10/02/08 12:30pm

Bill Heard Chevrolet Dealership, Sugar Land, Texas

Security Guard, Bill Heard Chevrolet Dealership, Sugar Land, TexasOn the lot at the shuttered Bill Heard Chevrolet off the Southwest Freeway in Sugar Land Saturday: a couple of armed security guards, hired by GM to make sure nothing leaves the lot.

Inside the dealership’s main offices it looks as though the entire showroom floor was frozen in time. Deflated balloons hang off of cubicle corners and showroom models. A loan application sits on a desk, unfinished. A framed picture of a family going down a roller coaster at Sea World hangs above an uncleared desk, one of many family photos that indicate the suddenness of the announcement.

If you’re to believe one of the managers of this particular dealership, the employees stayed late into the night helping customers get their plates processed and out the door. Contradicting this is an article from Wednesday in the Houston Chronicle in which the operations manager of Bill Heard Sugar Land, Linda Patterson, claimed they were selling vehicles into the night and would continue to stay in business. But by the next morning it was announced they would be closing, possibly for good.

After the jump: More on Bill Heard’s collapse, plus photos from Jalopnik’s (how’d they get?) behind-the-scenes report!

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09/04/08 4:03pm

What’s in the Swamplot inbox? More fun news and comments about Royce Builders and mortgage-y sidekick Hammersmith Financial:

According to a source all sales was finally let go yesterday. . . . Subdivisions have been completely stone cold. In addition, Hammersmith finished up last Friday. Between both, lots of shredding going on. The remainder of Royce is in the Hammersmith offices as well. Also, many who may be interested, [Royce Chief Operating Officer James] Hunter’s last day was a week ago Friday.

For any buyers out there who feel the have been defrauded by Royce, all they need to do is contact the Consumer Fraud Division at 713-755-5836. This is the DA’s office and there is the possibility that criminal charges may be filed if Royce knowingly defrauded consumers, but they MUST make the call.

A little bit more on the shredding:

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06/24/08 5:00pm

Tremont Tower, 3311 Yupon St., Houston

It didn’t garner much local attention, but a certain local condo building — along with a few close friends — made a star appearance in last week’s big mortgage-scam announcement by the FBI. More than 400 people were charged in 144 separate mortgage fraud cases nationwide over the last 3 months as part of the agency’s “Operation Malicious Mortgage.” Six of those arrests were in Houston:

This indictment charges Houston-area residents Frankthea Annette Williams, Ishmael Boyd Laryea, Charles Joseph-DeShawn Wilson, Kristen Anne Way and Robert Wilfred Stanley, and Tasha Rene Bellow, of Burbank, Calif., with engaging in a scheme to defraud by providing false and fraudulent information to residential lenders to induce the lenders to fund the purchase of single family homes and condominium units.

11 News reporter Allison Triarsi describes how the scams worked:

The suspects would find a home for sale, let’s say $200,000.

They would then get a phony appraisal that would almost double the home’s actual value. In that case, $400,000.

The culprits would then look for an investor. That’s someone to actually put the house in their name using their good credit for the closing and title.

A bank would then loan the money for the house, which has the phony appraisal value. The crooks would then pay the seller the $200,000 asking price and pocket the other $200,000.

Here’s a question. If you were trying to run this scam, where would you find properties you could get appraised for as much as twice their actual value? Sure, Houston had some price runups . . . and yes, appraisals can be played. But why fake something you don’t have to?

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04/17/08 10:08pm

An update on the 1031-exchange debacle surrounding the West Oaks Mall: In March, the mysterious Edward Okun — the mall’s owner — was indicted by a Virginia grand jury on charges of mail fraud, for misappropriating $132 million invested in his 1031 exchange company, 1031 Tax Group — along with bulk cash smuggling and related charges. Days later, Okun was arrested in his home on Hibiscus Island in Miami Beach.

To the 340 investors who had trusted $150 million of their 1031-exchange funds to supposedly-qualified intermediaries controlled by Okun, this was good news. But it doesn’t necessarily mean they’ll get their money back — or find a way around the huge tax liability now associated with their failed exchanges.

The 1031-exchange investors in Okun’s 1031 Tax Group had hoped to recoup some of their missing funds by raiding Okun’s other assets — including the West Oaks Mall. But the Okun-controlled companies that owned the mall declared Chapter 11 bankruptcy in October.

Today, the Costar Group reports that the freestanding building formerly known as JCPenney at the West Oaks Mall has been put up for sale, along with a mall in Salina, Kansas. The trustee in the bankruptcy case has hired Keen Realty, the new real estate division of KPMG Corporate Finance, to market both properties.

