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                                                                                                                                                           WATSON
                                                                                                                                                           DENIED
                                                                                                                                                           Golfer Tom Watson
                                                                                                                                                           misses a chance
                                                                                                                                                           to make history,
                                                                                                                                                           losing the British
                                                                                                                                                           Open to Stewart
                                                                                                                                                           Cink, right. 1C
MONDAY, JULY 20, 2009 ❘ 75¢                                                                                                       HERALDTRIBUNE.COM




                                                                           FLIPPERS’ TOLL
INSIDE




                                                                           ON GULF COAST:
                                                                           HALF A BILLION
LAKEWOOD RANCH CONDOS
Mark Riley stands next to the $300,000 Mercedes Maybach
he leased during the boom. Unhappy former clients say he
orchestrated flips in Lakewood Ranch, rarely selling to
outsiders. The toll: $30 million in defaults. 7A




                                                                           IN DEFAULTS
                                                                           A HERALD-TRIBUNE INVESTIGATION: IN SARASOTA AND MANATEE COUNTIES, 37 GROUPS
                                                                           OF PROPERTY FLIPPERS NOW ACCOUNT FOR NEARLY HALF A BILLION DOLLARS IN
SARASOTA INVESTMENT SEMINARS                                               DEFAULTS. REAL ESTATE INSIDERS ARE AT THE HEART OF MANY OF THE GROUPS.
Arthur Seaborne leaves his office in downtown Sarasota.
Former clients say Seaborne recruited investors into                       By MICHAEL BRAGA, CHRIS DAVIS and MATTHEW DOIG, Staff Writers
property-sharing ventures that guaranteed him a profit and




                                                                          A
left investors with mortgages they could not pay. 8A                                 ll across Sarasota and Manatee counties, the price increases defied logic.
                                                                                        More than 100 properties from Palmetto to North Port doubled in price in a single day during
                                                                                     the recent real estate boom. Proposed condos — no more than ideas on paper — flipped two or
                                                                                     three times before anyone moved in.
                                                                              Some investors bought up dozens of houses within a few blocks. Within weeks or months, they
                                                                           flipped them at a profit.
                                                                              A yearlong Herald-Tribune investigation has found that many of these sales cannot be explained by
                                                                           shrewd deal-making or as an innocent consequence of the real estate boom. Instead, they were manufac-
                                                                           tured by property flippers who found ways to drive up housing prices so they could make money at the
                                                                           community’s expense.
PALMETTO INVESTMENT CLUB
Marc Mailloux outside his home in Palmetto. The real estate
                                                                              The Herald-Tribune examined more than 3,000 property flips that occurred since 2000 in Sarasota
agent and his associates bought at least 158 properties. But               and Manatee counties. Based on interviews with more than 100 investors and real estate professionals
when the market cooled, they started selling to each other as
a way to get more bank loans. 6A                                           and a review of thousands of pages of deeds, mortgages, foreclosure filings and other public records, the
                                                                           Herald-Tribune found:
                                                                              ■ At least 37 groups of property flippers operated in Sarasota and Manatee counties. The groups
                                                                           bought hundreds of properties worth more than $350 million and sold them to associates for inflated
                                                                           prices.
                                                                              ■ The flippers identified by the Herald-Tribune — and the people who ultimately bought their prop-
                                                                           erties — have so far defaulted on more than $450 million in mortgage loans. Their defaults account for
                                                                           $1 in every $13 lost to foreclosure in Sarasota and Manatee counties from 2005 through 2008.
                                                                              ■ Nearly 40 percent of the people involved in questionable flips in Sarasota and Manatee counties
GULF COAST EASY TARGET FOR FLIPS
The Herald-Tribune identified 37 groups of property flippers               were industry insiders — real estate agents, developers, lawyers and mortgage brokers. Of the 37
operating in Sarasota and Manatee counties this decade. 9A
                                                                           groups discovered by the newspaper, 21 were organized by real estate agents or mortgage brokers.
                                                                              ■ Most flipping circles were organized by a leader who either recruited investors on the promise of
       HERALDTRIBUNE.COM/FLIPPING: Online-
       only profiles of more than 100 people in Sarasota                   easy money or conspired with friends and associates to sell properties at inflated prices. Some of these
and Manatee counties who were involved in property
flips. Plus an interactive map that lets you drill into the
                                                                           investors did not realize they were buying properties at inflated prices; others willingly lied about sales
details on each of the 50,000 suspicious Florida flips.                    prices to obtain mortgages that more than covered the actual purchase.
YESTERDAY: A Herald-Tribune investigation of flip-                            ■ Some of the people who organized or participated in flips were considered leaders of their profes-
ping fraud finds $10 billion in suspicious Florida deals.
Find yesterday’s story at heraldtribune.com/flipping.                      sion. One was recognized as one of the top 50 Re/Max real estate agents in the world. Another won mul-
TOMORROW: One Sarasota real estate agent orches-                           tiple awards from the Mortgage Bankers Association of Florida. Some flippers identified by the Herald-
trated more than $100 million in questionable deals.
                                                                           Tribune were seen as key clients by local banks and were allowed to pick their own appraisers or had
WEDNESDAY: Law enforcement ignored flipping
fraud as it happened — and may not punish it now.                          loan approvals expedited to quickly close deals.
THURSDAY: Bankers made flipping fraud possible.                               ■ Widespread flipping occurred in neighborhoods of all kinds. Some groups focused on new develop-
SUNDAY: How to prevent mortgage fraud.                                                                                                                                                    See FLIPPING on 6A



