COLUMN ONE : A Plague Visits the Landlords : ‘Petition mills’ flood the courts with fraudulent filings that help tenants delay eviction or withhold rent. Apartment owners, losing millions, face foreclosure--and renters end up paying a price too.

The pitch was tantalizing to someone facing eviction from an apartment: fork over $150, have some legal paperwork filed and stay put rent-free for at least three months.

That was the deal Stanley Simon and his Tenants Rights Group offered to renter Louis Roche last March as the two talked in Simon’s Northridge office.

“It’s called a stalling game,” Simon confided to Roche. “Let’s not kid each other; it’s a recession, there’s no money. . . . I have to play games and I’ll keep you in there.”

Roche paid up and the stalling game began.

But the tenant from Panorama City was not like thousands of other apartment dwellers who have done business with Simon’s group in recent years. Roche was a private investigator. And he was wearing a wire.

In September, police arrested Simon on suspicion of soliciting grand theft. He posted $50,000 bail and was back in business the next day. On Dec. 15, Los Angeles City Atty. James K. Hahn charged him in a 44-count criminal complaint with grand theft, making false statements to tenants and illegally practicing law.

Simon insists he has done nothing wrong. But authorities said they finally have gotten the goods on one of about 200 ringleaders of fraudulent “petition mills” in Los Angeles County, so named because of the number of legal filings they churn out on behalf of tenants who either want to stall their evictions or create phony allegations of poor living conditions so they can withhold rent.

Three days later, after years of mostly unheeded complaints by landlords, the U.S. attorney’s office announced the indictment of 17 people--including Simon and three other Tenants Rights Group employees--on federal bankruptcy fraud charges for allegedly running eight such mills. The federal prosecutions are among the first in the nation targeting the mills.

There are many legitimate groups that protect tenants from unscrupulous landlords, slum conditions and unfair evictions. Those groups, such as the Legal Aid Foundation of Los Angeles, are run by lawyers who make sure that renters receive adequate representation in the Municipal Court process known as unlawful detainer, in which a landlord seeks the necessary court approval to evict a tenant.

In contrast, the mills, which have proliferated throughout Southern California, are run by non-lawyer opportunists who never contest evictions, but only seek to delay them, authorities say.

The petition mills target tenants when they are most desperate--behind in rent or faced with eviction--and charge them as much as $3,000 during the eviction process, money they normally would pay the landlord. Some tenants sign up because they truly need help in delaying or contesting an eviction, while others just want a free ride. In both cases, mills coach clients on ways to find insignificant problems, or create them, as an excuse to withhold rent and stay in the apartment while a judge adjudicates the matter.

Because evictions must be court-approved, mills delay cases by filing a flurry of legal motions, including requests for a change of venue and a demurrer in which a tenant claims not to have been properly notified of an eviction.

No matter how frivolous, all claims require a hearing before a judge, which can take weeks or months to schedule. Despite promises by mills to the contrary, the vast majority of tenants are ordered to pay the back rent and are evicted anyway. Most mills further delay the eviction by filing for bankruptcy on tenants’ behalf without their knowledge, often forging their signatures and concocting bogus Social Security numbers. Bankruptcy automatically protects a tenant from eviction for several more months, but the tenant ultimately pays a price.

“In the end, the tenants end up on the street without a dime,” said Legal Aid lawyer Roderick Field. “It is a tragic situation.”

By encouraging tenants to stay in their apartments without paying rent, the mills have been victimizing landlords as well, delaying as many as 1,500 evictions a month in Los Angeles County during the past few years. California landlords say they lost $270 million in 1991 in missed rent and legal fees.

Deputy City Atty. Ellen Pais said she suspects that mills are the number one source of apartment building foreclosures in the San Fernando Valley, and possibly in other areas.

“These people are teaching people to steal from others,” said apartment building owner Karim Jaude. “And they are doing it in the name of protecting the tenants.”

