Sixth lawsuit alleges money laundering
By: CHRIS BAGLEY - Staff Writer | ∞
MURRIETA -- One of several men accused of running a vast mortgage scam has allegedly begun to launder money through his wife's clothing boutique and may be preparing to flee the country, according to a lawsuit brought Tuesday by a fresh pair of aggrieved investors.
The suit, filed in Riverside County Superior Court on behalf of San Diego County residents Brian Hendley and James Kabellis, is the sixth in a series of suits that accuse Murrieta resident James Duncan of fraud on the order of tens of millions of dollars.
Also named as defendants in the latest suit are Andrea Duncan; Blushed Boutique, a clothing store that she runs on Monroe Avenue in Murrieta; and a company linked to Duncan that has recently accumulated more than 50 Murrieta-area houses from small-scale investors who bought them under unusual circumstances in 2005 and 2006.
Hendley and Kabellis say they handed over a total of $112,000 for Duncan and his Nevada-registered company, Total Return Fund LLC, to invest on their behalf. Duncan had told the two men that they would receive their first cash returns in January of this year, but hasn't made good on the promise, according to the suit.
"They demanded their money back," Temecula attorney Richard Ackerman said in an interview Tuesday. "They (were) begging and pleading for their money."
Instead, Duncan deposited much of the money in his wife's business accounts, Ackerman wrote in the suit, later citing interviews with a former business partner of Duncan.
Andrea Duncan bought the boutique around the beginning of the year, according to Nancy Chu, the broker who sold her the business.
Reached by phone Tuesday, Andrea Duncan said she knew nothing about her husband's business activities. She declined to answer questions about funding for her own business. James Duncan didn't respond to a request for comment.
The Riverside County district attorney's office said earlier this year that it is investigating Duncan and several of his business partners. No criminal charges have been filed in the matter.
Meanwhile, the lawsuit Tuesday alleges that the couple may be preparing to flee to Malta, a Mediterranean island nation that does not have a current extradition treaty with the United States, an allegation that Ackerman said is based on interviews with a former Duncan employee. Andrea Duncan declined to address that claim.
Plaintiffs in the six lawsuits have alleged that a group run by Duncan and Murrieta-area resident Maurice McLeod encouraged clients to borrow on credit cards and liquidate retirement funds in order to invest with the group.
Unlike plaintiffs in the five earlier lawsuits, Hendley and Kabellis do not claim to be victims of mortgage fraud. Excess cash from mortgage loans was allegedly the largest single source of cash for the alleged scam. Several dozen clients of Stonewood Consulting, a target of the earlier lawsuits, bought as many as five houses apiece using 100 percent financing, according to publicly available property records.
In many cases, the clients paid 10 percent to 20 percent more than the sellers had demanded, even though the sellers never saw that extra money, according to those records and interviews with several real estate agents who said they were approached by Stonewood.
The lawsuits allege that Stonewood, Duncan and McLeod promised to put the excess cash into "high-yield, low-risk" investments, however neither man received any cash returns on their investments. The clients are now on the hook for as much as $3 million apiece.
Ackerman, who is representing plaintiffs in four of the six lawsuits, said lenders are foreclosing on a total of more than 100 houses, hollowing out neighborhoods in the Copper Canyon area of western Murrieta and other neighborhoods around the SCGA golf course in eastern Murrieta.
The clients' lawsuits allege that the purchases relied on proceeds from 100 percent mortgage loans, which were allegedly based on inflated appraisals.
Duncan, McLeod and former Stonewood chief executive Hendrix Montecastro haven't responded to dozens of calls and e-mail messages seeking comment since the first lawsuit was filed Jan. 5. Stonewood, meanwhile, has relocated to the Carmel Valley area of San Diego after operating out of a house in northern Murrieta for three years.
-- Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or cbagley@californian.com.
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George Wilkinson wrote on May 23, 2007 7:42 AM:Well that certainly answers some questions on homes in that area. Whenever you would look at prices, you would see anomalies of 10/20 percent high with houses sold for more that listing price... you wonder if the sellers will get involved legally because when someone offers you 400 thousand for a property you listed for 360 but demands 40 or 50 thousand back at closing you can't possibly think that you're selling your house legitimately and certainly if a realtor was involved he had to know that the transaction was part of a fraud somewhere. I guess when money's involved, some will always take the marginally ethical position even though it damages the innocent.
Donna wrote on May 23, 2007 11:58 AM:I find it hard to believe that spin offs of this scam are still going on in the Temecula/Murrieta area. The agents who are trying to profit at the expense of the lending institutions should be ashamed of themselves. They give all of us Realtors/Lenders a bad name! Why hasn't the Dept. of Real Estate suspended his brokers license?
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