Jason Rose

Here is another example of a recent Fair Housing Act lawsuit brought by the United States Department of Justice (“DOJ”). I try to post case summaries in order to provide timely updates to real estate agents and brokers about the "dos and don'ts" under the Fair Housing Act, since fair housing is such an important issue.

Yesterday afternoon (Tuesday, May 19, 2009), the DOJ filed a Fair Housing Act lawsuit against the town of Garner, North Carolina, and the town’s board of adjustment alleging that they violated the Fair Housing Act when they refused to allow up to eight men recovering from drug and alcohol addictions to live together as a reasonable accommodation for their disabilities.

The lawsuit also alleges that the defendants had engaged in a denial of rights to a group of persons or a pattern or practice of discrimination by failing or refusing to recognize their obligation to make reasonable accommodations. The home is chartered by Oxford House Inc., a non-profit organization that assists in the development of self-governing houses in which persons in recovery support one another’s determination to remain sober. The town of Garner permits up to six persons to live in the home, but has refused to consider requests by Oxford House to increase the number to eight.

The Fair Housing Act requires jurisdictions to make reasonable accommodations in their rules when necessary to provide persons with disabilities an equal opportunity to housing. As a result, the DOJ believes that the town should have granted the request to allow eight people as a reasonable accommodation.

This case arose as a result of a complaint filed with HUD by Oxford House. HUD conducted an investigation and referred the matter to the DOJ.

The lawsuit seeks monetary damages for the victims, a civil penalty and a court order requiring Garner to grant the requested accommodation and establish a procedure for considering future accommodation requests. The complaint is an allegation of unlawful conduct. The allegations must still be proven in federal court.

I will try to follow this case and provide an update when the case is resolved.

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To learn more about fair housing issues (and many other real estate topics), please visit us at www.123ConEd.com. We are the leading online provider of Michigan real estate continuing education. All of our courses are fully approved and properly certified by the State of Michigan, and are offered online.

Copyright © 123 ConEd LLC 2009. All rights reserved.

Here is another example of a recent legal case involving a fraudulent real estate scheme committed by a real estate agent. I try to post case summaries in order to provide timely updates to real estate professionals on important issues.

On May 7, 2009, Alethia Grooms, a licensed real estate agent, was sentenced to 37 months of imprisonment for her involvement in a $48 million property tax refund fraud scheme orchestrated by former District of Columbia Office of Tax and Revenue (“OTR”) manager Harriette Walters.

Ms. Grooms plead guilty on August 13, 2008, to Possession of Stolen Property, Conspiracy to Commit Money Laundering, and Conspiracy to Make False Statement in Connection with FHA Loan. She was sentenced to 37 months in prison, required to pay $650,929.19 in restitution, serve three years of supervised release, perform 300 hours of community service, and pay a $300 special assessment.

According to her plea agreement, Ms. Grooms participated in the theft and laundering of over $600,000 from the District of Columbia government through a D.C. property tax refund fraud scheme. Ms. Walters used her position at OTR to create false property tax refund vouchers that produced millions of dollars of fraudulent refund checks. From June 1989 through August 2007, Ms. Grooms and two of her friends received 17 fraudulent D.C. property tax refund checks, totaling over $460,000. Ms. Grooms also laundered an additional $145,000 in stolen D.C. funds through one of her bank accounts.

Ms. Grooms used her graphics design skills to help cover up the D.C. property tax refund fraud scheme. In June 2007, officials at SunTrust Bank became suspicious when a co-conspirator tried to deposit a $410,000 fraudulent D.C. check at that bank. The co-conspirator asserted that the money came from the co-conspirator’s participation in a tax sale auction at OTR. Ms. Grooms attempted to help the co-conspirator provide documentation by scanning a D.C. Real Property Tax Sale form with writing on it onto her computer.

In 2006, Ms. Grooms conspired with two OTR employees to commit mortgage fraud. Ms. Grooms was their real estate agent and assisted them with obtaining Federal Housing Administration (FHA) loans. In their loan applications, these individuals falsely claimed to have second jobs and inflated their bank accounts by $20,000. Using her graphics design skills, Ms. Grooms created bogus pay stubs and W-2 forms and forged bank statements.

In addition to her share of the proceeds of the fraudulent D.C. property tax refund checks, Ms. Grooms received cash, checks, and other items of value from Ms. Walters. In particular, Ms. Grooms received personal checks from Walters in the total amount of $42,300.

All eleven defendants in this conspiracy have plead guilty, and all but two have been sentenced. Ms. Walters, the ringleader of the conspiracy, is scheduled to be sentenced on June 16, 2009. She will likely receive a harsher sentence than did Ms. Groom.