Jaude heads a group of small investors whose 18 Southern California apartment complexes that he says have been besieged by mills, including the one Roche claimed to live in. “Most of our investors are small-time people who put their life savings into this,” Jaude said. “They could lose everything.”

Five of those buildings are on the verge of foreclosure because of the Tenants Rights Group and other mills, Jaude said. In the building where Roche claimed to live, at 14800 Roscoe Blvd., 36 of 43 tenants refused to pay rent in the last year--some for 10 months or longer. Jaude said that most, if not all of them, had signed up with the ever-present mill representatives who still walk his hallways.

Since Simon’s indictment, his storefront office in a Reseda Boulevard mini-mall has shut down, although authorities said his operation may have moved to another location. At 61, he faces a maximum of 35 years in prison and $1.75 million in fines in the federal case. Yet he insists he is only helping tenants stick up for their rights.

“It’s a legitimate business,” Simon said one day before his indictment. “I have done nothing wrong.”

The mills first emerged in Los Angeles a decade ago. Their activity soared in 1989, and they began spreading into Orange, San Bernardino and other nearby counties. They also have sprouted in Atlanta; Orlando, Fla.; Newark, N.J., Cleveland and other major cities.

“Obviously, it is a societal problem,” said Frank Szczebak, chief of the bankruptcy division for the federal court system, where most of the cases end up. “But nowhere is it anything like the magnitude it is in L.A.”

Besides victimizing tenants and landlords, such legal maneuvering clogs up the overwhelmed municipal and federal court systems. As many as 25% of the 85,000 or so personal bankruptcy cases filed in Los Angeles County last year were the work of mills, said Marcy J. K. Tiffany, U.S. trustee for the bankruptcy court of the central district of California. Mills often file bankruptcies for each tenant occupying an apartment and improperly make repeated bankruptcy filings on behalf of a tenant.

In Simon’s case, authorities allege that he also helped defraud landlords by telling tenants not to pay rent even when they had money and their living conditions were fine.

“No matter what, you’re not going to” pay, Simon tells Roche on the tapes, which will be used as evidence in Simon’s city trial. “You’re going to live there free.”

And Simon assures Roche not to worry about credit. “There’s no taint,” he says, “and there’s nothing to be nervous about.”

Not true, authorities say. Most tenants end up saddled with huge amounts of back rent due, legal fees and court costs to pay, and a credit rating so tarnished that they find it hard to get a credit card, car loan or decent apartment for 10 years.

People without the slightest knowledge of the eviction cases are also hurt. When a mill changes a few digits of a Social Security number to conceal a bankruptcy filing, the holder of the number ends up with major credit problems.

That happened three years ago to salesman John Burriel of Gardnerville, Nev., and prevented him from getting a car loan. A San Pedro man had used his Social Security number to file bankruptcy to stall his eviction. “I can’t tell you how frustrating it is,” Burriel said. “It is still plaguing me.”

However, landlords apparently suffer the most. Virtually every time they try to evict tenants, landlords say, mills get the names from county courthouse rolls that list all unlawful detainer actions. Tenants and their neighbors are then inundated with letters, flyers, phone calls and visits. Even tenants who have not had troubles are solicited with the pitch that they too can legally withhold rent. Mills also take out newspaper and TV ads.

By law, tenants can withhold rent if living conditions are substandard, but they are encouraged to put the money in escrow during the unlawful detainer process until a judge makes a ruling.

One year ago in response to the mills, a state law went into effect barring private citizens from viewing the courthouse unlawful detainer rolls for 30 days.

Although that law has helped, landlords say the mills remain active. “Now they just wait a month,” said Venice landlord Norman Galper. “It takes a lot longer than that to evict someone.”

FBI agents nationwide are investigating another angle--illegal leaking of confidential tenant information.

“Across the country, we have seen situations where low-level clerks in bankruptcy court and the trustees’ offices can be bribed for this insider information,” said Thomas R. Parker, assistant special agent in charge of the FBI’s Los Angeles office. “Los Angeles has not been immune to that.”