INSIDE                                              40th ANNIVERSARY OF THE FIRST LUNAR LANDING
SARASOTA
HOSPITAL MAY UP RATE
The increase would cover grow-
ing expenses and fund building
projects at Sarasota Memorial. 1B
                                                    Before a giant leap, plenty of anxiety
1931-2009                                           APOLLO 11: Local man was               the right questions and run the
FRANK McCOURT DIES                                                                         right tests.
His Pulitzer Prize-winning book,                    part of the team that put                 Astronauts Neil Armstrong and
“Angela’s Ashes,” told of his                                                              Buzz Aldrin were riding the most
impoverished Irish childhood. 4A                    the moon within reach                  thoroughly inspected flying ma-
                                                                                           chine in the history of flight as it
Classified ........6C     Obituaries ........4B     By BILLY COX                           approached the moon’s Sea of
Comics .............6B    Opinion .........12A      billy.cox@heraldtribune.com            Tranquility. But with memories
Lottery .............2A   People ..............5B                                          of astronauts consumed by a pad
Movie Log .......5B       Sports ..............1C      ANNA MARIA — On the day
                                                    the Earth stood still for the Apollo   fire and colleagues obliterated in
                                                    11 drama on July 20, 1969, a Grum-     a rocket-engine explosion, Mo-
                                                    man engineer who tested and re-        rash knew the high frontier was
                                                    tested the lunar module was on         smeared with the debris of past
                                                    the edge of his seat. Powerless to     miscalculations.
           OUR 84TH YEAR                            change things now, Dick Morash            “It was nail-biting,” recalled Mo-
       NUMBER 284   4 SECTIONS
                                                    could only hope he had asked all       rash, 76, now retired in Anna Mar-
                                                                                           ia. “I guess I was like a zombie,
                                                                                           hoping it would work.”
                                                           A NICHE                            An estimated 500 million people
                                                                                                              See APOLLO on 2A
                                                           IN TIME                         APOLLO 11: A look at how the
                                                           A new Sarasota                  historic mission was executed. 2A
                                                           company helps the               AT SEA: A man linked to the Apollo
                                                           lawyers helping                 11 mission couldn’t watch it on TV. 2A
                                                           homeowners in                       ONLINE: See more historic
                                                           foreclosure.                         photos and watch NASA’s
                                                           Business Weekly                 restored video of the July 20, 1969,     Astronaut Edwin E. “Buzz” Aldrin Jr. poses for a photograph beside the
                                                                                           moon walk at heraldtribune.com.          U.S. flag deployed on the moon on July 20, 1969. ASSOCIATED PRESS ARCHIVE
6A Monday, July 20, 2009                                                                                                                                                                                                       www.heraldtribune.com

HERALD-TRIBUNE INVESTIGATION: FLIPPING FRAUD

Flipping hot spots
Herald-Tribune reporter Paige St. John mapped the amount of real estate flipping
in each square mile of Sarasota, Manatee and Charlotte counties and found that
suspicious flips occurred in nearly every residential neighborhood. But as the dark
                                                                                                                                           Flipping toll:
                                                                                                                                           $73 million just
clusters show, hot spots emerged in some communities. Flipping was most
intense in areas with a lot of new construction, such as Lakewood Ranch, and in
Bradenton, North Port and other places where housing prices were lower.
  French Creek Court



