New player emerges in fraud suits
By: CHRIS BAGLEY - Staff Writer | ∞
MURRIETA ---- Operating through an out-of-state company, a real estate investment group has begun to take possession of several dozen homes from clients who bought them two years ago under unusual circumstances, according to public property records.
The company, incorporated in Nevada as Total Return Fund LLC, has become a target of the third and fourth lawsuit in a growing string of cases that allege fraud on the order of hundreds of millions of dollars. According to Nevada state records, the company shares a mailing address with Jovane Investments LLC, whose chief executive ---- James Duncan ---- is targeted by all four lawsuits.
A total of two dozen plaintiffs allege that Duncan, mortgage brokerage Stonewood Consulting Inc., Stonewood chief executive Hendrix Montecastro, Pacific Wealth Management LLC and its chief executive Maurice McLeod, all of Murrieta, pocketed excess cash from clients' mortgage loans, using a fraction of it to make initial mortgage payments on the houses before suddenly backing out last fall and allowing the houses to fall into foreclosure.
Total Return Fund has acquired at least 56 houses in and around Murrieta since September, with several of the transfers taking place since an initial lawsuit was filed Jan. 5, according to a search of a database used by local real estate agents.
Of 15 houses whose records were examined by The Californian, nine had been bought between mid-2003 and mid-2005 in a series of unusual transactions brokered by Stonewood.
Those initial purchases raised eyebrows among local real estate agents because many of Stonewood's offers were $75,000 or more above the amounts sellers were asking. Most Stonewood clients bought multiple properties with 100 percent financing, according to the real estate database.
The recent string of transfers is unusual in that few of the houses appear to have been listed on the open market, according to the database. That's common between family members, but not among sellers who are trying to get the highest price for their houses. In most cases, ownership was transferred by grant deed, without a sale price being recorded.
The 56 properties include three houses ---- on Chesterfield Lane in Wildomar and Wrangler Drive and Evening Shade Place in Murrieta ---- that Total Return Fund acquired in early January from Bernie Cabrales and his wife, who have signed on to the Jan. 5 lawsuit.
"We signed the grant deeds pursuant to Pacific Wealth's instructions and also relying on the fact that we believed everything represented to us was true and legitimate," Cabrales wrote in the suit. Cabrales was told his property was being "liquidated," but he said he didn't realize that he was signing grant deeds that would transfer ownership.
"We had no idea what they were," Cabrales said Tuesday. "They said, 'Just sign it, and we'll take care of the rest.'"
James Duncan, listed as Jovane's registered officer in California state records, hasn't responded to numerous calls and e-mails seeking comment. Nor have Montecastro or Pacific Wealth chief executive Maurice McLeod. Pacific Wealth, which has registered in Nevada, was recently ordered to stop using the name following a lawsuit by Pacific Wealth Management LLC, an unrelated San Diego investment firm that is registered in California. McLeod registered Pacific Wealth Management LLC as a Nevada company in July 2003, though it has used a Murrieta telephone number for most of the last two years, plaintiffs said.
Syling and Carol Lee lost eight Murrieta-area houses and are still on the hook for the monthly mortgage payments, according to a lawsuit the Murrieta couple filed Feb. 13 in Riverside County Superior Court. The suit alleges that the defendants arranged for the Lees to buy the houses over the last two years and broke a promise to help cover the monthly payments.
The couple realized last month that the houses were in the name of Total Return Fund, though the loans were still in their names.
In the lawsuit, the Lees said they were pressured to sign a series of documents which ---- they later realized ---- had transferred ownership to that company. Initial mortgage payouts from the Murrieta couple's eight houses totaled more than $4 million, according to the real estate database.
The Riverside County District Attorney's office is investigating several of the defendants in the civil lawsuits, according to a supervisor in the office. No criminal charges have been filed in the matter.
A fourth lawsuit, filed late Friday, alleges that the defendants left a San Diego County couple on the hook for some $7.2 million in outstanding mortgage payments. The couple, Vicente Rodriguez and Kim Kelso, allege that they lost 12 houses in a similar way, also to Total Return Fund. They were told the transfers were necessary to "facilitate" the sale of other properties that were part of an elaborate investment group.
That group spans 11 states, according to a client list filed as part of the lawsuit. Residents of northern California, southern Arizona and northern Texas who spoke to The Californian said they were recruited into the group by family members and by friends they knew as fellow church members or fellow employees of the U.S. Air Force.