The mills typically call themselves “typing,” “eviction defense” or “renters’ rights” services. One Inglewood firm boasts 24-hour emergency service, while another group guarantees seven months free occupancy, “no matter how far you are behind in your rent.”

Tenants Rights Group flyers claim that “with years of experience and thousands of clients, we are the leaders. Don’t be misled by impostors who make wild claims they can’t support.”

After those flyers began luring tenants from Jaude’s buildings, he hired an attorney, who in turn hired Roche to “sting” Simon by posing as a tenant.

Most of Jaude’s tenants who signed on with the petition mills were evicted, Jaude said. Others, such as Maria Elida Cisneros, remain.

Cisneros and her three children have lived in Apartment 39 for eight years. She said she only decided to complain about cockroaches--and withhold her $833 monthly rent payments--last June, after a neighbor told her about a tenants rights group. Cisneros said she does not know the group’s name, but pays a man $140 in cash each month when he knocks at the door. “Here in this building, a lot of people do this because the manager never listens,” she said. “I was tired of saying, ‘Please come fix.’ ”

Assistant manager Alfonso Hernandez listened outside Cisneros’ apartment one recent night and shook his head in disbelief, saying she never requested repairs until after signing up with a petition mill. “It just takes one tenant,” he said, “and then everybody talks about it and it spreads.”

Jaude said he makes repairs promptly, but that mills teach tenants to look for problems, or cause them, and then to hide the mills’ involvement. Jaude said his investors’ group has lost $1.3 million during the past two years in legal fees and missed rent.

Jaude recently posted warnings about Simon at his complexes: “Don’t be misled by his promises. Do not follow his advice. Do not lose your money.”

Judges routinely award landlords back rent and court costs. But most evicted tenants disappear without paying.

So Jaude now offers recalcitrant renters $1,000 or more to leave. Meanwhile, he said, negotiations with his banks and mortgage lenders have fended off foreclosures.

Roger Gleckmann has not been so lucky. After many of his tenants went to “unscrupulous legal companies” and stopped paying rent last spring, the bank foreclosed on his 36-unit Hollywood complex. “How do you support a building when no one is paying rent?” Gleckmann fumed. “How do you even maintain it?”

TRW REDI Property Data, which tracks foreclosures, reports that at least 96 Los Angeles County apartment complexes went into foreclosure in 1992, up from 24 in 1991. Real estate experts say other factors are at work too, including the recession that is taking its toll on tenants, boosting apartment vacancies.

But mills have been a major factor in dozens of foreclosures, especially among those landlords barely breaking even, said Katherine Bergh, an apartment broker for the Grubb & Ellis commercial real estate firm.

Last summer, all four of James Myers’ tenants in Panorama City stopped paying rent, and he blames Tenants Rights Inc. All the tenants were evicted in November, but not before trashing the units, Myers said.

“It really has been a nightmare,” he said. “If this was the only rental property I owned in addition to my home, I would have lost them both.”

Police search warrants allege that Tenants Rights Inc. charged renters $140 a month, refused to work with Myers so he could correct problems and then conspired to defraud him out of more than $7,800 in rent. Alleged ringleaders Franco and Rhina Erittier fled just days before police searched the group’s Sepulveda headquarters, Los Angeles Police Detective John Stieglitz said. “It wouldn’t surprise me,” he added, “if they’ve reopened under another name.”

The mills are easy to start and easy to move, authorities say. A phone, a desk, some legal knowledge and access to a copying machine is all that is needed.

Legal Aid Foundation lawyer Field said a draft report by a federal task force on petition mills shows the number of cases has dropped sharply since the confidentiality law went into effect in 1992, but the mills remain a serious problem, especially in low-income communities where few tenants speak English or know the law.

Little has been done until recently to curtail mill activity.

A special fraud task force at the trustee’s office has been probing the mills for years. But until December, the U.S. attorney’s office in Los Angeles had prosecuted only one mill operator, who was convicted last May, and refused to comment on the problem before the recent indictments despite several requests by The Times.

