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Cal-Vet Insiders Get Repossessed Home Bargains

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Times Staff Writer

Cal-Vet employees and their relatives, taking advantage of below-market interest rates, have purchased homes repossessed by their agency from veterans in at least seven cases over the last three years.

Although the sole purpose of the loan program is to aid Californians who served in the military, only one of the seven buyers was a veteran who normally would have qualified for a Cal-Vet loan, spokesmen for the Department of Veterans Affairs said.

For the record:

12:00 a.m. June 28, 1985 For the Record
Los Angeles Times Friday June 28, 1985 Home Edition Part 1 Page 2 Column 1 Metro Desk 2 inches; 71 words Type of Material: Correction
A May 24 article in The Times contained an allegation that certain Cal-Vet employees used insider information to purchase homes repossessed from veterans by their agency. The article made separate reference to a Fair Political Practices Commission investigation of William P. V. Garcia, former head of the Cal-Vet loan program. The article was not intended to imply that Garcia is under investigation in connection with the home purchases or that he is in any way involved in the home purchasing dispute.

Even so, Bill Schwabe, acting Cal-Vet division manager, said the transactions did not violate any state law or policy.

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“Selling to an employee or a relative of an employee is perfectly acceptable as long as the details of the sale are proper and above board,” Schwabe said. “I have no reason to believe they are not proper.”

Advance Knowledge

According to one agency employee, some Cal-Vet workers and their relatives bought repossessed homes using advance knowledge of when the homes would be put on the market.

“They’re the first ones to know when a home’s available,” said the employee, who asked to remain anonymous because of fear of retribution.

In one case, a Cal-Vet worker’s bid for a house was accepted by the agency before the property was publicly advertised, according to the employee.

The Department of Veterans Affairs, which oversees the Cal-Vet program and other state services for veterans, has been one of the most troubled state agencies during the Deukmejian Administration.

Admits Violation

Last December, Gov. George Deukmejian fired Veterans Affairs Director Andres Mendez after he admitted raising campaign contributions for Deukmejian on state time and then pocketing the money. Mendez also admitted violating conflict-of-interest laws by accepting gifts from an investment banking company that profited by more than $200,000 from a decision he helped make.

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As an offshoot of the Mendez probe, the Fair Political Practices Commission has been investigating whether William P. V. Garcia, the former head of the Cal-Vet loan program, made decisions that affected his own property holdings.

Commission spokeswoman Lynn Montgomery confirmed that an investigation of Garcia is under way but would not discuss any details of the case.

Carlos Alcala, Garcia’s attorney, said, “He was initially investigated for conflict of interest and he was cleared of that. They may be looking at some technical reporting stuff.”

After Mendez was fired, Garcia was demoted to supervisory purchasing agent because of “philosophical differences in management styles,” according to department spokesman Tom Jones.

Loans for Veterans

Under Cal-Vet, known officially as the Division of Farm and Home Purchases, veterans who were residents of California before joining the service are eligible for home loans of up to $75,000 at an interest rate of 8%.

The only way a non-veteran can obtain a Cal-Vet loan is by purchasing a repossessed house, Schwabe said. In such cases, the interest rate rises to 10%.

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According to department officials, employees and purchasers of the repossessed homes, there are seven cases in which Cal-Vet program employees or their family members bought repossessed prop erties.

Of the seven properties, six are houses and one is a mobile home. One is in Bakersfield and the others are in the Sacramento area.

Four were sold to employees and their spouses; the other three were purchased by relatives of employees.

The seven properties were sold for prices ranging from $16,000 for the mobile home to $74,000. None sold for more than $3,500 under their appraised value.

The sale of an eighth house to a relative of an employee in the Sacramento office has been approved, but the transaction has not been completed, Schwabe said.

Maricela Armenta, a Cal-Vet program technician in the Sacramento loan office, said she and her husband bought one of the repossessed houses earlier this year. Neither she nor her husband is a veteran, she said.

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“When the opportunity came up, we said we might as well,” Armenta told The Times. “It was just a matter of putting in a bid. . . . I really don’t know what the policy is.”

Employee Bought Home

Cindi Anderson, also a Sacramento Cal-Vet employee, bought a repossessed house that was never available to the general public, according to the Cal-Vet employee who requested anonymity.

Anderson and her husband, both non-veterans, made an offer on the property that was accepted by her office before the house was advertised.

Anderson referred all questions to her superiors saying, “It’s kind of a personal matter, my buying a home.”

A third repossessed home was purchased in November, 1982, by David Washington, a Sacramento police officer. His brother, Robert, works in the same office with Anderson and Armenta and handles appraisals in the area where David Washington purchased his home.

Denies Brother Helped

David Washington, who is not a veteran, denied that his brother gave him inside information about the repossessed property. Washington said he made an offer on the house after seeing a newspaper ad and eventually bought it for $57,500, $3,500 less than its appraised value.

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“My brother didn’t really handle it,” he said. “He didn’t handle the paper work at all. I didn’t do any negotiating with him. I felt it was basically on the up and up.”

Under the resale procedure, Cal-Vet loan officers can deal exclusively with the first bidder for a repossessed house and negotiate a final price, whether the bidder is a veteran or not.

The agency usually suffers a loss on repossessions and tries to sell them as quickly as possible, Schwabe said.

$1.4 Million Lost

In 1983 and 1984, Cal-Vet lost a total of $1.4 million on the 359 repossessed houses that were sold, he said.

“In most cases, repos are not easy to dispose of,” he said. “They’re not attractive properties. We’re carrying the property. We’re not making the interest.

“If we’ve established a value on the property of $65,000 and somebody comes in and offers us that asking price, whether it’s an employee or somebody else, what difference does it make? We’re selling it for the best buck we can get.”

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Schwabe denied that employees were given preference over veterans or other members of the public. If that had happened, he said, it “would not be appropriate.”

“To the best of my knowledge, the sales are proper,” he said.

533 Repossessions

From January, 1983, through April of this year, Cal-Vet made 13,840 loans to veterans. During that same period, 533 homes were repossessed from veterans who could not make their payments.

Schwabe said none of the employees was ever in a position to make decisions concerning the property they eventually purchased.

“These people were just lower-level staff working people, clerical people,” he said. “There’s no objection to the employee or the relative buying the house if it’s a valid supportable sale.”

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