Alleged rescue scam busted

Hundreds of homeowners facing foreclosure have fallen victim to scam artists who told them they could hang on to their properties by placing them in phony “land grants,” authorities said today as they announced the breakup of the alleged scheme.

In a joint announcement, California Atty. Gen. Jerry Brown, San Diego County prosecutors and the FBI said they had shut down Federal Land Grant Co., a San Diego-based business that allegedly persuaded hundreds of homeowners, most of whom didn’t speak English, to pay $10,000 each for the bogus protection from foreclosure.

The homeowners were falsely told that by transferring their land back to the federal government they could protect it from any lender’s claim and eventually get it back free and clear, although they might first be evicted, officials said.

In related cases, authorities said, property owners paid only $500 but signed their homes over to the defendants and were required to make payments in which they supposedly were leasing back their own homes.

In both scenarios, the homeowners typically wound up losing their money and being evicted, Brown said.

More than 400 homes were in San Diego County, with scores of others in Riverside, San Bernardino, Orange and Los Angeles counties, officials said, adding that they expected to find more victims throughout California who hadn’t come forward or didn’t realize they were scammed.

At the heart of the alleged scheme were land grant transfers, used hundreds of years ago when the United States was still acquiring land from other countries. They are no longer recognized by any court or county assessor, Brown warned.

“There hasn’t been a legitimate use of the land grant since the conclusion of the Mexican-American War,” he said in a news release. “If some fast-talking scam artist offers a quick escape from foreclosure using archaic documents, be extremely suspicious.”

Federal Land Grant promoted the scheme at weekly seminars where the sales pitch was translated into Spanish, authorities said in court documents. They said the company was run by William Hutchings, 62, his wife Xiaoke Li, 43, and Hutchings’ former wife, Shawna Landis, 36.

Authorities said Hutchings and Li were arrested on criminal charges of conspiracy and grand theft Wednesday as they were making a presentation to more than 50 new homeowners. Two men involved in the presentation, Edgar Martinez, 30, and Diego Gil, 38, also were arrested. The four were jailed Thursday and could not be reached for comment. Landis was being sought, Brown and San Diego County District Atty. Bonnie M. Dumanis said.

The defendants were charged with more than 100 felony counts and that number is expected to increase, according to San Diego County prosecutors, who will handle the criminal case. Their assets and bank accounts were frozen, and Brown filed a lawsuit seeking restitution and fines.

Steve Robinson, a San Diego deputy district attorney, said the defendants were being held in lieu of $750,000 bail each and would be arraigned Friday in San Diego Superior Court.

The victims were in deep trouble on their loans, having received notices of default, the first step in foreclosure proceedings, indicating they were behind more than 90 days on their payments.

People in similar circumstances should call their lenders, Robinson said, “but a lot of people don’t realize that’s the best thing you can do right now. They’re scared.”

To lend credence to the scheme, the company attached to the paperwork a survey from when property was transferred to the U.S. by a foreign entity hundreds of years ago. In San Diego, for example, the company attached a copy of a survey from the Spanish Land Grant of 1872 and said that the deed reinstated the land grant and would protect homes from foreclosure, the attorney general’s office said.

Similar documents have been used as evidence by survivalist and tax protest groups such as the Minutemen and Posse Comitatus in unsuccessful attempts to avoid paying property taxes, according to supporting material filed with Brown’s lawsuit.

Brown sued the individual defendants and the companies through which they operated: FLG Co. and Land Grant Services, both incorporated in California; Landis Business Services Inc., a suspended California corporation; and KBS Resources, incorporated in Nevada.

 scott.reckard@latimes.com