“These are very difficult cases to develop,” U.S. Atty. Terree Bowers said after the indictments. “It’s not your classical type of case.”

Mill operators use a variety of techniques to keep from getting caught. In nearly all cases, the name of the mill does not appear on paperwork filed on behalf of tenants. Mill bosses often disavow the actions of their employees. And those tenants who have not disappeared have no interest in testifying against the mills because they might be considered accomplices.

Some apartment owners and legal activists complain that authorities could have been more aggressive in targeting the mills.

“It’s a little late,” legal advocate Field said. “We’ve been after them to do this for years.”

Others say no amount of prosecutions will curb the mills. “It’s too lucrative,” said bankruptcy trustee Tiffany. “I don’t care how many federal prosecutions you have; you’re spitting into the wind.”

The Petition Mill Process

Here are the steps a landlord must follow to have a tenant evicted, and some of the tactics that a petition mill can use to delay eviction for up to a year:

NOTICE: The landlord gives a tenant a three-day notice to pay the rent or leave. The landlord files an unlawful detainer lawsuit in Municipal Court, which serves formal notice that the tenant is being evicted for non-payment of rent or other reasons.

RESPONSE: The tenant must file an answer to the complaint within five days, after which landlord can request a trial, usually held at least 20 days later. Petition mills file a series of legal motions on behalf of the tenant as a delaying tactic. They contend that the landlord did not properly notify the tenant, that the suit should be heard in a different courthouse and make other requests, which authorities say are often frivolous and rarely granted but which require a hearing to be scheduled before a judge.

COURT RULING: Once the judge rules that a tenant can be evicted, marshals are notified that they may post a notice on the tenant’s door giving the renter five days to vacate.

MORE DELAYING TACTICS: Before the marshal arrives, the mill often claims an “Arrieta defense,” in which the tenant contends that the landlord failed to identify all residents in the apartment subject to eviction. Frequently, tenants say that a friend or neighbor has been living in the unit. Although steps were taken last year to prevent Arrieta defenses, mills continue to use the delaying tactic.

BANKRUPTCY FILING: Once all delaying tactics are exhausted in Municipal Court and a lockout date has been set, mills frequently file for federal bankruptcy under the tenant’s name, often without telling the tenant. That grants the tenant automatic immunity from eviction until the bankruptcy case either is dismissed or the landlord receives a bankruptcy judge’s permission to evict the renter. Nearly all landlords are granted such permission, but the courts are so clogged that it can take weeks or months just to get a hearing.

FINAL ACTION: Once a tenant’s bankruptcy is exhausted and the landlord once again gets permission for eviction, the mill will put another of the tenants in bankruptcy. Often, mills put each tenant through the bankruptcy process several times, falsely stating on their petition that they have never declared bankruptcy before.

RESULT: Landlords pay thousands in court costs for each tenant ultimately evicted. And although the mills often promise that the tenant will never have to pay the rent and that their credit rating will never suffer, the tenant ends up evicted, owing back rent and court costs, and with a credit rating marred by a bankruptcy filing, which can take 10 years to erase. Because the bankruptcies are filed merely as a delaying tactic, the mills do not provide the required information and tell tenants not to appear at court hearings so the case is eventually dismissed. Nevertheless, the bankruptcy shows up on any cursory credit check.

MORE INFORMATION: Anyone with concerns about petition mills can call the Los Angeles city attorney’s office, Consumer Protection Section, at (213) 485-4515, the U.S. attorney’s office at (213) 894-0703, U.S Trustee’s Office at (213) 894-6811 in Los Angeles and (714) 836-2691 in Orange County, the Legal Aid Foundation of Los Angeles’ Eviction Defense Center at (213) 387-9011, the San Fernando Valley Neighborhood Legal Services at (818) 896-5211 and the Orange County Legal Aid Society at (714) 835-8806.