Firm Charged With Illegally Renting Homes

After investigations in six Southern California counties, Orange County district attorney’s officials have filed criminal charges against operators of a so-called property management firm that moves in on homes in foreclosure, re-keys the locks, rents the properties and pockets the cash.

Windsor Pacific Inc., a San Bernardino-based company with a Newport Beach satellite office, is one of a growing number of outfits using the tactic, citing a 19th century squatters law once used to break up Spanish land grants and prevent arable land from lying fallow.

Prosecutors have tracked the company’s dealings in San Bernardino, Kern, Riverside, San Diego and Los Angeles counties, but the Orange County district attorney’s office is the first to file against its principals.

“We’ve got to let everybody know, ‘You can’t do this,’ ” said Deputy Dist. Atty. Jim Marion, who filed an 11-count felony complaint last week against four Windsor Pacific employees. Two were arrested; arrest warrants are out for the other two.

Windsor Pacific finds homes just entering foreclosure, makes sure they are vacant, then re-keys the locks and asserts a right to them under the common-law doctrine of “adverse possession,” owner Dennis Murphy, 43, has said in previous interviews.

The company then advertises below-market rents and places tenants in the homes as “house-sitters” until the banks or mortgage holders, the properties’ rightful owners, chase them out.

Patrol officers called to the scene often balk at the Windsor paperwork presented to them, deeming the matter civil and telling tenants or bank representatives to get an attorney.

“It’s so phony,” Marion said. “. . . It doesn’t sound legal to me. But it’s very, very close. They think they’ve found a loophole, and because they’re smooth talkers, they’ve convinced a lot of people.”

Windsor Pacific referred all calls Monday to its attorneys, who were unavailable for comment.

Los Angeles County prosecutors were nearing a civil settlement with the company, which has claimed “hundreds” of Los Angeles County properties in foreclosure, said Los Angeles County Deputy Dist. Atty. Jeffrey McGrath of the Consumer Protection Unit.

Prosecutors there opted to pursue Windsor Pacific civilly, McGrath said, and have been negotiating with the company for more than three months.

“What the effect of the criminal filing [in Orange County] will be I’m not sure,” McGrath said. “The state attorney general’s office was going to sign off on the settlement so it would have statewide effect.”

McGrath declined to discuss the details of the negotiations, which are ongoing, but said the agreement would place “certain terms and conditions on the operation of their business.”

“We really wanted to stop the practice, and we really wanted to get an injunction,” he said. “There are consumers being harmed. The people renting the houses think they’re getting something but really they’re just trespassing.”

San Bernardino County Deputy Dist. Atty. Gordon Isen, who heads the real estate fraud unit, said a lengthy investigation of Windsor Pacific there “will reach a conclusion in the very near future.”

District attorney’s investigators executed a search warrant at Windsor Pacific’s main office in San Bernardino on Jan. 22 and seized “a great volume of material,” Isen said.

“We’ve been analyzing that material and a number of reports that have come to this office, and the investigation is ongoing.”

To claim someone else’s property by adverse possession, a person must occupy it for five years and pay taxes on it for that period, among other conditions. Windsor Pacific tells renters that it has a right to the property through adverse possession, when in fact the company would not have that right until five years had elapsed, McGrath said. Windsor Pacific doesn’t pay property taxes, but Murphy has said that he planned to.

The mortgage holder usually catches on long before then and moves to evict the unlawful tenants.

In Orange County, Marion filed the felony complaint against Murphy and Vice President Steve Utley, 39, both of the San Bernardino office, and against Randy Scholnick, 42, and Kenneth Henderson, 51, both of the Newport Beach office.

Scholnick and Utley were arrested last week. Warrants have been issued for the arrests of Murphy and Henderson, Marion said.

The complaint charges them with conspiracy to trespass, rent skimming, grand theft and second-degree burglary. According to the complaint, Windsor Pacific rented 125 such properties between January 1996 and January 1997 in Orange and San Diego counties alone.

San Diego County Deputy Dist. Atty. Jeffrey Brodrick, of the real estate fraud subdivision, said his office has reviewed complaints against Windsor Pacific, but those have dropped off lately.

“I’m cheering on the prosecutors,” he said of the Orange County filing. “Due to the fact that other aggressive prosecutors are taking action at this point, it lessens the need for us to do something. A lot of people are very unhappy about Windsor Pacific.”