                                                                                                                                           at local banks
  Sarasota mortgage broker Arthur                                                       75
                     21 homes in one
  Seaborne bought about 20 homes
  North East Manatee County
  on thisManatee County neighbor-
  street and quickly flipped them
  hood and quickly flipped them
  to investors for what appear
  to be inflated prices. Many                                     41                                                                       FLIPPING from 1A                                     THE DIFFERENCE BETWEEN
  are now in foreclosure.                                                                                                                  ments in Lakewood Ranch. Others pre-                 LEGITIMATE FLIPS AND FRAUD
                                                                                                                                           ferred luxury waterfront houses on Bird              Property flipping is perfectly legitimate when
                                                                                                                                           and Siesta keys or duplexes in the work-             transactions are arm’s length — when buyers
                                                                                                                                           ing-class neighborhoods in and around                and sellers act independently. It becomes
                                                                                                                                           Bradenton.                                           fraud when buyers and sellers conspire to
                                                                                                                                              ■ When the market cooled, flippers                artificially drive up prices. And if they inflate
                                                                                                   64                                      and their business partners stuck lend-              sales prices to get larger mortgage loans,
                                                                                                                                           ers based in Southwest Florida with                  they commit mortgage fraud.
                                                                                                                                           about $73 million in bad loans. Although
                                                                                                                                           Sarasota-area flippers got most of their
                                                                                                   70                                      loans from national lenders, their mort-             against the equity. Banks fed that belief
                                                                                                                                           gage defaults hit aggressive local banks             by approving deal after deal.
                                                                                                                                           especially hard. Those defaults helped                 But others identified by the Herald-
                                                                                                                                           doom Bradenton-based First Priority                  Tribune tricked investors into buying
   MANATEE COUNTY                                                             University Parkway                                           Bank.                                                overpriced homes or conspired with as-
   SARASOTA COUNTY                                                                                                                            The Herald-Tribune found that some                sociates to fraudulently drive up hous-
                                                                                                                                           of those involved in flips were nothing              ing values.
  Bradenton                                                                                                                                more than naive investors. They paid far               Many arranged sales with fake prices
  In working-class neighbor-                                                   Fruitville Road                                             more than they could afford believing                so they could get loans that more than
  hoods in and around                                                                                                                      they could sell the houses before the                covered the cost of a house. Then they
  Bradenton, one group bought at                                                                                                           bills overwhelmed them.                              pocketed the extra money.
  least 158 properties and                                                                                                                    Others were irresponsible specula-                  The following pages have deeper
  legitimately flipped many to                                                Bee Ridge Road                                               tors who bought house after house with               looks at several of the local groups
  outside buyers. When the market                                                                                                          little or no money down and no clear                 whose real estate flips have led to the
  slowed, they sold properties to each                                                                                                     way to pay their mortgages if the houses             most defaults.
  other, allowing them to obtain bigger                                          Clark Road
                                                                                                                                           could not be resold.                                   Tomorrow, the newspaper takes a
  loans from the banks.                                                                                                                       Flipping schemes uncovered by the                 closer look at the area’s most prolific flip-
                                                                                41                                                         Herald-Tribune were so common that                   ping group.
  Waterfront property                                                                                                                      some investors who participated be-                    Online at Heraldtribune.com/flip-
  A Sarasota real estate agent working with 28                                                     75                                      lieved they did nothing wrong.                       ping, read profiles of more than 100 local
  investors bought and sold dozens of properties                                                                                              They viewed flipping as a legitimate fi-          people involved in suspicious property
  along the Sarasota County waterfront. In some                                                                                            nancing tool, an easy way to demon-                  deals — some of them organizers, some
  cases, properties were sold from one investor to                                                                                         strate that property had increased in val-           of them occasional participants and
  the next several times.                                                                                                                  ue so that banks would lend money                    some of them innocent victims.

