COLUMN ONE : Signing Away Their Trust : Tim Barnett said he could help strapped homeowners. Instead, he allegedly defrauded at least 40 people. His exploits, say some, illustrate how officials have allowed real estate scams to flourish.

When the spray-painted graffiti began to appear on Tim Barnett’s expensive hillside home, there were enough suspects to fill a bus.

A loan broker and investment adviser who promoted his business as “Christian owned and operated,” Barnett had been accused by dozens of customers--most of them inner-city residents--of stealing their meager savings and even their homes.

With so many angry clients screaming for his hide, Barnett had no way of knowing who was painting such phrases as “Tim Barnett must pay me $” and “Jesus wants his money” on his home in exclusive Anaheim Hills in Orange County.

Could the vandal have been one of those who had complained that they were duped into deeding their property to Barnett when they thought they were merely applying for loans?

Or was the culprit one of many who had said they trusted the Bible-quoting Barnett to invest their savings in his lending and real estate ventures, only to discover that he had pocketed their money?

After several nighttime raids, the mystery tagger was finally caught.

He was Paul A. Thomas, 57, who had grown bitter and despondent over Barnett’s refusal to pay a debt of more than $25,000. When Barnett ignored his calls and letters, Thomas said, he decided to “write a letter on his house.”

But before dawn one morning last year, Barnett found Thomas lurking in the shadows, cloaked in a ski mask and spray can in hand. Although Thomas was unarmed, Barnett fired a bullet through his side. Then, for good measure, he shot out the windows of his car.

Thomas, who was not seriously wounded, pleaded no contest to malicious mischief and was fined $540. Barnett was not charged.

When they got word of the shooting, officials with the California Department of Real Estate, which regulates mortgage loan brokers, took the unusual step of contacting police. They wanted authorities to know “our position as to who was probably the real victim here,” said Ed Grant, a manager with the department.

Barnett had been the subject of a flood of complaints to consumer and law enforcement agencies since 1988, yet officials had not filed charges nor taken steps to warn the public.

Putting in a good word for Thomas seemed to be the best that they could do.

By this time, Barnett had allegedly defrauded at least 40 people, according to interviews, lawsuits and other documents reviewed by The Times. About 30 former clients had sued him.

His exploits, say officials and advocates for the poor, illustrate how real estate and home loan scams have been allowed to flourish in the Los Angeles area because of a lack of commitment by law enforcement agencies to fighting white-collar crime.

But Barnett, who has sought bankruptcy protection twice in the last two years, describes himself as a victim of the real estate slump, although he appears to be living well.

Although reluctant to discuss cases detailed in this story, Barnett said in three brief interviews that he never meant to cheat anyone--and that he means to pay his debts.

“I know the mistakes I made, and I’ve repented for that,” Barnett said. “I basically got in over my head, but my intent was never to defraud anyone.”

Others claim Barnett knew exactly what he was doing.

“If he were Pinocchio, his nose would be in China,” said Patricia Goldsmith, an attorney with the Legal Aid Foundation of Los Angeles, which has represented alleged Barnett victims.

“He talks about Jesus a lot, and he gets extremely upset when I tell him he’s going to go to hell.”

*

From the start, Tim Barnett was a man in a hurry. He graduated in 1981 from El Camino Real High School in Woodland Hills, married his high school sweetheart and, while in his early 20s, became a top producing loan officer for a Carson-based mortgage firm before striking out on his own.

He formed American First Funding Inc., Funding 21 Mortgage Corp. and other companies, operating at various times from offices in Gardena, Carson and City of Commerce. For a generous fee, he would help customers find loans to make home repairs or catch up on mortgage payments. Like other so-called foreclosure consultants, he grasped the opportunity created by a dearth of institutional lending in inner-city neighborhoods, where thousands of low-income people have valuable equity in their homes but struggle with monthly payments.

Barnett had talent to match his ambitions.

In the words of one associate, he could “just about get Eskimos to buy ice cubes.” He was smooth, personable, energetic--clearly a young man going places.

By age 25, he and his wife, Kimberly, were ensconced in their $750,000 hillside home in Orange County. He rode to work in a black Rolls-Royce; she drove a Mercedes. A customer once overheard Barnett boasting on the phone that he would “make $1.5 million this year.” Clients found his success reassuring. He seemed far too well off to covet their small savings and modest homes.