A spreadsheet filed earlier this month as evidence in the lawsuit lists 423 people as "core clients" and "golden clients" in the group.
Two other married couples whose houses have recently been deeded to Total Return Fund said they were also confused by recent transactions. One couple, who live in the San Francisco suburbs, said they were in the process of signing onto the Jan. 5 lawsuit. The other couple, who live in Southwest County, said they had been consulting an attorney, but declined to comment further.
The 56 houses are in a variety of conditions. Total Return Fund is now attempting to sell several of them, according to Rodriguez's and Kelso's lawsuit. Another, on Dahlias Way in Murrieta, was dark one night last week, with a variety of advertising fliers strewn about its front porch.
At least two others are being used as offices. One, on Mountain Breeze Drive in northwestern Murrieta, was transferred to Total Return Fund in late October, also without a sale price being recorded, according to the real estate database.
Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or cbagley@californian.com. Comment at www.californian.com.
See also:
Scope of alleged scam grows
Investors' legal battles span 5 years
Renters latest victims of alleged scam
Real-estate investors bought on faith
High-ball offers raised flags in 2004; Unusual investment patterns cited in lawsuit reported to authorities
Suit alleges massive mortgage scam
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I'm sorry but, wrote on Feb 20, 2007 10:08 PM:I don't feel sorry for these people. Sure, it sounds like those comapnies did things that should be illegal but these folks were just plain dumb! Lock up the law breakers but the greedy (and dumb) people mentioned in this article should get nothing.
to I'm sorry wrote on Feb 21, 2007 8:45 AM:dumb?? you said, they are not dumb, even dumb people dont make this kind of mistakes.
So..... wrote on Feb 21, 2007 11:30 AM:Its NOT dumb to sign something when its obvious you don't KNOW what your signing? How about buying 8 to 12 homes when you KNOW there's no way you can afford to do that? Final question; do you think you'd even consider doing what these folks did? I'm not suggesting they weren't conned, or course they were. I'm just wondering how/why they did what they did (besides their obvious greed).
vince wrote on Feb 21, 2007 2:05 PM:they are GREEDY indeed....
Pedro wrote on Feb 21, 2007 5:46 PM: "They said, 'Just sign it, and we'll take care of the rest.'" Oh, okay, I'll sign right here. Idiots - all the way around. The scam artists WILL go to jail for mortgage fraud, though, there's no doubt about it.
Let's have compassion wrote on Feb 21, 2007 10:54 PM:All of us have some greed to a certain extent (some more than others), and we all make stupid mistakes. Take into consideration of the fact that a lot of these people got involved with this because they TRUSTED and knew the big players of these companies. They trusted friends, family members, and so on who were also involved. I know about this because I know people involved in this scam and they are NOT greedy and stupid people.
stick to bedpans wrote on Feb 22, 2007 5:38 AM:Greedy, stupid and parochial - plain and simple. To trust exclusively on familial or ethnic ties is not the way to do business. You jeopardize not just a professional relationship but a personal one when a deal goes sour. There are 2 P's personal and professional - keep these apart. Trust people based on merits.
To: sick to bedpans wrote on Feb 22, 2007 2:01 PM:Easy to say... Harder to do, especially when your friends/relatives are doing incredibly well in their investment at the time you are offered to sign up.
stick to bedpans wrote on Feb 22, 2007 5:26 PM:Harder to do indeed - seeing material gains that are "incredibly well". Incredible is the correct word - for it was "so implausible as to elicit disbelief." We have former friends and a cousin who asked us to "host an investment party" at our home - we said NO. Regretfully, estrangement from family and friends is the price to pay for fiscal sanity and responsibility.
shaking head wrote on Feb 23, 2007 7:27 PM:Why don't you people come on over and spit on us too?? Yes...we made a mistake. No, we aren't greedy or stupid. Too trusting...yes. As this was Family and very close friends. It never ceases to amaze me how the bullies come out and taunt us in this mistake. Crimes were committed, but you obviously are more concerned with telling us how greedy or stupid we are rather than worrying that the guy next door was the man who ripped us off. How these crooks continue to walk around in their communities is beyond me knowing the extent of their crimes. Point your anger at them folks.
