Most days of the week, a band of men and women with large cashier's checks in their pockets or briefcases full of cash gather on the steps of the Los Angeles County Courthouse for the auctions of foreclosed property.
The assembled group, known in the real estate business as the "40 Thieves," are the sharks who prowl Los Angeles seeking to snap up properties when the owners fall on hard times.
One of the biggest and most successful of the crowd is William D. Little--recognized by his peers as a great white among the sharks.
Since the early 1970s, Little has bought and sold thousands of Los Angeles-area properties through the foreclosure process and continues to buy or sell about two pieces of real estate a week. He now holds between 200 and 400 area properties--the exact number, he said, "doesn't make much difference."
Routinely Files Lawsuits
And just as routine as his buying and selling of property is his filing of lawsuits.
From 1977 through 1986, Little has filed more than 2,200 complaints--mostly eviction proceedings--in Los Angeles Municipal Court--nearly one for each day that the court has been open for a decade.
And in state Superior Court, Little has either sued or been sued more than 400 times during the same 10-year period, and is involved in about 45 suits filed so far this year. The actions cover a wide variety of business disputes.
In the late 1970s, Little was hounded by the press, public interest attorneys and, for a time, government investigators because of his aggressive efforts to scoop up troubled properties.
Despite his combative and controversial business style, the Canadian-born Little has kept a low profile for most of the 1980s.
But now he has changed the strategy of his real estate business--buying fewer properties and holding more as a landlord--and Little is again in the public eye for his aggressive use of the eviction process.
Nearly Evicted Woody Herman
Earlier this month, ailing band leader Woody Herman was nearly evicted from a Little-owned house in the Hollywood Hills. Fans finally came up with the money to pay the back rent, and Herman was allowed to stay.
Little's lawyer said later that Little had been unaware that Herman was living in the house or that he was ill, adding that if he had known, "the matter would have been treated altogether differently."
Two weeks later, Little tried to evict an elderly Mid-City woman, even though she was willing and able to pay rent. Only after the intervention of a public-interest attorney and City Councilman Nate Holden did Little say the entire matter was all a mistake and the woman was allowed to return home.
But these cases prompted Holden to ask the Los Angeles city attorney to investigate Little's use of the eviction process. A spokesman for the city attorney said the facts are being reviewed. Holden has also asked the City Housing Authority to look into Little's properties in the city's subsidized rent programs.
Little maintains that his business of buying troubled properties from troubled people is largely misunderstood by the public.
"I believe it is a legitimate function," said Little in an interview last week at the courthouse. "There is nothing wrong with buying at a foreclosure sale. Someone will buy, or it goes back to the lender."
His role, he said, is to "recycle" properties. "Not just buying, but fixing up (properties) to realize their equity."
And, he said, "I don't create the problem that leads to the sale."
Others see it differently.
"He became a self-made millionaire on the broken backs of a lot of little people," said Gary Blasi, an attorney with Legal Aid Foundation of Los Angeles. "These people used to have mortgages of $90 a month. Now they have rents of $600. He and others (in the same business) have decimated low-income housing in South-Central L.A."
What Little and other investors in foreclosed and distressed property do is buy mortgages or other loans or liens against a property that are in default. If the equity left in the properties is greater than the total amounts owed, the buyers make the difference.
One way to get a jump on the competition is to acquire the rights to a property before it goes to a public auction.
In many instances during the 1970s, according to court documents, Little was able to buy houses from unsophisticated owners facing foreclosure for as little as $500 after promising to pay off delinquent loans. Little would then often pocket tens of thousands of dollars by selling the house.
Today, he said, he does most of his buying at auctions and usually sends a representative to do the actual bidding.
The "40 Thieves" may, from day to day, number more like 10 or 12. Some jokingly use the term itself while others say the name refers to practices that are no longer nearly as prevalent as they once were. And the composition of the group changes as new investors try their luck and old timers take their marbles and go home. Some are regulars and some just show up occasionally.
"You have to be a little unscrupulous. . . . Being totally honest you can't make it," one attorney familiar with the business said.
Among the illegal, but time-honored, practices in the foreclosure business are "chilled sales," according to lawyers, auctioneers and others in the field. In a chilled sale, an interested buyer will pay others anywhere from a few hundred to several thousand dollars not to bid. That clears the way for him to buy the property at a lower price than if it were subject to an open auction.
"One time at a sale a guy wanted to bid, but the '40 Thieves' were there," one auctioneer said. "They went to the non-professional and said they'd give him $5,000 to stop bidding. . . . Other times, they'll say, 'Give me $1,000 and I'll stop bidding.' It may sound good, but it's illegal."
Many bidders said that those abuses are rare today.
On a recent morning, about 15 bidders turned out for an auction of four properties on the downtown courthouse steps. The bidders ranged in age from mid-20s to late 60s, represented just about every race of man and more were in blue jeans and sneakers than designer suits.