Barnett’s Christian zeal completed the package. Clients--many of them religious--would arrive at Barnett’s office to find him and his staff engaged in prayer. He belonged to the Crenshaw Christian Center, one of the largest predominantly African-American churches in the country, and would talk of tithing and quote the Bible.

“He went to my church . . . so I trusted him fully,” recalled Bertha Toomer, a former client who said she lost thousands of dollars and nearly lost her home.

Expanding beyond his church contacts, Barnett placed ads in the Christian magazine Not Forsaking the Assembling. There he promoted American First Funding as “one of Southern California’s largest Christian owned (and) operated mortgage companies . . . basing all assistance (and) advice on the Word of God.”

A story in the magazine discussed the roots of his success. “If you pay your tithes, confess the Word daily and live right, you can’t go wrong,” Barnett was quoted as saying.

“Success,” he went on, means “knowing that you’re doing what is required of you by God.”

“We basically built his business for him in terms of doing a lot of PR,” said a source at the magazine.

Later, the source said, the magazine received numerous complaints that Barnett “was really giving people a hard time.”

His clients had believed that a man of such powerful convictions would never lie or cheat. “That’s how he won my confidence,” said Eldridge Armstrong, a disenchanted investor. “And that’s what makes him such a diabolical and sinister type.”

“He’s using the Lord’s name to do what he does. That’s the thing I hate about it most,” said Gortha Seals, who claims she lost nearly $50,000.

Barnett’s accusers are those who came to him for loans and a second group enticed to invest in his business.

Some borrowers began in decent shape, with substantial equity in their homes and needing only a small loan to make repairs or to pay a few bills. Others were well behind in their payments and in danger of losing their homes. But whether their problems began as large or small ones, they invariably grew worse.

Some borrowers said Barnett took so much of their loans as fees, commissions and other charges that little or none of the money reached them or their creditors.

A dozen said in lawsuits that Barnett conned them into deeding their property to him or his associates--a charge Barnett has denied.

Several said they were told to sign a pile of forms as part of the loan application, only to find out later that they had signed a blank grant deed.

Others said they knowingly signed a deed but did so under duress--and only after Barnett falsely promised that it would not be officially recorded.

Often these customers were facing foreclosure. In some cases, their incomes were so small and their chances of paying new loans so dim that they would have been better off selling and getting what money they could from their equity.

But instead of giving this advice, Barnett promised something far more alluring: He could refinance their homes and, at the same time, lower their monthly payments and put some cash in their pockets.

Thus, the clients went home happy. But Barnett, by their accounts, did not follow through--stringing them along until they were about to lose their homes.

At this point, they said, he informed them that their credit was so bad that he could not get them a loan unless his name or an associate’s was placed on the deed. Desperate, the clients said that they agreed to transfer title and that Barnett promised not to record the deeds.

But, they claimed, Barnett did record the deeds, allowing him or his associates to transfer or borrow against the property.

As a result, some borrowers lost their property forever. Others eventually regained title from Barnett or his confederates, but only after unauthorized borrowing had drained their equity and left them deeper in debt.

A second group of clients gave money to Barnett, believing that they were buying a stake in his success. In return for the payments--variously described as loans or investments--they said Barnett promised high returns but gave little or nothing back.

In at least one instance, Barnett allegedly married the schemes by getting a couple to borrow against their house to raise the money to invest.

According to a lawsuit, Barnett pocketed the borrowed investment of $27,000 and took $7,500 in commissions and fees for procuring the loan.

Some investors assumed that their funds were secure because Barnett gave them deeds of trust on properties he supposedly owned. If he failed to pay them for any reason, they could always foreclose.

But after Barnett defaulted, they said, they found that their trust deeds were worthless.

Some said they learned that the property was not Barnett’s to begin with. In other cases, they claimed, Barnett never recorded the deeds of trust and, without them knowing, transferred the property to a new owner.

Some of these accusers did not pursue Barnett because they could not afford a lawyer or thought his bankruptcy made it a lost cause. About a dozen victims who filed lawsuits obtained court judgments, usually winning by default when Barnett failed to answer their complaints. Even they have been generally unable to recover their losses.

Among them is Paul Thomas, the spray-painter shot by Barnett. Thomas, a Los Angeles city worker, sued Barnett for fraud and for shooting him, and recently was awarded actual and punitive damages of more than $80,000.

“We’re elated we won,” Thomas said, “but collecting is a horse of a different color.”

*

To Walter and Violet Douglas, Barnett seemed a godsend.

