An alleged real estate fraud scheme built on greed

News item from your government today: "The Securities and Exchange Commission today filed securities fraud charges against the promoters of a real estate investment scheme targeting the African-American community in the Los Angeles area and other locations in Nevada and Georgia."

In short, the alleged scheme was this: An Altadena woman named Jeanetta M. Standefor, through a Pasadena company called Accelerated Funding Group, operated an allegedly fraudulent "foreclosure reinstatement" scheme. More than 600 people invested $18 million in the scheme between 2005 and 2007, believing they could reap returns of up to 50% within 30 to 45 days, the SEC says. Investors were led to believe that their wildly profitable investments would also help distressed homeowners avoid foreclosure.

The SEC press release alleges this was the crudest, most primitive kind of financial fraud: There was no "foreclosure reinstatement" program at all. It was just a ponzi scheme -- you "invest" money with me, and later I give some of it back to you, telling you that is your profit. I raise more money and pay some of it back as "profit" to the new investors, keeping some of that money too. It's not complicated: I raise money and keep some of it. I don't invest any of it in anything.

From the SEC: "Standefor also used more than $1.9 million of investor funds for personal expenses such as her lavish wedding and honeymoon, cars, jewelry, tickets to entertainment event and home renovations. Standefor and AFG also misused investor funds to pay $121,000 in 'consulting fees' to Standefor's husband Darrell R. Dansby."

My attempts to reach Standefor for comment at Acclerated Funding Group were unsuccessful. The company still has a working phone line, but it goes to voicemail and the mailbox is full.

Bloviation: This is a bit harsh, but I'll say it anyway: The investors in this case may have been defrauded, but they were chasing a really silly dream. Anyone who believes they can make an investment relating to foreclosure, and then get a return of up to 50% within 30 to 45 days, is asking to be separated from their money. There's a name for that kind of thinking: greed.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Comments

[Michael Snyder]

I don't think an investment n crack cocaine would pay back 50% in 45 days even if the "investor" wasn't smoking their own stock. I think these "investors" were deep into the storeroom.

[left of lefty]

i won't be too quick to judge the 'investors.' most likely the scam targets poorly educated folks who don't know any better. sure, you and i know that a 50% return in 30-45 days is suspect. but there are more people out there who simply don't know what a typical 'good' investment return is supposed to be.

let me put it another way ... people who know the deal is too good to be true won't be investing in it.

similarly, most people who read this blog understand what an ARM is, what rising interest rates mean to mortgage payments, and why interest-only and neg-am loans are bad. unfortunately, most of the population, even the ones with college degrees, don't have a clue.

i'm sure there were a few greedy investors. but i think most were simply guilty of being ignorant.

[thebitterrenter]

What kind of time does a securities fraud conviction carry?

Is this better or worse than mortgage brokers writing mortgages for people they knew had no hope of repaying them?

On the one hand, it's completely criminal, instead of flagrantly careless.

On the other hand, it's a pretty straightforward transfer of money, so the courts and the sheriffs won't have to deal with any actual foreclosures, and the victims won't have to worry about their credit ratings being tarnished.

Which brings up another point. If a fraudulently written mortgage becomes the basis of a mortgage backed security, which subsequently crashes in value due to foreclosures, does that give rise to a securities fraud claim?

[Michael Snyder]

left of lefty,
Bless your kind heart but these folks were just plain greedy. The first red flag should have been that comedic rate of return. Educated or not I'll bet their mommas said, "If it sounds too good to be true; it probably is too good to be true."
As I've said before, the real fraudsters are having their "mistakes" laundered and pressed by the Fed to the tune of $600 billion in assorted buy/bailout / money laundering schemes. Proof of that pudding will come in another five to six months as the "loans" against subprime AAA rated instruments come due. Although the market remains unstable with oil & food costs skyrocketing, the Fed seems to think it has inflation under control and Wall Street's buyin' it.
Back here on the ranch most benchmarks would indicate a deteriorating financial picture with no real relief in sight. I guess cattle aren't the only source of methane from Texas.