  Lakewood Ranch
  Demand in some new Lakewood Ranch
  developments, particularly the WaterCrest
  condominiums, was so high that banks
  approved loans on properties that nearly                                                                Venice Ave.
  doubled in value in a year.
                                                                                                                                                                                                75
                                                                                                                                                                        Price Blvd.
  North Port
  Although the Herald-Tribune did not find the same type of organized
                                                                                                                                    41
  flipping schemes in North Port that it found elsewhere, few places in the
  region experienced more suspicious flips per square mile than the
  residential neighborhoods that largely make up this city. Many of the flips
  displayed classic signs of fraud, including foreclosure soon after purchase.
     In Southwest Florida, North Port was among the communities with the most
  new houses built during the boom.


Dig into property flips in your neighborhood
      Online at heraldtribune.com/flipping, an interactive map displays
      all of the more than 50,000 suspicious Florida real estate deals
uncovered by the Herald-Tribune analysis. Click on the map button, then                                                                                                                                                        75

double click on the map to zoom in and see specific sales. Or type in a city
(Sarasota, Fla.) or a street address to see flips in your neighborhood.                                                                                                                                                       41

By clicking on the dots, you can view the details of any of the 50,000 suspicious
transactions. The size of each dot represents the sale price of the property. The
dots are also color-coded so at a glance you can see how big the price increases
were in your neighborhood.


During the boom, the number of suspicious property flips soared
As the real estate market boomed in 2005, suspicious property flipping intensified in Sarasota, Manatee and Charlotte counties. The charts show the number of suspicicous flips in each county for
every month this decade.
90                                                                                               90                                                                           90
      Manatee County                                                                                      Sarasota County                                                              Charlotte County
80 Property flipping intensified in                                                              80       In June 2005 alone, there                                           80
                                                                                                                                                                                       In summer 2005, more than
   Manatee County as it did across                                                                        were 89 suspicious property                                                  200 suspicious property
70                                                                                               70                                                                           70
   the state during the height of the                                                                     flips. That is about the same                                                flips occurred — nearly as
60 real estate market. In summer                                                                 60       number of flips that                                                60       many as occurred in all of
   2005 there were 155 flips in                                                                           occurred in all of 2001 in                                                   2002 and 2003.
50 Manatee County, nearly as many                                                                50       Sarasota County.                                                    50
   as occurred in all of the previous
40 year.                                                                                         40                                                                           40

30                                                                                               30                                                                           30

20                                                                                               20                                                                           20

10                                                                                               10                                                                           10
                                                                                                   0                                                                           0
  0
   Jan.     Jan.     Jan.      Jan.     Jan.     Jan.      Jan.        Jan.      Jan.              Jan.      Jan.    Jan.   Jan.    Jan.    Jan.   Jan.   Jan.   Jan.           Feb.     Jan.     Jan.   Jan.       Jan.     Jan.     Jan.    Jan.
   ’00      ’01      ’02       ’03      ’04      ’05       ’06         ’07       ’08               ’00       ’01     ’02    ’03     ’04     ’05    ’06    ’07    ’08            ’00      ’01      ’02    ’03        ’04      ’05      ’06     ’07

SOURCE: Herald-Tribune analysis of Florida property appraisers’ sales data                                                                                                                                      STAFF GRAPHIC / JENNIFER F. A. BORRESEN

                                                                                                                                                          them into foreclosure.                         within the law and never intended


Bradenton area ‘club’                                                                                                                                        Since April 2008, the group has
                                                                                                                                                          defaulted on 70 loans. In addition,
                                                                                                                                                          group members have ceded 16 oth-
                                                                                                                                                          er properties to a private finan-
                                                                                                                                                          cier, Alan P. Richards of Sarasota.
                                                                                                                                                                                                         to inflate values. He pointed out
                                                                                                                                                                                                         that banks had their own apprais-
                                                                                                                                                                                                         ers review each deal and always
                                                                                                                                                                                                         signed off on the mortgages.
                                                                                                                                                                                                            “Did we do anything to their ap-


