Indictments of 8 in O.C. Fail to Mollify All Illegal-Condo Owners

The indictments this week of a former Huntington Beach mayor and seven others in the city’s condo-conversion scandal satisfied some homeowners who unknowingly bought the illegal units, but others said the score was far from settled.

“I wish I felt better, but I don’t,” said Renee Tarnow, who spent $80,000 bringing her newly purchased condo up to code before discovering it had been improperly converted from an apartment. “For this to be going on as long as it did, there had to be a network of people involved. The city knew it was going on and they turned their head.”

City officials have denied they knew the conversions were occurring until Tarnow complained in 2002, which eventually led to the indictments announced Wednesday.

Dozens of residents in Huntington Beach bought the converted condos, only to discover their homes were legally still apartments. They found themselves facing thousands of dollars in permit fees and contractor bills to make their homes comply with building codes, which set different requirements for condos and apartments. They also were unable to sell or refinance their units.

A federal grand jury indicted former Mayor Pam Julien Houchen, a real estate agent, on 11 counts of mail fraud and seven counts of wire fraud relating to the transactions. Former real estate broker Phil Benson was labeled the mastermind of the alleged scheme and faces 50 counts of mail fraud and 24 counts of wire fraud.

Five title companies that insured the purchases have since agreed to pay city fees on behalf of the homeowners they insured, as part of a settlement offered through the city.

On Monday, the City Council voted to legalize the units of 35 homeowners who signed the agreement. But some homeowners balked at the deal.

“We just don’t trust the city,” said Steve Worley. He said he’s worried he’ll be hit with a huge repair bill on top of city fees. A general contractor has already estimated it would cost $5,000 just to bring the electrical system into compliance.

Tarnow, who has filed a lawsuit against her title company, said she discovered her home wasn’t up to code when she asked a contractor to install outlets.

That led to inspectors discovering electrical and plumbing errors. When they found that a structural support wall had been removed, they condemned the home until repairs were made. Then Tarnow discovered her home wasn’t legally a condo. Tarnow and her husband sued Benson and won a $450,000 judgment.