[jbob]

Any guesses as to which party she supports?

http://www.newsmeat.com/fec/
bystate_detail.php?zip=91101&last=Standefor&first=
Jeanetta

[Geek Seek]

Here's a $44M alleged fraud story:

http://newyork.fbi.gov/dojpressrel/pressrel08/
wirefraud050808.htm

The company involved is called Olympia Mortgage. We have an OlympiaWest mortgage out here... wonder if the two are connected.

Also... looks like L.A. Times did an article on her as a flipper back in 2004:

"Flipping for fame and fortune
August 27th, 2004
From Los Angeles Times
Relying mightily on her powers of imagination, Jeanetta Standefor paces the length of an unremarkable bare box of a dark living room of an... more"

Can you post a link to the original article?

[TrojanDLA]

Nothing extraordinary really. Fraud scams are probably one of the oldest professions and it all started with the village "witchdoctor".

During the tech boom, there were internet scams. During tax season, there are tax scams. I'm sure with the Olympics coming up, we'll see some memorabilia scamming in China.

[MyLessThanPrimeBeef]

I agree with TrojanDLA. It's reassuring to know that human nature hasn't changed a bit since the late Stone Age. Pride and greed - someone should write a book about it.

And as surely as summer follows spring, it's always hottest hours (like 4 or 5PM) after the sun has started its descent (noon), and again months later (like August) after the sun has started its southward journey in the sky(summer soltice). So, even though the housing market on the West Side has always turned, the un-initiated, the ignorant, they continue to 'falsely' think and delude themselves about immunity and their specialness.

Speaking of the sun going down, when little men...and little women in politics cast long shadows, you know it's getting dark.

[TakeFive]

Only a slighly more foolish than paying someone $995 to help you walk away from your property.

[gary]

per the movie "the devils advocate" the devil snickers and says "vanity its my favorite sin". The vanity of the illusion of wealth is what is going on here, not greed. I am sure they bragged about their "advisor" is getting them a 50% ROR. Its like the cry baby story about some ole fool lady that got scammed a couple of weeks ago giving up 800k for a lottery scam. I bet her kids or grandkids or some real charity could have used the money. But, nooooooo she had to give it away because of vanity and future riches. Another ole fool did the same thing in corona del mar. And these fools are from "the greatest generation"? Right...When people talk to me about their wisdom in their decisions its vanity speaking, not greed.

[Anon]

Geek Seek - here is the original article from 2004:

TELEVISION & RADIO; Flipping for fame and fortune; Buy a house, fix it fast, try to sell it for a profit. It's a way of life in L.A., and it's headed for TV.
[HOME EDITION]


http://pqasb.pqarchiver.com/latimes/access/683772071.html?dids=683772071:683772071&FMT=ABS&FMTS=ABS:FT&type=current&date=Aug+27%2C+2004&author=Lynell+George&pub=Los+Angeles+Times&edition=&startpage=E.1&desc=TELEVISION+%26+RADIO%3B+Flipping+for+fame+and+fortune%3B+Buy+a+house%2C+fix+it+fast%2C+try+to+sell+it+for+a+profit.+It%27s+a+way+of+life+in+L.A.%2C+and+it%27s+headed+for+TV.

Los Angeles Times - Los Angeles, Calif.
Author: Lynell George
Date: Aug 27, 2004
Start Page: E.1
Section: Calendar; Part E; Calendar Desk
Text Word Count: 1838



Abstract (Document Summary)



Auditioning for the role of novice flippers, Chris Mullen and Mark Anthony Puopolo vamp for the video camera. Blueprints in hand, the couple stand on the walkway of the nearly 100-year-old California Craftsman, on which they just closed escrow. It's a corner lot not far from Standefor's property, on a lively tree- laden street. Kids whiz by on scooters, and an ice cream truck trundles by with its woozy music box, creating an idyllic suburban- urban nostalgic postmodern backdrop for the audition tape.

