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12/04/15

New York Times: Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes

New York Times: Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes 

Relying on the secrecy of limited liability companies, white-collar thieves are targeting pockets of New York City for fraudulent deed transfers, leaving the victims groping for redress.

By Stephanie Saul

November 7, 2015

Partially paralyzed and reliant on a wheelchair, Ozella Campbell spends a lot of time watching television. It was under those circumstances in February 2014 that she saw a commercial urging her to call MyHouseIsADump.com, a company that offered to buy houses in as-is condition, in cash, and to close the purchase within seven days.

She called the toll-free number and within hours, she said, a well-spoken young man appeared at her brownstone, a longtime family home in Bedford-Stuyvesant, a Brooklyn neighborhood in the throes of transformation.

The next day, the man’s associate arrived.

“He said, ‘You don’t have to pay any more bills,’” said Ms. Campbell, who was $1,000 behind on her electric bill at the time.

A third man, named Alex, ostensibly the boss, arrived next. He promised, Ms. Campbell said, to pay her delinquent mortgage, provide for her housing for two years, and pay her $43,800. He also hired a lawyer for her. All she had to do was sign over the deed to her house. 

More than a year later, Ms. Campbell, 75, is in limbo. Her former home at 679 Jefferson Avenue is owned by an entity called Jefferson Holding LLC and she is left with her delinquent $529,000 mortgage.

“He lied,” she said tearfully of Alex in an interview at the illegally converted garage in Canarsie, Brooklyn, where she lives for now. “He said, ‘Don’t worry, Mrs. Campbell, we’re going to take care of you.’ ”

Ms. Campbell never learned Alex’s surname. And when her relatives tried to find Jefferson Holding LLC at its Great Neck, N.Y., address, there was no company there by that name.

Hard to Crack

In Bedford-Stuyvesant and other pockets of the city, white-collar criminals are employing a variety of schemes to snatch properties from their owners. Often, they use the secrecy afforded to shell companies to rent out vacated properties until they are caught or sell them to third parties. Victims are left groping for redress, unable to identify their predators or even, in some cases, to prove a crime has been committed.

Attention lately has focused on the growing use of shell companies to buy prized real estate in Manhattan and other glittering destinations for global wealth. But the stealthy practice of deed theft illustrates another way that limited liability company law used to create such entities has been twisted and stretched to conceal the ownership of real estate. This is particularly true in Brooklyn neighborhoods where profits in the hundreds of thousands of dollars from quick turnaround sales have become common.

“Sham LLCs are a huge problem in terms of their lack of transparency, in terms of who is behind the property and who is behind these schemes,” said Jennifer Sinton, a lawyer with South Brooklyn Legal Services, which is representing Ms. Campbell in an effort to reclaim her home.

A review by The New York Times of several dozen cases, and interviews with lawyers, prosecutors and others knowledgeable about fraudulent deed transfers, suggest they are accelerating even as officials struggle to address them. The city’s Department of Finance said it was investigating 120 cases, many of them hard to crack because of the role played by LLCs, officials said. Underscoring the rising alarm over the problem, the state attorney general, Eric T. Schneiderman, and the Brooklyn borough president, Eric L. Adams, held a forum last month to warn property owners about it.

Deed thieves often scan legal notices for mortgages in arrears, typically targeting properties like Ms. Campbell’s that are in poor repair or abandoned. Vulnerable homeowners — including older and disabled adults — are sometimes tricked into signing over their properties, while believing they are getting financial relief.

In other cases, signatures are simply forged on deeds. The thieves, meanwhile, hide behind inscrutable mazes of limited liability companies, rented post office boxes and fake addresses.

Coming amid waves of gentrification, the reports of deed theft have helped feed the unease felt in neighborhoods where longtime residents — blacks and Hispanics, the poor and middle class — are increasingly being priced out. A report last year by the Lawyers’ Committee for Civil Rights Under Law and the Center for NYC Neighborhoods found that the schemes disproportionately affected black and Hispanic homeowners.

When LLCs are taken to court, those behind them often remain a step ahead — and impossible to find. “They’re shell companies,” said Jomo Gamal Thomas, a lawyer who has represented several deed fraud victims. “There’s no guarantee you’ll get your money back.”

 

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