Wednesday, September 3, 2003

Lawsuit alleges property flipping

By Ken Alltucker
The Cincinnati Enquirer

A lawsuit filed Tuesday in federal court in Cincinnati accuses nearly three dozen companies, real estate investors and others of orchestrating a complex mortgage fraud that involved selling overpriced homes to three unwary buyers.

Each buyer was promised a chance to build wealth by owning rental homes, the suit filed in Cincinnati charges. It also alleges each buyer ended up with junk properties that generated large repair bills, leading the rookie landlords to financial ruin.

The FBI raided four companies named in the lawsuit in July in connection with an investigation of 500 suspicious property sales over the past few years in Greater Cincinnati. Those companies include Premier Land Title in Glendale, Global Title in Sharonville and two Fairfield companies, Charter First Banc and TR Funding.

The investigation involves real estate "flipping," the practice of artificially inflating the value of properties, taking out mortgages on them that far exceed the real value and pocketing the difference.

But the lawsuit alleges a wider conspiracy of investors, lenders and appraisers that worked together to pump up the value of homes in working-class neighborhoods and sell them to unsophisticated buyers. In some cases, loan applications were falsified, the suit charges.

The nonprofit housing discrimination group, Housing Opportunities Made Equal, is paying for the lawsuit. A Walnut Hills couple, Kimberley and Tony Fletcher, filed a complaint with HOME after purchasing six homes.

The Fletchers claim they were lured with false promises of profitable deals. They say they were left with shoddy homes that generated large repair bills. They filed for bankruptcy and lost their rental properties to foreclosure.

"These are wonderful working people who had absolutely pure credit," said Karla Irvine, director of HOME. "This decimated them."

The Fletchers met real estate investor Horace Roberson in 2001. Roberson, of Madisonville, told the Fletchers that he had a property-investing program designed to help build wealth for African-Americans.

The lawsuit states Roberson promised to help arrange appraisals and loans to purchase the rental homes. He even promised to repair the homes, recruit tenants and collect rent for the Fletchers, according to the lawsuit. All the Fletchers had to do was use their credit to purchase the homes and then collect rent.

But soon after the Fletchers purchased the homes, the lawsuit says Roberson reneged on his promises to repair and manage the properties. Furthermore, the Fletchers were left with mortgage debt that far exceeded the value of the homes.

The lawsuit describes Roberson, who couldn't be located for comment, as a "front man" for a web of real estate speculators, mortgage brokers, title companies and others that have operated a widespread mortgage fraud scheme in several Greater Cincinnati communities. Investigators and community activists believe this fraud has contributed to Hamilton County's record foreclosure rate, which has skyrocketed 66 percent over the past four years.

Other plaintiffs named in the lawsuit include Earl Woods of Lower Price Hill and Gloria Ward of South Fairmount. Like the Fletchers, Woods and Ward say they were lured in by a front man, Milton Trice III of Amberley Village. Trice didn't return phone calls for comment.

Woods purchased three homes, and Ward bought six homes. Both are struggling to recruit tenants and make mortgage payments.

"These people seem to be caught in a web of improper actions by a core group of people," said Ted Wills, a lawyer representing the Fletchers, Woods and Ward.

The lawsuit asks that the plaintiffs have all property liens removed, get all their money back and be awarded unspecified damages.

One of the defendants, appraiser Joseph Zajac, declined comment. The lawsuit accuses Zajac of artificially inflating the value of several properties to get loans that surpassed the real value of the properties. Another defendant, Ronald Trester, also declined comment.

Other defendants couldn't be reached. They include: Steve Minger, Preferred Funding, LLC; Yellowstone Properties; DS Properties; Heather Wells; Kena Property; Executive Mortgage Group; Steve Carey; Seven Hills Financial; Freedom Financial; First Ohio Capital; Midwest Mortgage; Nick Ski; Midas Mortgage; Safe Fund Real Estate Investments Inc.; Priority Rehab; Big and Little Construction; Joseph Zajac; Zajack (sic) Appraisal Services Inc.; Lisa Powers; Donald Powers Jr.; First Service Title; Premier Service Mortgage; Richard Davidson; Davidson Insurance Agency, and Foremost Insurance Co.


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