No bids were entered on the first three properties, but then came the main event, a thrice-postponed sale of a Lynwood home. The action started at $26,000 and within four bids hit $55,000. From there to the final sales price of $71,850, the bidding went up by $100 or $50 at a shot.
"I'm just hungry, that's all," said the winning bidder in a European-cut suit.
"Now I have to put on my overalls and fix the place up," he said to the amusement of the other bidders.
Hoots, Wise Cracks
Although there were hoots and wise cracks as the price climbed, the bidding process was taken very seriously by the gathered, whether they were actively bidding or not.
"They're a bunch of rowdies . . . but we're talking about wealthy men," said one auctioneer who asked not to be identified. "They carry $80,000 or $100,000 in cashier's checks in their pockets and may not even bid. It's just in case they want to bid."
One bidder pulled his Mercedes with a car phone into the three-minute parking zone by the steps. Little used to show up in a yellow convertible Rolls Royce that he purchased at an IRS auction. He subsequently sold it, though. "Too flashy," the 47-year old Little said.
Although public interest attorneys said there have been, and continue to be, gross abuses of the system by many, Little has never been charged with any criminal wrongdoing.
'Rough and Tumble'
"I can't control what other people do," Little said.
Still, he admitted, "It was more rough and tumble 10 years ago. . . . I'm not the same person I was."
And the real estate market has changed, he said. During the 1970s, his strategy was to get his hands on as much property as possible, because real estate could double and triple in just a few years.
"Now it's a business," he said, and you have to make the most of the property. That means operating as a landlord and getting the best rents possible. "Part of that business--and I don't like it--is evicting people," Little said.
Still, Little has attempted to push the laws to the limit. In 1984, Little sued the Municipal Court for being too slow in processing his evictions. Under the law, a trial must be scheduled within 20 days. Little maintained in his suit that the court was routinely taking 33 to 39 days. He lost the suit.
Accused of Tricking Tenants
In a 1982 lawsuit brought by the Legal Aid Foundation of Los Angeles on behalf of hundreds of Los Angeles renters, Little was accused of tricking tenants into signing away their rights under the eviction laws. Under the law, tenants are entitled to notice of an eviction and a hearing.
According to the suit, Little convinced many to sign stipulations, waiving a hearing and giving Little the right to evict them on a moment's notice. Some tenants had withheld rents because their apartments had mice and cockroaches and no hot water or gas, according to court declarations.
Once Little had the documents in hand, the lawsuit said, he was able to force immediate payment of rents and even charge rents higher than allowed under rent control.
Little won the suit at the trial level, but lost it on appeal. He had to remove the eviction proceedings and reduce many of the rents.
Little said that only about one lawsuit in 10 results in an eviction. The filing of a lawsuit, he said, convinces many tenants to begin making rent payments again. "When dealing in a low-income area, you have more problems," he said.
Attorneys who have dealt with Little said he is smart and practical.
"He's a very bright man who knows how to dance along the edge of the law," said Ann Haskins, an attorney with the public interest law firm of Public Council. "I have an immense respect for his intelligence (but) not his methods."
"He'll file an eviction in Van Nuys against people in South-Central L.A.," attorney Blasi said. "We're talking about people who have never been to the Valley in their entire lives and never been to an attorney in their entire lives."
Seeks to Settle
Little, who often represents himself in legal proceedings even though he is not an attorney, typically seeks to settle landlord-tenant cases rather than go to trial, according to attorneys who have dealt with him.
"I can't think of a case (against him) that we have taken to trial," Haskins said. "If we get a good lawyer and a good defense, he'll cut a deal. Some of these guys will fight you tooth and nail no matter what."
Little, who was a used car salesman before getting into real estate in 1972, said: "I enjoy the business I'm in. There's a certain excitement. Things are different in this business every day."
Although he used to operate on his own, Little said he now employs a staff of 36 to manage his properties and seek out new opportunities.
And that, Little and others in the business said, is increasingly difficult to do.
"In the 1970s people laughed," said Little, who immigrated from Canada in 1966. But, while they laughed, "I bought a house and duplex for $5,500. The S & L foreclosed the day before at $6,500 and I ground them down another $1,000. Now it's a completely different picture."
More players have joined the market and practices have been cleaned up, according to several bidders at a recent auction.
"We're pros, but we're honest," said Kip Cyprus, a foreclosure specialist with Cyprus Real Estate of Sherman Oaks and a regular at the auctions.
In past years, trustees would sometimes try to hide sales and eliminate potential bidders. In one case, a beneficiary of a delinquent note held the sale on Catalina Island to dissuade bidders from turning out.
But for the most part, foreclosure specialists said, those practices have been eliminated as the industry expanded.
Others, such as Mark Johnson of the Eviction Defense Center, said the business cooled down because most of the easy money to be made in the poorer neighborhoods has already been had.