Real Estate Watchdog Is Asleep, Says Lawmaker

An obscure state agency charged with regulating land sales has come under fire from an influential legislator, consumer advocates and real estate experts since the Marshall Redman land-fraud case came to light.

Assembly Minority Leader Richard Katz (D-Sylmar) said legislators are considering new laws to better protect consumers from real estate fraud. Katz has suggested a review of the actions of the state Department of Real Estate in the Redman case.

Redman, whose broker’s license was revoked in 1973, was charged in May with theft and fraud in connection with a $20-million desert real estate operation that targeted hundreds of working class Latinos.

“What is the Department of Real Estate doing?” Katz wrote Real Estate Commissioner Jim Antt Jr. “It is obvious that there is no division in the department that oversees and follows these cases to make sure they are handled by local prosecutors in a timely manner and in a way that protects consumers. Why not?”

Joining Katz was Los Angeles County Supervisor Mike Antonovich, who publicly criticized the agency for not closely monitoring Redman, and a San Francisco-based consumer protection group that has called for the dissolution of the department if it doesn’t improve its enforcement record.

Department officials claim they did everything they could, but critics aren’t convinced.

“You get the sense they never treated this case seriously. They should have known this guy was a bad actor based on his history,” Katz said. “Frankly, the answers they’ve given just aren’t satisfactory. I mean, they pulled his license. That should have indicated a problem.”

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Antonovich was also critical of the agency for not closely monitoring a new real estate business Redman has been operating since the charges were filed in May. Antonovich has formed a local task force that includes a representative from the state real estate agency and will examine ways to create an early warning system against fraud.

“Here he is opening up a new business,” Antonovich said of Redman. “With his past record, the Department of Real Estate should have been flagged to his activities. They should have put special monitoring in place to watch him closely. But apparently, that hasn’t happened.”

Between 1978 and 1994, authorities allege, Redman’s three companies sold undeveloped Antelope Valley land to thousands of unsophisticated Latinos from urban Los Angeles, promising utilities and running water that were never delivered.

Redman’s firms also sold land they did not own, authorities say.

In a reply to Katz, Antt says his agency’s hands were tied because “Mr. Redman was offering and selling land as the owner” and “did not need a real estate license to conduct that activity.”

While legislators consider whether new laws are needed to protect consumers, advocacy groups claim that the real estate agency is supporting proposals that would divest it of much of the consumer watchdog role it now plays.

“If you’re looking for ways to better protect the public, you’re looking in the wrong direction,” said one Department of Real Estate investigator who requested anonymity.

One bill under consideration would eliminate a reporting responsibility of developers selling major land projects. Land sellers now must file quarterly reports to alert the agency to any suggestive trends of dissatisfied customers that might prompt an investigation.

Dan Garrett, the real estate department’s assistant commissioner for legislation, said the agency is not lessening consumer protection but merely helping to streamline old laws.

“We haven’t seen one of these projects covered under the law for 15 years,” he said. “Sometimes, years go by and circumstances change but the laws don’t change. You don’t need horse-and-buggy regulations anymore, either.”

Attorney Marvin Starr, a national expert on real estate law, says that for the agency to support measures lessening its powers is “like Folsom prison saying it doesn’t need guards.”

The agency should be held accountable for its lack of enforcement, said Starr.

“The department is like this big facade in front of a house,” he said. “But if you look behind it, you find that there’s not much there.”

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Norma Paz Garcia, an attorney for the San Francisco-based Consumers Union, said the state agency is leaving consumers out in the cold.

“A lot of the laws they’re trying to get rid of are good regulations to protect consumers,” she said. “What they’re doing is diluting consumer protections. And for me, that calls into question the entire role and mission of the agency.”

The agency’s record in monitoring brokers, Garcia said, is dangerously lax. In a recent report, the Consumers Union found that the department in 1993 had jurisdiction over 337,000 licensed property brokers. That same year, the agency received 8,850 complaints, which resulted in just 146 license suspensions and 563 revocations, the study found.

“I think it’s time for the Legislature to look into whether the agency is performing its public function,” Garcia said. “And if not, then we should consider getting rid of it. Give the job to an agency that can protect consumers.”

Neal Dudovitz, the executive director of the San Fernando Valley Neighborhood Legal Services, said his agency has examined the role of real estate investigators while exploring ways to assist victims of the alleged Redman scam.

“What’s very striking here is the fact that what was happening was no secret to these people,” he said. “When we talk to people about Redman, including the real estate folks, most say ‘I knew about that.’ But it kept going on. That’s what frustrates people.”

Betty Ludeman, an assistant real estate commissioner in charge of enforcement, said the agency would be willing to entertain suggestions on how to correct oversights uncovered by the Redman case.

“In hindsight in any such case where there were a lot of victims, you can look back and say you could have done some things better,” she said.

Meanwhile, Katz says he will research reforms to strengthen the agency, including proposals to give real estate investigators arrest powers and to increase enforcement staff.

“So far, they’ve been little more than a big bureaucracy saying ‘My job is just between lines A and B and if it’s not between those lines, then I don’t have to do anything about it,’ ” he said of the agency. “Well, that’s not acceptable. This is indeed their problem.”

Katz said the agency should take a hard look at what it can do to prevent real estate fraud, instead of explaining away its inaction.

“At some point, if all the agency becomes is a keeper of broker’s licenses, then someone else will have to take up the enforcement role.”