bought 158 properties                                                                                                                                        That means people associated
                                                                                                                                                          with the investment club have de-
                                                                                                                                                          faulted on 86 loans totaling $17.1
                                                                                                                                                          million in the past 16 months.
                                                                                                                                                             Dennis Black, a Port Charlotte
                                                                                                                                                                                                         praisers? Did we do anything in-
                                                                                                                                                                                                         correct?” asked Sirois, a Realtor
                                                                                                                                                                                                         who once worked at Vantage Real-
                                                                                                                                                                                                         ty of Florida in Palmetto. “We
                                                                                                                                                                                                         would buy a property for $80,000
By MICHAEL BRAGA                                        cooled in the second half of 2005,                    ing three years, the club sold 25           real estate consultant and apprais-            and put $30,000 in and then the
and CHRIS DAVIS                                         the investment group, including                       properties among its members, all           al instructor, said the rash of fore-          bank would send an appraiser to
Staff Writers                                           Marc Mailloux, Tony Toledo,                           at escalating prices that allowed           closures is the result of bad lend-            reappraise the property. Some-
   Drive a few miles through the                        Brian Sirois, Vincent Bower and                       them to get larger bank loans.              ing practices by banks. Lenders                times the properties were double
residential neighborhoods around                        Danette Bloomer, began strug-                            After receiving the new loans,           should have looked at how much                 appraised to make sure the value
downtown Bradenton or along the                         gling to sell their houses to out-                    club members kept making inter-             rent could be charged for each                 was there. We didn’t care.”
waterfront in Palmetto and chanc-                       side buyers.                                          est payments for years, hoping              property and written loans only                   Mailloux, another Vantage Real-
es are you will pass a house that                           Sirois said it became more diffi-                 they could eventually sell the              for amounts that could be justi-               ty agent, told the Herald-Tribune
was once owned by a self-de-                            cult to get banks to approve refi-                    properties at a profit. But that nev-       fied by the rental income.                     that he and his fellow investors
scribed Palmetto “investment                            nancing as the real estate market                     er happened, Sirois said.                      Instead, Black said, he believes            were legitimate investors who
club.”                                                  slowed, so club members began                            “I was losing money the whole            lenders wrote oversize mortgages               found themselves in a desperate
   Since 1998, the investors have                       selling properties to each other to                   time I was paying those mortgag-            based on the belief that property              situation.
purchased at least 158 properties                       get back some of the money they                       es,” Sirois said. “Trust me, we all         values would continue to rise.                    He said their property flips
in Manatee County. Their goal                           had invested in improvements.                         took a beating on this.”                       “No lender was basing their de-             were not designed as scams, but
was to buy, fix up and sell proper-                         If one group member renovat-                         Because the houses the group             cision on investment criteria.                 were the only means they could
ties as rapidly as possible.                            ed a house and no one would buy                       bought were primarily duplexes              They were basing it on the hope                find to avoid foreclosure.
   When they could not find buy-                        it, the price was marked up and a                     and houses at the most affordable           that the borrower could sell at a                 Mailloux said he depleted his
ers for the houses they fixed up,                       sale arranged to another member.                      end of the housing spectrum, the            higher price,” Black said.                     bank account, spending several
they would get mortgages, rent                          That sale was used to apply for                       economic downturn hit them espe-               “Some people didn’t believe it              hundred thousand dollars paying
out those houses and wait for an                        fresh loans.                                          cially hard.                                would end. But bubbles always                  mortgages on properties until he
opportunity to sell.                                        Before summer 2005, property                         Their pool of renters dried up as        end. The primary function of hous-             could no longer make payments.
   The investment strategy worked                       deeds show, investment club mem-                      construction workers and laid-off           ing is shelter. If rents you obtain do            “I was just going down this road
for years while property values                         bers rarely sold properties to each                   manufacturing employees left the            not support the purchase price,                that was a financial train wreck,”
were increasing.                                        other — on average two a year                         area. Then the banks froze their ac-        then something has to give.”                   he said. “It turned into the Ameri-
   But when the real estate market                      from 2000 to 2004. In the follow-                     cess to fresh capital, which pushed            Sirois said the group operated              can nightmare.”
www.heraldtribune.com                                                                                                                                                             Monday, July 20, 2009 7A

HERALD-TRIBUNE INVESTIGATION: FLIPPING FRAUD




In March it was moving day for Mark P. Riley, left, and Richard S. Waid at their Westchester Circle home in Lakewood Ranch. As a real estate agent during the boom, Riley benefitted from
repeated flips he helped arrange among his friends and neighbors. Today, Riley and many of his clients are in foreclosure. STAFF PHOTOS / THOMAS BENDER

