17 Charged With Bankruptcy Fraud Involving Tenants
Citing the enormous toll on tenants, landlords and the bankruptcy court system, federal law enforcement authorities Friday announced a crackdown on scam operators who officials say abuse the legal system to help renters occupy apartments for months without paying rent.
Federal indictments were unsealed charging 17 individuals with tying up the court system with frivolous and fraudulent bankruptcy filings designed to delay the evictions of tenants. Of those, at least 11 were in custody by Friday evening, and the rest were expected to be detained over the weekend, said Charlie Parsons, special agent in charge of the FBI’s Los Angeles office.
In all, those indicted are accused of running eight “petition mills,” so named because of the volume of legal documents they regularly churn out on behalf of clients to buy them more rent-free time in their apartments.
“I hope this will send a message to what has become a cottage industry in Los Angeles and around the country, not only to the people running these mills but to the potential victims,” Parsons said.
U.S. Atty. Terree Bowers said the scam has produced myriad victims.
The tenants, who pay the mills between $200 and $3,000 to help them contest their evictions, almost always find themselves on the street--owing back rent--because the mills only delay the evictions, not contest them.
Landlords are being financially ruined, Bowers said, because so many tenants are refusing to leave their apartments and will not pay rent. Moreover, judges are being inundated annually with at least 30,000 petition mill cases, making it nearly impossible to hear legitimate claims, Bowers said.
Once those judges evict the tenants for refusing to pay rent, the mills then file bankruptcy actions on their behalf--sometimes forging the tenants’ names--immediately suspending the eviction process.
The mills have become so prevalent that they are responsible for one in four of the 80,000 or more personal bankruptcy cases filed in Southern California each year, said Assistant U.S. Trustee Marjorie Lackin-Erickson.
The cost to landlords in California last year was an estimated $270 million, according to one study cited by authorities at a news conference at the Federal Courthouse. And, Bowers said, the costs to taxpayers is enormous because they end up paying for the backlog of court cases.
“A lot of people have found this to be an easy way to make a fast buck,” said Assistant U.S. Atty. Maureen Tighe.
One reason authorities are so concerned, they said, is because the mills target low-income minority and immigrant tenants who are desperate because they face eviction or are having trouble paying rent.
Typically, employees of the mills comb courthouse records that list the names and addresses of tenants being evicted by landlords through the unlawful detainer process. They then deluge the tenants with letters, flyers, phone calls and visits. Some mills have been more brazen, authorities said, going door to door at apartment complexes in low-income areas and soliciting tenants who do not have problems, but like the idea of not paying rent.
In the end, Bowers said, the mills only prolong the eviction--often committing bankruptcy fraud in the process--and the tenants wind up owing back rent.
Rod Field, an attorney with the Legal Aid Foundation of Los Angeles, said the mills never make the effort to contest the evictions of tenants who have legitimate claims for withholding rent, such as substandard living conditions. Instead, they take the easy route of filing one legal document after the next.
Those indicted on Thursday face charges of conspiracy to defraud the U.S. Bankruptcy Court, conspiracy to commit perjury, making false statements in bankruptcy filings and other criminal counts. The indictments allege that they filed bogus bankruptcies, failed to tell tenants that they were putting them in bankruptcy and putting false information on their filings under penalty of perjury. The alleged mill operators also illegally obstructed and impeded the administration of the bankruptcy courts, according to the indictments.
A representative of one alleged mill, Tenant’s Rights Group of Northridge, had no comment, saying: “I don’t know anything about it.”
The head of the firm, Stanley Simon, whose indictment was unsealed Friday, was also charged earlier in the week by the city attorney’s office with grand theft, practicing law without a license and other charges. He has denied any wrongdoing.
Also indicted by federal authorities on various criminal charges from Tenant’s Rights Group were Margarita Ozuna and Tom Spont, both of Northridge, and Melody McCord, 23, of Simi Valley.
The indictments also named Olivia Barba and Carlos Paredes, 29, of Bellflower-based P.A. Legal; William Barth, 32, of Tenant Services of Los Angeles; Norman Flores, 55, and Ivana Flores, 49, of Alpha Omega Services in Norwalk; Kirk Clymer of Tenant’s Rights of San Diego; Carlos Estrada, 42, of Tenant United in Downey; Nannie Jean Williams of J.J. Williams in South-Central Los Angeles, and Esperanza Serrano, Hugo Dahdah, Diana Heineberg, Oscar Lozano and Martha Dahdah, who allegedly operated Latin America Legal Services. Two others not alleged to be running a petition mill also were named for making false statements in bankruptcy petitions.
If convicted, they face a maximum of five years and a $250,0000 fine on each count.