02/07/08 10:54am

FSI Trailer

It’s not just a burgeoning problem that’s destroying neighborhoods and creating havoc in the real-estate market: Mortgage fraud is now also the target of over-the-top TV-show parodies. Yes, “FSI: Fraud Scheme Investigation” is . . . a training video for bored mortgage professionals — or anyone who’s suspicious (or wants to be) that he may be surrounded by unlawful real-estate hijinx.

But really, “FSI” is so much more than that. Designed for “maximum employee learning retention,” the DVD has been a runaway hit for Interthinx, a company that ordinarily provides risk mitigation and compliance tools for the financial-services industry, but occasionally breaks out of that mold to film comedy-dramas like this or its predecessor, “Desperate House Lies.”

But wait, there’s more!

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12/12/07 2:13pm

[youtube:http://www.youtube.com/watch?v=iLqkHr77N0U 400 330]

So the actors aren’t likely to win any awards, but this new video posted to YouTube by Tremont Tower owner-victim-gadfly Heather Mickelson is notable for it’s uh . . . stirring illustration of the connection between construction-quality complaints and foreclosure train wrecks.

The Tremont is colorfully renamed “LemonTree Tower” in the video reenactment. If you’re new to the story, you’ll find better introductions to the sordid Montrose condo tale elsewhere. But if you’ve ever wondered why foreclosures seem to gather like flies around new developments that feature questionable levels of quality (and, say, water-tightness), this will make pretty good internet theater. No, the mortgage defaults aren’t the work of the millions of mold spores and the grim reaper, who together make cameo appearances in the video; they’re the ultimate result of the surefire sales techniques employed for undesirable properties — made so much easier, of course, by the subprime-mortgage boom.

Here’s the formula: Building with bad enclosure + poor disclosure = lots of foreclosure. Or just watch the video. At just over seven minutes, it’s still a lot shorter than Glengarry Glen Ross.

11/27/07 8:11am

Here’s another example of the importance of loyalty and reputation in the Houston residential real-estate biz. The Houston Press‘s Richard Connelly catches up with the ex-partner of formerly ubiquitous Houston real estate agent Mike Spear, whose ubiquity has been a bit challenged since he began serving a two-year sentence in federal prison for income-tax evasion earlier this year.

. . . even though Spear himself might be behind bars, his spirit lives on: If you’re looking to buy or sell a house here these days, you might be forgiven for thinking you’re doing business with the well-known realtor.

Before the two joined Prudential Gary Greene in 2005, Spear and Realtor Ray Allison ran Montrose mainstay AllisonSpear Realtors. Allison explains to Connelly:

There’s a group of professionals within Prudential Gary Greene that are organized as the Mike Spear Team, but it is not the official name of this company.

Huh?

Mr. Spear did work with this firm. He is no longer with this firm. The Mike Spear Team does continue. It is appropriate for it to continue . . .

There’s more: Spear’s admissions from the July 2007 plea agreement, featuring shell corporations and a Mercedes Benz.

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11/14/07 4:04pm

9602 Moonlight Dr., Meyerland, Houston

One detail glossed over delicately in Lisa Gray’s colorful tale of the decline of Meyerland’s Carousel House, featured in today’s Chronicle: The abandoned home’s apparent awful stench. From a few would-be visitors, posting on HAIF:

The owner told me that everyone he’s taken in there has gotten sick soon after coming out. Apparently it is REALLY nasty in there. I may swing by and get some new filters for my mask.

and

i could smell “the smell” just standing in the driveway

But hey, the interior shots from just a few short years ago make the house look super fab! Built in 1964 by owner Robert Cohen, the Modern gem merited a Texas magazine feature story in 2003. Just four years, one ultra-rich attorney, one shady personal assistant, countless hookers, umpteen heroin hazes, and a couple of dozen missing exotic cars later, the house on the corner of Moonlight Dr. and Braesheather appears headed for an almost-certain but certainly difficult demolition. (15,000 pounds of steel, anyone?)

After the jump, highlights of the home from its heyday, excerpts from the sordid and fetid tale of its fall from Modern grace, and a photo of the far more up-to-date carousel that just might be built in its place!

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10/16/07 8:03am

Food Court at the West Oaks Mall, Houston, Texas

So much excitement at the West Oaks Mall! Don’t worry, it likely won’t be foreclosed on—because the owners of the super-regional mall at Westheimer and Highway 6 have now declared bankruptcy. This is bad news for about 340 investors who were hoping to recoup 1031-exchange funds that went missing in the middle of their transactions. They’ll likely lose more than $150 million dollars . . . and possibly be required to pay taxes on the gains they made (and were hoping to shield with the 1031 exchange) . . . before they lost them.