                                                                                                                                                                   was part of the greed factor,” Ri-



Riley: agent                                                                                                                                                       ley said. “Everybody from age 20
                                                                                                                                                                   to age 80 wanted a quick return.”
                                                                                                                                                                      But a Herald-Tribune analysis
                                                                                                                                                                   of every condo sale in WaterCrest
                                                                                                                                                                   shows that sales prices among Ri-
                                                                                                                                                                   ley’s associates were often higher



at the center                                                                                                                                                      than the going rate. Riley said that
                                                                                                                                                                   can be explained because many of
                                                                                                                                                                   his condos had special amenities,
                                                                                                                                                                   such as high-end flooring and
                                                                                                                                                                   kitchen fixtures.
                                                                                                                                                                      The Herald-Tribune found that


of $30 million                                                                     Mark Riley’s clients were among the many who flipped condos at
                                                                                                                                                                   in 2005 and 2006, when the vast
                                                                                                                                                                   majority of WaterCrest sales oc-
                                                                                                                                                                   curred, deals arranged by Riley
                                                                                                                                                                   were on average nearly 20 per-
                                                                                                                                                                   cent higher than the norm.
                                                                                                                                                                      The gap is even wider when


in defaults                                                                        WaterCrest in Manatee County. Today, one in four units is in foreclosure.       you consider only the prices Ri-
                                                                                                                                                                   ley’s buyers could control. Ignor-
                                                                                                                                                                   ing the original purchase from the
                                                                                                                                                                   developer, Riley’s average sales
                                                                                                                                                                   values were 38 percent higher in
                                                                                                                                                                   2005 and 31 percent higher in
                                                                                                                                                                   2006 than the total average for
WaterCrest condos a microcosm                                                                                                                                      WaterCrest in those years.