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To learn more about a variety of real estate topics, please visit us at www.123ConEd.com. We are the leading online provider of Michigan real estate continuing education. All of our courses are fully approved and properly certified by the State of Michigan, and are offered online

Here is another example of a recent legal case involving fraudulent real estate loan schemes and bank fraud, all related real estate transactions involving real estate professionals. I try to post case summaries in order to provide timely updates to real estate professionals on important issues.

On April 16, 2009, the two owners (Jonathan Helgason and Thomas Balko) of a Minnesota real estate company were sentenced in federal court for mortgage fraud in connection with a scheme involving at least 162 properties, principally in north Minneapolis, and mortgage proceeds of approximately $35 million.

Mr. Helgason was sentenced to 96 months in prison and three years of supervised release. Mr. Balko was sentenced to 84 months in prison and three years of supervised release. Restitution will be ordered at a later date.

According to their plea agreements, Mr. Helgason, a licensed real estate agent, and Mr. Balko were the owners of numerous companies, including TJ Waconia, Total Title LLC, Complete Real Estate Services, Inc. and CityWide Management, LLC and Investor’s Warehouse LLC (collectively, “the TJ Group”).

From approximately 2005 to 2007, Mr. Helgason and Mr. Balko executed a scheme to defraud and to obtain money by means of false and fraudulent pretenses. Using the TJ Group, Mr. Helgason and Mr. Balko purchased approximately 162 properties throughout the Twin Cities metropolitan area, principally in north Minneapolis. They would then resell the property within a few weeks to an “investor” who would purchase the property, sight unseen, at a price set by Mr. Helgason and Mr. Balko without negotiation, often times $20,000 to $60,000 more than the TJ Group had paid.

According to the plea agreements, people were told by Mr. Helgason and Mr. Balko that the investors were simply “lending” their credit to TJ Waconia (one of their companies). In exchange for “lending” their credit, the investors would receive a kickback payment of about $2,500 and a promise of an additional payment after two years when the TJ Group was to repurchase the property from the investor.

Through the scheme, the defendants perpetrated a fraud on the lenders who were led to believe that the “investors” were the actual owners of the properties, when, in fact, the “investors’” ownership was in name only. During the two-year period during which the investor owned the property, the TJ Group was responsible for all payments and maintenance on the property. In some instances, Mr. Helgason and Mr. Balko also provided investors with funds to pay the buyer’s portion of the property purchase price and worked with others to provide lenders with false loan applications on behalf of the investors so that they would qualify for the loan.

The two men, on behalf of the investors, obtained approximately $35 million in mortgage proceeds to purchase the properties from the TJ Group. Ultimately, the scheme collapsed, and the TJ Group did not repurchase the properties or continue making payments to the investors in order to pay their mortgages. The investors were left owning properties with mortgages that exceeded their property’s market value.

This case was the result of an investigation by Federal Mortgage Fraud Task Force, including the Federal Bureau of Investigation and the U.S. Postal Inspection Service. It was prosecuted by the United States Attorney's Office.

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To learn more about a variety of real estate topics, please visit us at www.123ConEd.com. We are the leading online provider of Michigan real estate continuing education. All of our courses are fully approved and properly certified by the State of Michigan, and are offered online

Here is another example of a recent legal case involving fraudulent real estate loan schemes and bank fraud, all related real estate transactions involving real estate professionals. I try to post case summaries in order to provide timely updates to real estate professionals on important issues.

On Monday (May 4, 2009), three people (Todd Gongwer, Lance Parker, and Joel Lee) plead guilty to conspiracy to commit bank fraud. Mr. Gongwer, a licensed real estate agent, also plead guilty to tax evasion. Mr. Parker also plead guilty to illegally structuring cash transactions.

According to the plea agreements and evidence presented during the plea hearings, from 2005 through 2007, the defendants and others negotiated and participated in real estate deals in which each of them purchased a luxury home for a falsely inflated purchase price from real estate builder Thomas Parenteau in exchange for an undisclosed or disguised kickback. Mr. Gongwer admitted to using nominees to purchase at least two other luxury homes for inflated prices with kickbacks.

In each transaction, the buyers misrepresented their income and assets in order to obtain approximately 90% financing of the inflated purchase price. The buyers, seller Mr. Parenteau and Mr. Parenteau’s real estate agent, Bonnie Helt, attempted to justify the inflated purchase prices by creating and signing false work change orders and addendums that created the appearance that the inflated price represented additional substantial work to be completed on the homes. However, no such agreement was actually intended by any party, and the documents were not disclosed to the lenders. The object of each transaction was to use the loan proceeds in excess of the actual purchase price to fund hundreds of thousands of dollars in kickback payments to the buyers. The loans associated with the real estate purchases of Mr. Gongwer, Mr. Parker and Mr. Lee have all gone into default.

