, the banks are still stuck with a lot of them and can't get $21,000.
That many properties going on the market all at once, many on the same blocks where other defaults were occurring, literally decimated neighborhoods.
Attached is a link to the Columbus Dispatch article on the topic.
Do you have questions about distressed assets, receivership or bankruptcy sales, auctions? Email me at rfk@gryphonusa.com and I'll try to answer it in an upcoming post.
Richard F. Kruse is the President of Columbus, Ohio based Gryphon USA, Ltd. (www.gryphonusa.com). The Gryphon Organization includes Gryphon Asset Management providing receivership and consulting services in the distressed marketplace, United Country Gryphon Realty & Auction Group (www.ucohiorealty.com & www.ucohioauctions.com) providing real estate brokerage and auction services throughout Ohio and OnlineAuctionUSA.com (www.onlineauctionusa.com) providing commercial asset liquidations from the Midwest to East Coast.
United Country Gryphon Realty & Auction Career Opportunities Available. Call 614-885-0020 x 17
The men recruited people who were "relatively ignorant regarding real-estate business" to sign for loans on investment properties, according to the indictments.
Interesting, huh ?
Mitch,
I must have missed the seminar where they taught this technique. However we had our own local hero's take the game plan to a whole new level, involving a ponzi scheme.
I have written several articles on the local mess, as it unfolds and thought you might want to see what our guys did California Gangsta Style by reading this article I wrote,
Mortgage Fraud Can Have a Negative Ripple Effect
Make sure you check out the comments, several of the victims have spoken out and provided links to thier own victim websites. It is a heartbreaking story.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
Rich,
It is a National Epidemic! It seems that when the Real Estate Market took a turn for the worse, The "Predators" saw and created an opportunity for themselves. I've witnessed similar schemes here in Miami for the past 5 years. The "ringleader" locates vulnerable appraisers, attorney's, seller's "straw-buyers", eager lenders a questionable title company... and the scheme develops into a massive fraudulent enterprise. The rewards are huge, so it is easy to see how the participants get sucked-in.
The crime is certainly NOT victimless as you mentioned, entire neighborhoods and families get hurt financially by the ripple effect on abandoned properties and artificially inflated values.
In my opinion, IF YOU DO THE CRIME, BE PREPARED TO DO THE TIME.
Warm Regards,
Sunny Isles Beach, Florida
Rich - we had sort of the same thing here in Toledo a couple years ago. And it is still impacting business. The houses that were placed with a Receivor are being auctioned off slowly and the investors are only getting back about 10% of their original investment.
In one particular case the investor had $95,000 tied up in the note. The deal went belly up, the bldg went to auction and sold for $30,000. The split after commissions came down to $24,000. When the receivors were paid and the attached fines were settled, the investor got back $5,700 of his original $95,000. Hardly a good return on his money.
I have been approached by several 'wholesalers' who have wanted me to invest in their LLCs to purchase pre foreclosures. The trick is that there is no defined way to cash out. And even though they want to purchase through a short sale, the market price becomes twice what the market will bear. I have said no thanks - more then once - and I still get those calls.
I was born at night, it just wasn't last night.
Rich,
Did you see this one?
http://www.newarkadvocate.com/apps/pbcs.dll/article?AID=/20070824/UPDATES01/70824025
Call me when you get a chance.
More news in today's Dispatch
http://www.dispatch.com/live/content/local_news/stories/2007/08/26/hitshome.ART_ART_08-26-07_B1_PB7NGJO.html?sid=101