FRIENDS DUH! wrote on Mar 8, 2007 10:59 PM:****YOU WOULD DO THE SAME THING.**** They trusted them because they thought they could. It's obvious the victims knew someone the scammers knew. If you read the other articles related to this one, you will see that the people they duped are friends aquaintances and friends of aquaintances and friends. Even notice that some of the vicims are the co-workers of the scammers mom who is a nurse. The guys mom probably didn't even know what was going on. They obviously trusted them because some one they know told them that they could trust them. I think many people would do the same thing in that case. It's not greed. They are people that wanted to make safe income producing investments for their future. They just wanted to invest and thought they found a good way to do that. I feel so bad for those people. I have been a real estate agent for many years. The purchase contract is 9 pages and I have never had 1 person read the whole thing and they very rarely read it at all. They just sign where i tell them to, because they trust me. Same thing with loans, lawyers, escrow companies, auto loan companies, credit cards etc. These people just did what almost everyone does. It's just terrible what happened to these people.
FRIENDS DUH! wrote on Mar 8, 2007 11:01 PM:****YOU WOULD DO THE SAME THING.**** They trusted them because they thought they could. It's obvious the victims knew someone the scammers knew. If you read the related articles related to this one or read the comments you would see that the people they duped are friends aquaintances and friends of aquaintances and friends. Even notice that some of the vicims are the co-workers of the scammers mom who is a nurse. The guys mom probably didn't even know what was going on. They obviously trusted them because some one they know told them that they could trust them. I think many people would do the same thing in that case. It's not greed. They are people that wanted to make safe income producing investments for their future. They just wanted to invest and thought they found a good way to do that. I feel so bad for those people. I have been a real estate agent for many years. The purchase contract is 9 pages and I have never had 1 person read the whole thing and they very rarely read it at all. They just sign where i tell them to, because they trust me. Same thing with loans, lawyers, escrow companies, auto loan companies, credit cards etc. These people just did what almost everyone does. It's just terrible what happened to these people.
IP address wrote on Mar 10, 2007 7:05 PM:Keep up the excuses. It seems justification of the victims actions are more important than going after the alleged perpetrators. Keep writing too. Our IP addresses are available to anyone who legally asks for it - it would be interesting who the commentators are. Break break... By the way I saw a Maserati with CA plates driving around in the Arlington, VA area.
Agent? wrote on Mar 10, 2007 7:43 PM:I have seen it all in SW Riverside county real estate. An "agent" who allows his clients "not to read" a contract. A true Realtor will sit down with you and do the "deep dive" - down to what mineral rights mean and etc. Do not be lazy and say "just trust me - sign this." Do your 2.5% worth of the deal, after all you are working for the homebuyer. Or is your slice of bread buttered on both sides. In this string an agent generalized the home buyers as non-readers - as much as I will probably generalize from now on that all agents cannot spell [sic] vicims. If rushing to sign a document is due to the adage "time is money" then the agent sold a house - it is all about the money. A true Realtor puts people together with their dream homes.
FUNNY wrote on Mar 11, 2007 6:48 AM:"FRIENDS DUH!" is an agent who cannot spell victim - sloppy because it is the same agent who allows his clients not to read their contracts. "Agent?" cannot even punctuate a question. What other characters will come out of this motley blog - variety show.
Misery wrote on Mar 11, 2007 7:10 PM:In answer to funny. Misery joins this show. Misery does love company. It seems the excuses to indulge in the investments had the premise that all are greedy. Not true we see lots of selfless people out there, firemen in CDF, the volunteers of non-profits in Temecula such as the food bank and other countless examples. Stop looking for cohorts in explaining your greed away. If the second premise was that all would have done it too, then it would have happened already. More people would have been victmized. Trust but verify. Peace
first time shame on them second time shame on us wrote on Mar 21, 2007 11:52 PM:First of all these clients could not have gotten any homes on their own. if these investors were fruad, why not just give them the homes because it is not yours. The Bank owns these homes!!! NOT YOU. Who is the looser really! If you just stick to one home you can afford and sleep at night.If they were fruad and they can sleep at night...why don't you! What is 10-50 homes going to do for you?
Harmed wrote on May 20, 2007 8:36 AM:I am truly surprised by the ignorance shown by the commenters on this forum. If they had been the victims, they would be screaming bloody murder. ...
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