Their money was to be held in escrow accounts for when they came back to conclude the back-end purchase of their tax-free exchange. When that time came, the money was gone.

Now, one of the largest of those assets that creditors had hoped could be used to recoup some of their money is untouchable.

IPofA West Oaks Mall LP, IPofA West Oaks LeaseCo LP and IPofA WOM Master LeaseCo LP (collectively, the “West Oaks Debtors”), filed voluntary petitions under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, last week.

The West Oaks Debtors are directly and/or indirectly owned and/or controlled by Edward H. Okun, a controversial investor who also controls several 1031 qualified intermediaries under the umbrella firm of The 1031 Tax Group LLC that are also currently tied up in bankruptcy proceedings.

Shopping’s still good, though!

1031 exchange investors: watch where your money goes.

Photo: West Oaks Mall

07/24/07 10:22pm

Burned Shell of 7802 Links Crossing Lane in SpringFor months, the giant, burned-out shell of a home has been sitting on an acre lot at the corner of Links Crossing Lane and Augusta Pines Parkway in Spring, less than half a mile from the baby Bermuda grass fairways of the Augusta Pines Golf Course and its 100,000-sf “southern style” clubhouse. But now Harris County Fire Marshal investigators are reporting that the fire that destroyed the 7000-sf McMansion in February was a poorly concealed arson. While owner Michael Macomber was vacationing in the Bahamas, a man named Adnan Aquil filled the home with 25 five-gallon cans of gasoline he had purchased over several days from Wal-Mart and arranged them so they would ignite spectacularly.

According to investigators, Macomber has now confessed that he paid Aquil $10,000 for his handiwork, before filing a $1.2 million insurance claim.

What made Macomber do it? Was he tired of being overextended on an overmortgaged, overpriced, and oversized home in an overmarketed subdivision in Northwest Houston?

“He was holding on to everything,” [Harris County Senior Arson Investigator Dustin] Deutsch said. “His credit score was getting impacted, payments were getting impacted. The county probably didn’t appreciate him bouncing his tax check. . . .”

Of course there’s more to the story:

“After further scrutiny of the closing paperwork, investigators determined that the residence’s value was grossly overvalued by a local real estate appraiser,” Harris County Arson Investigations officials stated in a media address. “It was also learned that Macomber grossly inflated his stated income to the mortgage company. This embellishment included forged financial documents and other misleading credentials.”

In return for paying an inflated price for the Augusta Pines McMansion in March 2006, Macomber allegedly received a $171,000 kickback from the seller. In all, seven people, including a neighbor couple, have been charged in fraud related to this home. According to KHOU, every house on the street has been foreclosed on.

Yes, it’s a short street.

Photo of 7802 Links Crossing Ln.: KHOU

06/19/07 11:24am

The 1031 Exchange industry grew enormously during the recent nationwide real-estate boom, as unwitting owners of suddenly high-priced real estate discovered that selling their properties would trigger substantial capital-gains tax bills. Real-estate owners hoping to defer capital-gains taxes when they sell their investment properties have regularly turned to firms touting their services as qualified intermediaries to help them get the benefits of the tax-free 1031 exchange.

1031 Exchange accommodators can help investors navigate the somewhat tricky process more flexibly, but the industry is largely unregulated. And now two of them have gone bankrupt or been accused of absconding with funds investors have placed with them between transactions:

Mr. McGhan and his companies allegedly misappropriated more than $95 million of customers’ proceeds to fund other business and personal activities, according to a lawsuit brought earlier this year by several aggrieved investors and now in federal court in Los Angeles.

The lawsuit alleges that Southwest was a Ponzi scheme in which Mr. McGhan allegedly took QI funds belonging to more than 130 clients, in part to finance investments in a company that manufactures silicone-breast implants.

Well, there’s another growth industry. But, says the Wall Street Journal,

a QI can do virtually anything with the funds in its possession, subject to its agreement with the taxpayer. “There isn’t any kind of prohibition in the tax code that says where those dollars can be placed,” says John King, senior vice president at a subsidiary of Fidelity National Financial Inc. in Jacksonville, Fla. that serves as a qualified intermediary.

Misappropriated investments are one thing; presumably the double whammy for investors whose funds have gone missing is that their exchanges will likely fail too, and they’ll end up having to pay a tax bill on gains they no longer have.

Some advice, then:

you must make sure your 1031 intermediary places your money in a segregated account (and “segregated” means only your money is in that account). You should also insist on a method to check on the account yourself to see that your funds stay put.