They paid $487,000 for this three-bedroom, one-bath home and hope to sell it for $800,000 to $900,000, after five to six months of work. "It's the small costs that tend to add up quickly," says Puopolo. "We worked out the numbers separately, and together we decided that our goal is to spend between $100,000 and $150,000." What they fear most is merging the personal and the professional and the stress that it might have on their partnership, says Mullen. "Stress affects me differently," says Mullen, 40. "It slides right off. With Mark ... he tends not to listen."

ON LOCATION: [Jennifer Ayala] films Chris Mullen, left, and Mark Puopolo in Pasadena, where the men bought a house to flip.; PHOTOGRAPHER: Richard Hartog Los Angeles Times; THE AMERICAN DREAM: Jeanetta Standefor, right, pitches her plans to Jennifer Ayala, left, and [Lindsey Topping]. She's hoping to turn around a condominium and make $50,000.; PHOTOGRAPHER: Richard Hartog Los Angeles Times

[Anon]

Here is the victim's concern:

Since 2005 I have invested in a company called Accelerated Funding Group based out of Pasadena,CA. The company buys foreclosure loans by the bulk and trys to refinance them at full value. Investors like myself would pay the last three months of each home owner to get them out of default. The investment would pay us 50% profit of our orginal investment plus interest if it closed after 45 days. The first two times I invested worked fine, but the last time I invested (September 06) has been extremely frustrating. Its been over year and I still have no answers to what's going on with my money which is $150,000. I owner of the company Jeanetta Standefor has not communicated with any of the investors over the last several months because of a questionable sickness. The person who has stepped in her place Relda Neely has not provided any information regarding our money or the status of the company. Several investors have threatened lawsuit and called the SEC. I really need help to figure out what's the best course of action. Please help.

http://www.lawguru.com/cgi/bbs/message.php?i=
581370548&view=a

[fred]

TO ANON.............................so based on your logic are the good folks at countrywide supposed to get the stock bought back at $40/share verse the current price of $6/share. You INVESTED and didnt do anything other than write a check and assume you were owed somthing. Flipping homes is no different than investing in stock. WHen you win your all full of your own self righteous wisdom and when you losse its boo-hoo time. Anybody that gets 50% ROR on REO and expects it to never end is a fool. Your placed your bets and now live with it. If I was on that jury you wouldnt get a dime.

[Miles]

I can understand working in this environment and not knowing what is g0ing on. You are caught up in being professional anddoing the best you can at your job. If all the deposits and money handling was done my Ms. Standefor, how can the office manager know all the answers and how can she give you more informations than she herself is given regarding the illness of the boss? Have you gone without pay?

[Jeanetta Standefor-Investor]

ANON- I understand your worries/concerns. True, you were sort of expecting a miracle when awaiting a 50% return, however I've known Jeanetta for over a year and I have invested with her as well. Though never promised anything outrageous, I was beside myself upon hearing the news. Don’t pay attention to the harsh remarks, as there will always be folks with opinions that might not be the most useful to any of us. However, it’s unfortunate that we can’t really do anything other than to wait patiently to see what goes on with her trial. I have contacted several attorneys, however they’ve all advised me with the same dreadful answer “you’ll have to wait & see.” I would be more than happy to compare notes on this matter, so let me know if there’s a way to contact you. I’m also okay with a blog dialogue if that works for you. Wish you luck. I hope you weren’t the poor guy/gal who funded her wedding. There are no regrets, as I’ve learned a lot from this person, but the most distracting feeling is losing who you once considered a good friend/mentor. No I didn’t make a dime with her, after investing a good chunk of money, but evidently she had a few different methods of luring in investors. You are in “good” company. I just wish I had the time to be at the trial as I’d like to see if this person ever goes thru an uncomfortable stage. I don’t think I could ever get over her calmness/confidence and strategic way of making you feel “empowered.” I’m also curious if Rhelda was involved, as she’s represented Jeanetta at several functions.