of everything that went wrong                                                                                                                                      LAWSUITS AND DEFAULTS
                                                                                                                                                                      With money from WaterCrest
                                                                                                                                                                   deals flowing in, Riley and Waid
By MICHAEL BRAGA                          ited. Investors made several mil-                                                                                        began living the high life.
and CHRIS DAVIS                           lion dollars selling property, pri-                                                                                         Records from one of Riley’s
Staff Writers                             marily in the WaterCrest condo                                                                                           former employees show he leased
   Just a few years ago, Mark P. Ri-      development. Riley made hun-                                                                                             an $83,000 Land Rover, a $63,000
ley was a rich man.                       dreds of thousands in commis-                                                                                            Porsche and a $43,000 BMW at
   On the back of the real estate         sions on the repeated sales he bro-                                                                                      about the same time.
boom, he earned enough money              kered. But it all crashed with the                                                                                          But by late 2005, it was clear
to buy a $2 million home in Lake-         fall of the real estate market.                                                                                          that something was wrong with
wood Ranch. He and his life part-            In interviews with the Herald-                                                                                        many of the WaterCrest deals.
ner shared a fleet of luxury cars, in-    Tribune, Riley said he did nothing                                                                                          The final buyers on several con-
cluding a $300,000 Mercedes               wrong. He said he was merely a fa-                                                                                       dos were having trouble getting
Maybach with recliner rear seats          cilitator, helping sellers find buy-                                                                                     banks to finance their loans, ac-
and a built-in champagne refriger-        ers and vice versa.                                                                                                      cording to several lawsuits filed
ator.                                        If there was any collusion to                                                                                         against Riley in Manatee County’s
   Riley made so much money flip-         drive up property values, he was                                                                                         circuit court.
ping homes that he pledged to pay         not a part of it, he said. In fact, he                                                                                      Starting in late 2005, a string of
nearly half a million dollars to put      said, sale prices in each deal were                                                                                      Riley’s clients filed lawsuits claim-
his name on a hockey arena set for        set by the seller and backed up by                                                                                       ing he convinced them to partici-
construction in eastern Manatee           an independent bank appraisal.                                                                                           pate in real estate investments
County.                                      Riley said that all the transac-                                                                                      without explaining the risks and
   Today, all of it is gone.              tions he arranged as a real estate                                                                                       that he took money from escrow
   The house has been seized by           agent were “arm’s length” and                                                                                            deposits before the final contracts
the bank, the luxury cars returned        that he did not recruit his buyers.                                                                                      were closed.
or repossessed. The hockey arena             “All of these people came to                                                                                             In one of those lawsuits,
is a half-finished shell, abandoned       me; I didn’t seek them out,” he                                                                                          Stephen Smith alleged that the
when the economy began to                 said.                                    James W. Scalici at the Lakewood Ranch house he originally bought as            unit he bought was worth substan-
slump.                                       But deeds filed with the Mana-        an investment with real estate agent Mark Riley. Scalici later bought Riley     tially less than what he had paid.
   And Riley has left a trail of finan-   tee County Clerk of the Circuit          out. He said he was told to lie about his income to qualify for a loan.         In another, Phil and Elizabeth
cial ruin and unhappy clients.            Court show that sales brokered by                                                                                        Greenwell alleged that Riley
   Interviews with Riley clients,         Riley in Lakewood Ranch primari-                                                                                         failed “to disclose that banks and
along with public records and oth-        ly involved about a dozen people,        partner, Richard Waid, had start-        more on a single unit by the time      mortgage companies would not fi-
er documents obtained by the Her-         many of whom knew Riley before           ed their own real estate company         it was built.                          nance or would place severe re-
ald-Tribune, reveal that from             the sales.                               and mortgage brokerage — Mark               Unit 201 at 6406 WaterCrest         strictions on an assigned contract,
2004 to 2007, Riley acted as the             Buyers involved in the transac-       P. Riley Luxury Real Estate Group        Way followed a typical path. In        generally known as a ‘flip.’ ”
real estate agent and organizer of        tions included Riley’s neighbors         and Mortgage Concierge — giv-            November 2005, one of Riley’s cli-        Today, about four years after
repeated flips in Lakewood                Scalici and Genaro Epifanio; a           ing them the ability to broker           ents bought the condo from the de-     WaterCrest was completed, one
Ranch.                                    friend and neighbor, Linda Maugh-        their own deals and navigate the         veloper for $550,763. Three weeks      of every four condos has gone
   The flipping seeded specula-           an, and her sister, Milene Moses;        mortgage industry on behalf of cli-      later, Riley’s neighbor, Linda         into default. Sixteen of the 46 de-
tion in the growing community.            and Mike Shackelford, a real es-         ents.                                    Maughan, bought it for $675,000,       faults belonged to Riley clients.
To date, it is one of the most finan-     tate agent who worked with Riley.           It did not take long for an oppor-    a 22.5 percent increase. Deed             Across Sarasota and Manatee,
cially damaging groups to operate         Other buyers were referred to Ri-        tunity to present itself.                records show she sold it the same      Riley’s clients, including Maugh-
in Manatee County, leading to             ley through his employees or had            The year before, Homes by             day to Scalici for $825,000, a 50      an, Moses, Shackelford, Epifanio
more than $30 million in defaults.        previously used him as their real        Towne had put nearly 200 new             percent increase over the original     and Manoj Bhattacharjee, have de-
   The basic premise was simple:          estate broker.                           condo units on the market in its         price.                                 faulted on 17 loans totaling $12.1
Identify investors, flip the same            In a 2005 Herald-Tribune story,       WaterCrest development in Lake-             Riley said that the dates on        million since June 2007.
properties several times from one         Riley described himself as a real        wood Ranch. Moderately upscale,          many of the deeds are misleading          “I made a mistake,” said Bhatta-
to the next and cash in on real es-       estate agent with ready investors        lakefront and well-located, the de-      because the sales occurred over a      charjee, a Manatee County real es-
tate price increases driven by the        waiting for the next opportunity.        velopment became a microcosm             longer period of time and the          tate investor and neighbor of Ri-
speculation.                                 “I get calls from builders and de-    for everything that went wrong           deeds were simply filed all at once    ley’s. “I should not have gone
   In three lawsuits filed against        velopers because they know I             during the housing boom.                 when the condo construction was        with him, and I am paying a penal-
Riley and his company in Mana-            have the buyers,” Riley said at the         Demand was so high that the de-       completed. Even so, the time that      ty for my foolishness. At times we
tee County’s circuit court in 2005        time.                                    veloper had to hold a lottery to de-     passed between each sale could         lose sight and try to earn some-
and 2006, former clients describe            In his recent interviews, he said     cide who would get a unit. Hope-         be measured in months.                 thing extra. This was a situation
him as a flipping orchestrator            sales among friends are perfectly        ful crowds were stocked with                Riley’s ability to make such        like that.”
who promised to flip under-con-           legitimate.                              speculators who planned to flip          sales happen earned him a reputa-         Riley filed for Chapter 7 bank-
struction properties before the              “What could be more normal            their units before they were even        tion as Lakewood Ranch’s master        ruptcy protection in November,
bills came due.                           than that?” he said. “You have           built.                                   of the flip. In 2004, when Curtis      claiming $51 million in debts and
   Riley and his company “en-             three or four friends. You call             Each new flip generated a new         Shaw was frustrated by slow con-       only $3.5 million in assets. It is the
gaged in a scheme to flip condo-          them and tell them you just              sales commission for whoever             struction of a condo in East Mana-     largest personal bankruptcy filing
minium units at WaterCrest nu-            bought and sold condos and made          brokered the deal.                       tee, he sought Riley for help.         to date by anyone who invested in
merous times in order to collect          a pile of money, and they say               “Mark made over $1 million in            “I went to him because some-        local real estate.
repeated commissions,” Stephen            they’d like to do that, too.”            WaterCrest flipping condos back          one told me he was a master at flip-      In February, a tow truck driver
Smith alleged in one of those law-                                                 and forth to the same people two         ping unfinished condos. He could       attempted to repossess Waid’s
suits, filed in January 2006.             FLIPPING WATERCREST                      or three times,” said Scalici, the       sell it before it had gotten out of    car. Riley began shouting at the
   According to several of Riley’s           Just as the real estate market        onetime Riley neighbor who par-          the ground because he had all          driver and continued arguing
investors, including former neigh-        was heating up in Sarasota, Riley        ticipated in deals with Riley.           these investors,” Shaw said.           with a police officer dispatched to
bor Jim Scalici, Riley would con-         left his agent’s job at Michael Saun-       Closing documents from one               Riley says he was not doing any-    defuse the situation, a Sarasota
vince people to buy a condo,              ders & Co. and struck out on his         transaction show that Riley made         thing unusual. Especially in 2005,     County Sheriff’s Office report
promising them riches with no             own.                                     a real estate commission of as           the Sarasota-Bradenton market          says.
risk. Then Riley arranged sales              Confident and charismatic, the        much as 7.5 percent on sales in          was a frenzy of speculation. Wa-          Riley was arrested on misde-
from one investor to the next, rare-      48-year-old rapidly joined the top       WaterCrest.        Riley’s     clients   terCrest prices increased rapidly      meanor charges of resisting arrest
ly if ever selling to outsiders, Scali-   ranks of local society, winning the      bought and sold the units as many        from month to month because so         without violence. In May, prosecu-
ci said.                                  trust of people of means.                as three times within a year, mean-      many people wanted to buy.             tors agreed to withhold prosecu-
   In the beginning, everyone prof-          By early 2005, he and his life        ing Riley could collect $150,000 or         “Everybody in this community        tion.
8A Monday, July 20, 2009                                                                                                                                                                            www.heraldtribune.com