The Douglases ran a self-service laundry and fast-food stand on Juniper Street in Watts and lived in the back. In 1983, they sold the property and moved back home to Texas.

Their buyer, Kenneth M. Brown, made a down payment and signed a note to pay the balance over 10 years. By 1991, Brown had paid off about half the mortgage, but he had fallen on hard times and got behind in his monthly payments.

Brown turned to Barnett for help.

Although Brown needed only $23,000 to pay the Douglases and some delinquent taxes, records show Barnett procured two loans for $76,000--enough to pay the Douglases and the back taxes and to put money in Brown’s pocket.

But according to a lawsuit filed by Brown, neither he nor the Douglases got a dime. Instead, all the money went to Barnett and his associates in the form of fees, commissions and other charges.

Brown said he got nothing but deeper in debt.

And the Douglases said they were swindled out of their stake in the property.

Barnett had called the Douglases in Texas to say they would be paid the balance of the note as soon as the formalities were concluded. To close the deal and get the paperwork in order, the Douglases should convey to Barnett the deed of trust that Brown had given them eight years earlier. This deed was their security, allowing them to foreclose if Brown failed to pay his debt.

They followed Barnett’s instructions--unwittingly surrendering their stake in the property.

When the dust cleared, Brown had defaulted on the new loans, lost the property to foreclosure and was out in the street.

And the Douglases lost their nest egg and the mortgage payments of $525 per month.

“It’s been a great loss to my wife and me because we depended upon that money,” Walter Douglas said.

“I’d be willing to drive all the way back to Los Angeles or, if possible, walk some part of the way to help put (Barnett) away.”

*

Vonell Adams said he signed a bunch of blank forms when he applied for a loan but said that did not seem unusual at the time. Later, Adams said, he discovered that he had signed a blank grant deed to his house in Carson; Barnett filled in the deed and recorded it in his name.

Barnett eventually agreed to transfer title back to Adams.

But while Barnett held title, Adams’ house became a target for others who claimed that Barnett had fleeced them. Unaware that Barnett was not the rightful owner, they slapped liens on the house to recoup their losses.

As a result, when Adams got the property back, it was encumbered by liens for unpaid state and federal taxes, as well as nearly $200,000 in liens and trust deeds from three Barnett clients.

“I was a victim, just like they were a victim,” Adams said. Because of the liens, the “property can never be sold because there’s so much owed on it,” Adams said.

One lien holder is the mother of a former Barnett employee.

The employee, Maria Arche, said in an interview that Barnett pocketed her mother’s investment of $53,000--her “whole life savings.”

“I trusted in this guy,” Archer said. “I talked my mom into it. . . . How can you burn so many people and be so Christian?”

*

Betty Young asks the same question.

A single mother working two jobs to support six children and two grandchildren, Young planned to remodel her home in Watts and start a day-care center.

Barnett was going to help her.

“Being, I thought, an upstanding black businessman, I really thought he would be the one to try to help me,” Young recalled.

Barnett was glad to assist. He would not only find a lender but send a construction crew to do the work.

The lender Barnett found was Barry Malcolm. Malcolm, 26, has a string of aliases; he was using the name Rodger Bolden when he was arrested last summer for soliciting riot relief funds for a nonexistent charity.

But when Young met Barnett and Malcolm in 1991, they seemed reputable enough.

“I thought these were legitimate people and especially because they were, you know, in the church,” Young said.

But there were problems from the start.

The loan to Young was to cover the remodeling and pay off her mortgage--held by Young’s friend, Barbara Parker, who had sold the home to her.

But in a lawsuit, Parker said she was tricked into signing a document that subordinated her position as first mortgage holder, giving the new lender first priority to be repaid. Now there was less chance Parker would be fully repaid--and the likelihood ebbed considerably when disaster struck the house.

Young said Barnett’s workmen removed windows, curtains, cabinets, the bathtub and kitchen sink--and did not come back. The interior was then vandalized--perhaps by neighborhood youths who saw that it was wide open.

Although Young said her house was made uninhabitable, she is responsible for payments on the loan. These payments, along with rent on a temporary home, exceed $2,000 per month--a staggering sum for a woman who works as a teacher’s aide and as a child-care provider at a home for disturbed children.

“I was just a poor mother who needed help,” she said. “I wanted a better life for my children . . . and ended up getting tricked.”

*

Arthur Willie knew something was wrong when Barnett would not take his money.

Willie, 51, had received a $10,000 short-term loan and agreed to repay Barnett the $10,000 plus $500 interest within three weeks.

