Small Creditors Hidden Victims of Land Scandal

Misuye Sato figured she was set for life the day she and her husband, Yuji, sold their stretch of desert scrubland to developer Marshall Redman.

After all, the $687 monthly payments he promised for 20 acres of sun-washed Antelope Valley land would stretch past the year 2000. At age 70, the Los Angeles woman knew she wasn’t getting any younger and probably wouldn’t outlive the payments.

She was wrong. Last year, the checks stopped coming.

In the six years since he bought the land, Redman’s fortunes have changed significantly. His three companies were seized in 1994, and Redman was criminally charged last May after authorities alleged he used questionable tactics to sell undeveloped desert property to unsophisticated Latinos, including land that Redman bought from the Satos.

A court-appointed receiver took over Redman’s $20-million real estate empire two years ago to untangle the financial mess and marshal refunds to some of the 1,500 land purchasers.

To get the job done, receiver Richard Weissman’s solution was to secure a court order temporarily halting payments to more than 100 Redman creditors. Among them are couples like the Satos, who say the equity stay has hit them hard.

Especially since Yuji Sato was diagnosed with colon and lung cancer. After paying for his costly alternative therapy, the couple have little money left over to enjoy their retirement. “That $700 helped a lot,” Misuye Sato said. “Nowadays, I don’t buy any clothes, but then I’m probably at an age where I don’t need clothes, anyway. But both my husband and I once loved to travel. That’s a luxury now.”

The Satos are among the invisible victims of the real estate scandal: Redman’s creditors. There are big banks and wealthy investors, but many are individuals and couples on fixed incomes who question the freeze on payments as extreme, unnecessary and unfair.

“The sellers are just as much victims as the people who bought properties from Redman,” said former receivership lawyer Ruben Sanchez. “Many are small-timers, retired people who sold land to Redman. They’re not getting paid. And they need the money.”

But receivers not involved in the Redman matter say a yearlong freeze on payments to creditors is not uncommon in such cases. Couples like the Satos, they say, should be prepared to go years without seeing their money.

“These types of cases can go on forever, depending on their complexity,” said Gil Vasquez, a receiver and former president of the California Board of Accountancy. “But if you’re a receiver, you never work fast enough. People have their life savings involved.”

Redman bought land in bulk, which he then split and sold at retail. The payments he received from small-plot buyers he used to pay off his creditors and buy more land.

Receiver Weissman says he had little choice but to delay payments to creditors while he assesses the financial health of the Redman companies and helps buyers to get clear title, an alternative property or a partial refund.

Weissman has spent much of his time dealing with First Charter Bank, which loaned the Redman businesses nearly $1 million, according to court records. In papers filed in Los Angeles Superior Court, the bank maintains that it should receive its money before all other creditors--even before refunds are given to Redman buyers.

Jules Kabat, an attorney representing the bank, refused to comment.

“I respect the position these people are in,” Weissman said of individual Redman sellers.

“Many were getting paid big money by Redman,” he said. “But my job is not to continue the work of Marshall Redman. I have to make sure some of these buyers get what they paid for. And their problems come first. Therein lies the dilemma.”

Weissman said that it is a slow process to investigate each purchase--often conducting interviews through Spanish interpreters--to determine which sales were legal so that he can begin making payments to creditors involved in those properties.

Weissman said that, even when lots were legally subdivided, questions arise about what promises Redman made to buyers about what they could do with the land and whether structures were built there legally.

Presently, about half of the 1,500 customers who signed land sale contracts with Redman are still paying the receivership a total of between $120,000 and $150,000 in monthly installments on the properties. The total has dropped slightly in recent months, Weissman said.

“After the public meetings we held on their problem, some Redman customers are waiting to see what will happen with their land, whether the sale was legal or not,” Weissman said. “Maybe some have stopped paying as a way to get a response.

“But that’s not the way the system works. The squeaky wheel is not getting the grease. Everybody who did business with Marshall Redman has to keep paying for this thing to work.”

So far, Weissman has reviewed 1,000 of the 1,500 Redman sales. Of those, he said, more than 300 had substantial problems. The other 700 were likely to be problem-free.

By October’s end, Weissman said, he hopes to have “fully resolved” 25 cases out of the 1,000 reviewed so far. He said he has no idea how many of the remaining 500 properties have legal problems.

“This is incredibly slow work, so it’s going to take a while,” he said. “As I confirm what sales are problem-free, I’ll make payments to the people entitled, but not before. Hopefully, we’re picking up speed.”

For Lloyd Borinstein, the receiver’s pace isn’t fast enough.

His company, Equitable Mortgage, represents several dozen investors who assumed loans from people who sold land to Redman--investors now out $10,000 a month.

Borinstein said that at a salary of $225 an hour, Weissman has good reason to see that his role as receiver is prolonged. “Redman isn’t the bad guy here, it’s this receiver,” he said.

“If they would have left Mr. Redman alone, he would have figured all this out. He may have done some things that were improper, but he was trying to solve people’s problems in a timely manner, unlike this other guy.”

Kern County prosecutors, who co-filed the 1994 civil suit against Redman, disagree.

“Sure, Redman would have paid off the sellers, but he also would have put a lot more money into his own pocket,” said Kern County Deputy Dist. Atty. C.M. “Bud” Starr II. “The only money the receiver has to pay anyone comes out of the pockets of people who bought land from Redman. So he has to deal with them before those who are better off.”

Weissman takes criticism such as Borinstein’s in stride. “I’m sure I’m the object of their disdain,” he said of the investors. “They’re money people and I can respect that. But people who bought land from Redman are the first on my list. As I deal with the Redman clients, the others will get taken care of.”

Bob Bowers of Brea is a retired aeronautical engineer who sold Redman 80 acres of Antelope Valley land in 1988. He feels for people who bought land from Redman. But as an innocent land seller, he says, why should he pay the price?

“That money is owed to me,” he said. “We were spending that $400 every month and now we don’t have it. We’re doing without.”

The 74-year-old Bowers wonders if he’ll see his money again.

“I have this growing suspicion I’ll never see any of it,” he said. “They’ll go bust on spending money on the receiver. Or something else will go wrong. But in the end, I’ll probably end up the loser.”

Those sentiments were echoed by the Satos, who see foreclosure as the only way to get paid.

“I feel bad for the people who bought from Redman,” Misuye Sato said. “I wouldn’t want to kick anyone off the land. But my husband and I really need the money.”

She says it will be a long time before she will have the money to return to Las Vegas to do a little gambling or see a show.

“We may be old, but my husband and I still have our lives to lead,” she said. “We’re the little guys. We shouldn’t be treated like we’re some big bank. We need the money to survive.”