Missing Foreclosure Deposits Target of Real Estate Inquiry
A real estate broker with offices in Long Beach and Cerritos has been accused of bilking more than $239,000 from dozens of investors countywide who thought they were making bids on property that had gone into foreclosure.
“People go down there like lemmings, take him their money and never get it back,” said Timothy Newlove, an attorney for the California Department of Real Estate. “Frauds are all different, but this one is especially effective because people think they are going to get a good deal on a foreclosure.”
The agency has scheduled a hearing beginning Wednesday seeking the revocation of Donald Joseph Smith’s broker’s license.
A spokesman for the Long Beach Police Department said police are looking at the allegations for possible criminal prosecution.
Smith, 37, who does business as UGI Realty and/or Multi-Property Investments, did not return several telephone calls. A Ventura attorney representing him, Kirk Grossman, said he had been instructed by his client not to comment on the allegations. And Scott Kipper, an employee named in the accusation as having sold real estate without a license and in a separate lawsuit as having participated in the alleged fraud, would say only that “everything is being taken care of.”
According to Newlove, the accusation stemmed from more than 40 complaints received by the Real Estate Department beginning last summer from people who said they had lost amounts ranging from $3,000 to $39,800. Most of the complainants, he said, had responded to ads Smith placed in newspapers, including the Los Angeles Times, offering to represent would-be buyers in bids on single-family homes that had gone into foreclosure.
After being shown the properties, Newlove said, the potential buyers were instructed by representatives of UGI Realty to draft cashier’s checks--in most cases for $5,000--as deposits. These, the bidders were told, would be placed in a trust account, to be returned if their offers were rejected.
Many of the buyers submitted bids that were not competitive, Newlove said, raising the question of whether they were intended to be accepted. “In some cases the bids were made at ridiculously low prices, and in other cases I don’t even know if bids were made,” he said. Department officials would not say whether Smith purposely convinced inexperienced clients to make low bids.
In any case, when the bids were rejected by the banks holding the various properties, Newlove said, bidders were unable to retrieve their deposits from the real estate company.
“There could be a lot more (people with complaints) out there,” said Newlove. Because the department is aware of only those who complained, department officials said, it has no record of whether anyone actually succeeded in purchasing property through the ads.
To Elizabeth Lansing, 23, a South Pasadena mother who with her husband, Kevin, put down $5,000 on a three-bedroom home in Glendale, the loss proved devastating. “It was a disaster,” she said. “We’re young, we’re not real estate agents and we believed them. This was (to be) our first house.”
As a result of the loss, she said, the couple ended up buying a less-expensive one-bedroom home in Altadena with the help of Elizabeth’s father. “We were planning on doing it all by ourselves,” she said. “It’s hurt us. I’ve been in tears a lot about it.”
Nathan Wiggins, 27, of Compton said he was temporarily forced to move back to his parents’ home with his wife and two children after losing an apartment and being unable to afford a new one due to the loss of his entire life savings of $5,000. “We were at wits’ end,” said Wiggins, an auto parts rebuilder. “I lived out of my truck for a while.”
Another complainant, Laura Chavez, made two payments totaling $39,800 as deposit on a bid for a house in Los Angeles, according to the accusation.
Several of the alleged victims said they had made inquiries to the Real Estate Department regarding Smith’s status before handing over their money and were told only that he was a licensed broker.
Complaints Not Discussed
Randy Brendia, the department’s Los Angeles district manager, said his agency does not “discuss complaints until (an action is filed), otherwise people would be maliciously filing complaints, (knowing) that they would be public. It would be a handy extortion tool.”
The department’s material in the case will probably be turned over to the district attorney’s office, Brendia said.
In addition to failing to return the bidders’ deposits, Smith is accused of employing at least two unlicensed agents--Kipper and a man identified as Hank Aguilar--and of refusing to open his books for inspection by the state.
Bob Mahakian, a detective with the Long Beach Police Department’s fraud detail, said the department is investigating between 40 and 50 complaints about UGI Realty to determine whether a crime has been committed.
UGI Realty “told people that there was a bankruptcy problem, so we don’t know” what will happen at this point, Mahakian said.