Reference: She has multiple corporations a few that I know of: AFG, AFG Trust, Accelerated Capital Group and knowing her, much more. Let’s just hope that the SEC is able to track all of her assets, as I’m sure she has plenty.

Fred, as far as the investment comparison, please look further into the issue before making such bold statements about what you would have done. Though I respect your opinion, in this case the money was completely used for personal leisure, so I don’t see the connection. This is a woman who appeared very notable within her community, had a “great family” all headed in an academic direction. She “gave back to the community” via donations, etc. This is a connartist your blogging about, and unfortunately it happens to the best of us. So there is no reason to put people in the box and determine who should/shouldn’t fall into the category of being foolish. I can only speak on my behalf and that is, for once I trusted someone who had a lovely family, great moral and ethical beliefs, never gave me a reason NOT to trust her and confided some of the most iatrical moments of her life to help me understand this corrupt business: Real Estate, not because I don’t make ends meet otherwise, but simply because there is heaps of interest to build, and be gratified that you’ve provided someone a shelter.

[CITIZEN]

July, 2008
QUESTIONS:
1) Why would a 280 unit, 4-building 1965 apartment building complex, now styled a homeowner association: "Newcastle Manor" in Encino California, with absentee owners, a large population of renters, and landlord owners with multiple units, need another special assessment of approximately seven hundred dollars, without ballot or vote from all owner/members...when owner/members just received an 11% increase in homeowner association dues in January,2008...and already are paying approximately $300. per month, with little benefit?
By law is there a limit in amount and frequency of "special assessments" allegedly for routine replacement or repair of items i.e. air conditioning units in just one building, etc., unless approved by written ballot and vote by all owner/members? What are the consequences to owner/members if a "special assessment" is not paid? Why are alleged HOA reserve funds in bank accounts of approximately 1.5 million dollars not being utilized for replacement or upkeep of the 4-building complex?
2) Do condo complexes with large blocs of renters in L.A.City require an onsite resident manager?
3)Are homeowner association "Boardmembers" required to disclose ownership information in the complex, contact telephone numbers and contact information to other owner/members and renters in the complex?
------------------------------------------------
Fraud traps await unwary associations
By Frank Nelson
April 06, 2008
http://articles.latimes.com/2008/apr/06/realestate
/re-hoafraud6
Homeowner associations are rocked by a triple whammy when they discover they are victims of fraud.

First, there’s the financial loss, which may be substantial. Next, the association members have to deal with the betrayal of trust. And third comes the nagging realization that this might have been prevented.

Fraud at nonprofits and small businesses – both categories that include homeowner associations – mostly involves conflict of interest, bribery and illegal gifts, false reimbursement of expenses, billing issues, check tampering and cash theft, according to the Assn. of Certified Fraud Examiners, based in Austin, Texas.

Perpetrators may be board officers or members, managers or other staff, association homeowners or outside parties such as vendors or tradespeople doing business with the association, said Ronald S. Stone, professor of accounting and information systems at Cal State Northridge and a certified fraud examiner.

Homeowner associations, as nonprofits handling large sums of money – in reserve and replacement funds, and daily operating accounts – are especially at risk, Stone said, because they lack the checks and balances, and financial acumen, of most commercial businesses.

But at the same time they are expected to exercise prudent judgment and maintain detailed financial records.

“They have a fiduciary responsibility to all the owners to exercise good business judgment,” Stone said, adding that they must also keep adequate books, records and files, including copies of major contracts, paid bills, bank statements and detailed collection records.

Red flags can include missing bank statements and other documents, photocopies instead of originals, unexplained cash shortages, duplicate payments to vendors and payments for unspecified services.