But Willie said that when he tried to repay Barnett a few days later, Barnett refused to see him--even telling his secretary to say he was not in.

“If you have something to give to somebody and he will not take it, that means he’s up to something,” Willie said.

Willie said Barnett’s intentions became clear when Willie did not get the tax bill for a rental property he owned. It was then, Willie said, that he discovered that the building on Marie Avenue in Los Angeles was now in Barnett’s name and had been used by Barnett to get a loan.

Willie believes that he unknowingly signed a blank deed, believing that it was part of applying for a loan. He said he had not been suspicious in the least. When they first met over lunch, Barnett had prayed before the food came.

“You think this is a really true guy, you know, and a man of God,” Willie said.

But with title in his name, Barnett borrowed $75,000 against Willie’s property.

Then Barnett defaulted on the payments, forcing Willie to obtain another loan to repay the Barnett loan and save his property from foreclosure.

Willie sued Barnett. In August, 1990, Barnett signed a stipulated judgment, agreeing to pay Willie the $60,000 remaining on the loan. But nearly three years later, Willie said, Barnett still has not paid him.

An auto mechanic who came to the United States from Jamaica, Willie said he cannot believe that Barnett has not been stopped.

Willie said he did what he could, making two appointments to tell his story to a Los Angeles police detective, who canceled both times.

“This guy is going ripping people off and nobody do nothing about it,” Willie said. “What we going to do to protect ourselves out here?”

Willie’s lawyer, Howard L. Ekerling, has asked the same thing for almost three years.

When Ekerling, a reserve Los Angeles police officer, began investigating Barnett on Willie’s behalf, he was amazed to find at least 20 more alleged victims.

During the summer of 1990, he gave the the Los Angeles Police Department’s bunco-forgery division a list of these cases.

When nothing happened by the next April, Ekerling sent the list and a letter to the Los Angeles County district attorney’s office, urging that Barnett be stopped from “preying on” inner-city residents.

Ekerling was not alone in seeking action. About the same time, officials with the Department of Real Estate were asking the district attorney to investigate, said Ed Grant, a department manager.

Barnett “was committing grand theft on nothing less than a giant scale, from what we could see,” Grant said.

But the district attorney’s office declined to investigate. In July, 1991, officials there informed Ekerling by letter that the case “does not meet our criteria for opening a major fraud investigation.”

To Ekerling, it was a clear message that “in Los Angeles County, we only file against violent crimes that everyone understands, like robberies and rapes and murders.”

Then last year, the district attorney’s office reversed itself and opened a criminal investigation of Barnett and two others, including Barry Malcolm. Last November, investigators served search warrants on Barnett and Malcolm and seized a variety of records.

But sources close to the probe say it has suffered from delays, with the small cadre of fraud investigators spread thin by competing cases.

Already, they said, some of the best-documented allegations of fraud have been lost to a three-year statute of limitations.

Thus, the probe is being focused on more recent complaints against Barnett. But Patricia Goldsmith, the legal aid lawyer who has battled Barnett, said she has “no expectations” that charges will be filed.

“I understand that (the district attorney is) overworked,” she said. “I understand that their focus is violent crime.

“It’s just a shame that when the documentation in the cases was there, that no one went after Barnett.”

Barnett said he expects to be absolved.

And he seems poised for a business comeback.

The ebony Rolls-Royce is gone; Barnett lost it when he failed to pay the lease of $2,100 per month.

The opulent offices are gone; Barnett lost them and two former landlords sued for non-payment of rent.

These days, Barnett seems to be working from his home.

Still, a document filed last year in Barnett’s bankruptcy case projected his income at $200,000 per year. Another document filed by Barnett reported income of $11,800 during one recent two-week period.

According to the document, this income came from “commissions from real estate refinance transactions.”

Officials with the California Department of Real Estate and Department of Corporations said Barnett could not legally receive such commissions without a license from the real estate department or a consumer finance lender’s license from the Department of Corporations.

He has neither, officials with the agencies said.

Barnett declined comment.

But he goes on undaunted and even presents himself as a role model.

Barnett recently gave an inspirational talk to a student audience at Locke High School in Watts. By coincidence, it was attended by the son of one of Barnett’s alleged victims.

Barnett told the students that “he started from the ground, and he made it, and we could make it,” recalled senior Robby Brown, whose mother, Betty, said her home was trashed by Barnett’s workmen.

Barnett also spoke of “going to church and paying your tithe” and “being honest with your customers.”