FACTS
On May 11, 2010 investors in Mortgages Ltd. filed a $900 million lawsuit alleging the bankrupt investment firm's lawyers and accountants should have blown the whistle on its risky lending practices. The lawsuit's plaintiffs argue that three large professional-services firms intentionally helped Mortgages Ltd. and former investment partner Radical Bunny LLC defraud investors.
The three firms, not named as defendants in previous Mortgages Ltd. lawsuits, are Miami-based law firm Greenberg Traurig LLP, Milwaukee-based law firm Quarles & Brady LLP and accounting firm Mayer Hoffman McCann PC, which is based in St. Louis.
"Mortgages Ltd. and Radical Bunny could not have perpetrated and concealed a fraud so massive without the complicity of lawyers and accountants," alleges the lawsuit, whose plaintiffs include investors Robert Facciola, Honeylou Reznik and Fred Hagel. "These professionals provided a façade of legitimacy to the scheme." Representatives of the two law firms have issued statements denying the allegations and expressing their readiness to defend against them in court. Both Mortgages Ltd. and Radical Bunny are insolvent and in bankruptcy.
Mortgages Ltd. financed several high-profile projects in the Phoenix area during the real-estate boom that began in 2005. In June 2008, after the death of Mortgages Ltd. chief executive Scott Coles, the lender was forced into bankruptcy by developers.
In April 2010 at the conclusion of an investigation that lasted nearly two years, the Arizona Corporation Commission ordered Radical Bunny to pay $190 million to investors. It found that Radical Bunny, which loaned money from almost 900 investors to Mortgages Ltd., was not registered as a securities dealer, misled investors about the degree of risk, and continued to solicit investment after its lawyers warned that doing so would violate securities laws. (azrep51810)
MORAL
Let me understand this. The investors are suing the lawyers because they warned Radical Bunny not to continue to solicit investors because it would violate securities law? Or do I have it wrong. Good luck with the lawsuit against the Greenburg firm, you will need it.
FOUR ARRESTED, FIVE WANTED IN SOUTHERN CALIFORNIA FOR FLEECING HUNDREDS SEEKING FORECLOSURE RELIEF
FACTS
On May 20, 2010, California Attorney General Edmund G. Brown Jr. announced that nine men engaged in a Southern California boiler room, tricked out in high-roller style with a roulette wheel and other casino equipment, have been charged with 97 criminal counts for stealing at least $2.3 million from more than 1,500 homeowners who were promised loan modifications but received no relief. The 97 criminal counts filed against the nine defendants, include 63 counts of grand theft, 26 counts of unlawful foreclosure consulting, seven counts of tax evasion and one count of conspiracy
Arrested were Greg Scott Quinn and Juan Pierre Washington, who worked as company sales managers and supervisors. They are being held at Los Angeles County Jail.
Gary Arnold Eisenberg and Ira Itskowitz each spent more than five years in federal prison for previous fraud convictions and are already in federal custody for violating parole in connection with their participation in the scheme.
The four principal owners of the business, Niv Iskin, Reviv Karpman, Tomer Kogman and Avraham Yechizkia, along with Barel Iskin, are still being pursued by law enforcement.
Brown's office initiated its investigation in March 2009 in response to numerous consumer complaints against the defendants' Canoga Park-based loan modification business, which operated as Mason Capital Group LLC and Gretchen Fox and Associates.
Between January 2008 and June 2009, the four owners took in at least $2.3 million in up-front fees, which ranged from $1,000 to $5,000, from more than 1,500 homeowners throughout the country. In almost every case, no loan modifications were completed, as promised. Financial records indicate that the four owners spent hundreds of thousands on private school tuition, travel, entertainment, shopping and other personal expenses while running Mason Capital Group LLC and Gretchen Fox and Associates.
The four owners used a telemarketing operation that targeted homeowners facing mortgage payment increases or foreclosure. During an initial call, the telemarketers touted the company's team of "attorneys, forensic accounting personnel, and loan negotiators" available to negotiate reductions in interest rates, monthly payments and principal balances; their supposed 90% to 100% loan modification success rate and refund guarantee. The telemarketers then collected financial information from homeowners to determine if they "qualified" for the company's services.
Soon after the initial call, homeowners received a follow-up call to inform them that their case had been "reviewed" and "approved." Telemarketers closed sales by insisting the approval would expire unless homeowners acted quickly, while reminding them about the refund guarantee if promised results were not achieved.
The company completed very few loan modifications, rarely contacted lenders, failed to honor the refund guarantee, employed unlicensed "loan processors" and had no legal staff negotiating with lenders.
While homeowners waited, they were told their loan modifications, or refunds, would be voided if they tried independently to contact their lender. Many lost their homes to foreclosure as a result.
To skirt the state's foreclosure laws, avoid paying refunds and conceal profits, the owners changed company names, claimed bankruptcy and shifted loan modification files to another business they created called American Financial Group LLC.
MORAL
Please remember, no advance fees allowed by anyone for loan modifications at all, including attorneys.
CALIFORNIA MOTHER AND DAUGHTER CHARGED IN $2.3 MILLION MORTGAGE FRAUD
FACTS
Alice Kantin and her daughter Dawn Marie Kantin, both of Kern County, Calif., have been charged with bilking dozens of people out of more than $2.3 million in an alleged real estate scam.
Prosecutors say the two of them ran a company called Desert Air Real Estate Investments Inc., which entered into rent-to-own agreements with at least 32 people. They say distressed homeowners would sign over their houses to the company, and then pay rent that would go toward the mortgage. But, prosecutors say, the women didn't put the rent money toward the mortgage, and the homes went into foreclosure.