Mr. Gongwer and Mr. Parker also admitted to conducting a similar transaction involving Mr. Parker’s purchase of 15 condominium units in three buildings located in Columbus, Ohio, from Mr. Parenteu’s associate and architect, William Tarcy. Mr. Tarcy plead guilty to conspiracy to commit bank fraud and agreed to forfeit assets related to the offense in March 2009. Mr. Tarcy’s sale of the condominiums also involved inflated purchase prices, fraudulently obtained financing by Mr. Parker, and substantial kickback payments to Mr. Parker as the buyer.

Mr. Gongwer accepted responsibility for causing a fraud loss between $2.5 million and $7 million. Additionally, Mr. Gongwer plead guilty to tax evasion for failure to report income he received. According to his plea agreement, Mr. Gongwer worked for RE/MAX Affiliates Inc. in 2004, and was paid approximately $158,333.32 in gross income. Mr. Gongwer deposited that income into nominee accounts in order to conceal his receipt of that income from the IRS. Mr. Gongwer also failed to file income tax returns for tax years 2000 through 2005. The tax loss caused by his conduct is between $200,000 and $400,000.

Mr. Parker and Mr. Lee each accepted responsibility for causing a fraud loss between $400,000 and $1 million. Mr. Parker also plead guilty to structuring transactions to avoid federal reporting requirements. During 2007, Mr. Parker engaged in cash transactions in amounts less than $10,000 for the purposes of withdrawing cash from his bank accounts in order to finance gambling vacations in Las Vegas and to avoid federal currency transaction reporting requirements.

Sentencing of all three defendants for a date after the July 2009 trial of Tom Parenteau, his accountant Dennis Sartain and his realtor Bonnie Helt, who were charged in April 2009 in a tax fraud and money laundering scheme. Mr. Gongwer faces a maximum sentence of 10 years in prison and a maximum fine of $500,000. Mr. Parker faces a maximum sentence of 10 years in prison and a maximum fine of $500,000. Mr. Lee faces a maximum sentence of five years in prison and a maximum fine of $250,000.

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To learn more about a variety of real estate topics, please visit us at www.123ConEd.com. We are the leading online provider of Michigan real estate continuing education. All of our courses are fully approved and properly certified by the State of Michigan, and are offered online.

Copyright © 123 ConEd LLC 2009. All rights reserved.

Here is another example of a recent Fair Housing Act lawsuit brought by the United States Department of Justice (“DOJ”). I try to post case summaries in order to provide timely updates to real estate agents and brokers about the "dos and don'ts" under the Fair Housing Act, since fair housing is such an important issue.

This morning (Thursday, May 7, 2009), the DOJ filed a lawsuit against Equity Homes Inc, PBR LLC, BBR LLC and Shane Hartung in federal court alleging that the defendants failed to provide accessible features required by the Fair Housing Act at six separate multi-family housing developments in Sioux Falls, South Dakota.

The lawsuit, which originated from a complaint filed with HUD, concerns six Sioux Falls complexes. The Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin and disability. Among other things, the Act requires that new multifamily housing developments be designed and constructed with basic accessibility features, including accessible common and public use areas, accessible routes to and through apartments, doors wide enough for wheelchair users, kitchens and bathrooms with sufficient maneuvering space for wheelchair users, outlets and environmental controls in accessible locations, and bathrooms with reinforcements for grab bars. The lawsuit alleges that the defendants failed to include certain of these required accessibility features at each of the six complexes.

When builders and designers construct homes without regard for accessible features, they are effectively shutting the door to persons with disabilities. Designing and constructing multi-family housing without basic features of accessibility violates the law and subjects the builders and designers to liability under the Act.

The lawsuit seeks a court order requiring the defendants to modify the complexes to bring them into compliance with federal laws and prohibiting future discrimination by the defendants, as well as monetary damages to compensate victims. The lawsuit filed by the DOJ is an allegation of unlawful conduct, and the allegations must still be proven in court.

********************************************

To learn more about fair housing issues (and many other real estate topics), please visit us at www.123ConEd.com. We are the leading online provider of Michigan real estate continuing education. All of our courses are fully approved and properly certified by the State of Michigan, and are offered online.

Copyright © 123 ConEd LLC 2009. All rights reserved.