Stone recalls a case in the early ’90s in which a Calabasas community manager used phony invoices and false bank statements to steal more than $1.5 million of association funds. He was eventually sentenced to six years in prison for check forgery and grand theft.

Many warning signs went unheeded in that case as the manager of the 268-unit association set up a system involving duplicate checkbooks, hidden bank accounts, bogus and real vendors, photocopies of documents and a set of false financial statements, Stone said.

Boards often are composed of well-intentioned volunteers, unit owners who typically are elected; however, they undergo no screening or background checks, Stone said, and may lack financial training or experience.

State legislation mandating three hours of board member education failed last year; the latest version of that bill, rather than make the education compulsory, would require members only to disclose whether they have taken such a course.

Yet another bill seeks to usher in education and training under the umbrella of a state bureau of common-interest developments that would be funded, at least in part, by a charge on community association homeowners.

Too much trust – in fellow board members, board officers, vendors, the manager or management company – and too little oversight, mixed with complacency and a reluctance to confront people and ask hard questions, can be a recipe for disaster.

Sometimes homeowner apathy is so widespread that the normal oversight flowing from the involvement of interested and caring residents is missing; this lack of participation may be extreme – and leave associations especially vulnerable to criminal abuse – in associations with high numbers of absentee owners.

David Harvey, treasurer of the association at Diamond Head, just west of Valencia, for seven years and now the association president, believes an obsession with the minutiae of association politics among many board members blinds them from seeing the bigger picture.

“Nobody watches the money,” he said. “Most of them are not businesspeople; they’re busybodies. They’re only interested in trying to control their neighbors.”

Meanwhile, property managers, who may have half a dozen properties, could be doing kickback deals with vendors, landscapers, painters and other suppliers, he said. “That’s what you need willing volunteers to watch out for.”

Pasadena attorney Kelly Richardson, co-founder and managing partner of Richardson & Harman, a law firm specializing in real estate and community association issues, recommends that to minimize fraud risk – and even questionable actions that can appear illegal – boards need to know what they’re doing, keep accurate records and operate as transparently as possible.

Looking back over some of the cases he’s been involved with, Richardson blames bad judgment, poor management and lack of documentation rather than dishonesty or intent to defraud.

Richardson said that even when accusations are unfair and unfounded, boards too often react by refusing to disclose information. “They make themselves look defensive and crooked when they aren’t.”

He said the law grants broad access by board members and homeowners to most association records, and when information is improperly withheld it unnecessarily elevates the level of mistrust and conflict.

Stone believes much fraud is driven by ego, greed and hubris. “People think they’ll get away with it. It’s like stealing cookies from the cookie jar. It takes a while to be detected but time works against them and eventually the fraud gets found out.”

Still, the fraud examiners association believes a great deal of general fraud goes unreported, perhaps because organizations do not realize it’s happening – the association says most instances of small-business fraud are discovered by accident – or they want to avoid bad publicity and other awkward consequences.

Among 1,134 cases of fraud between 2004 and 2006 that were surveyed in the association’s 2006 national report, about 800 were referred to law enforcement. Though some cases were still pending at the time of the survey, preliminary results suggested that almost 89% were prosecuted.

Richardson said prosecutors and police are more likely to be interested when there’s a lot of money involved and clear evidence of embezzlement.

In situations involving elected members or officers, where the chances of conviction and recovering the losses are slight, it may be best to “plug the leak, get the people out of office and move on.”

If an association discovers funds are missing, there are a number of steps it can take, Stone said, starting with removing the suspect from a position of control and securing books and records.

Richardson also recommends putting a stop on all bank account activity and asking the bank to call before it processes any checks or withdrawals. It may also be a good idea to consider closing accounts and opening new ones, at the same time reviewing bank signature cards and, if necessary, changing the authorized signers.

Other moves suggested by Stone include gathering all documents and other evidence, contacting the association attorney and insurance agent, and considering reporting the matter to the police.

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