HERALD-TRIBUNE INVESTIGATION: FLIPPING FRAUD



Seaborne:
More than
40 f lips as
market fell
Promises of ‘no money down’
                                                                                    Arthur Seaborne outside his Sarasota office. Seaborne gave up his mortgage broker license last year after state
turned into big losses for investors                                                regulators said he secretly lent money to clients so they could qualify for loans. STAFF PHOTO / CHIP LITHERLAND

By MICHAEL BRAGA, CHRIS DAVIS
and MATTHEW DOIG
Staff Writers
   Back in 2001, Sarasota mort-
                                               Rising prices during
                                               a downturn                                              Willows Bridge Loop
gage broker Arthur Seaborne was
broke.
                                                                                                                 Halls M C
                                                                                                                 Halls Mill C



                                               Arthur Seaborne bought
   Forced to give up his real estate           21 newly constructed
license years before and more                  houses (in red on the
than $2 million in debt, Seaborne
filed for bankruptcy protection                photo) in the Covered
                                                                                                                             ros
                                                                                                                             rs




                                               Bridge Estates neighbor-
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for the second time in 13 years.
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   None of that stopped him from               hood of Ellenton in 2006




                                                                                                                                                                        re
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                                                                                                                                                                          nc
harnessing the real estate boom to             and 2007. At a time when




                                                                                                                                                                           ch
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remake himself into one of Saraso-




                                                                                                                                                                           Cr
                                               prices were starting to




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                                                                                                                                                                              e
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                                               drop, Seaborne sold most
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                                               of the properties to his




                                                                                                                                                                                       rt
   From mid-2006 through 2007,
Seaborne bought and sold more                  clients for tens of
than 40 new homes worth $11.6                  thousands of dollars more
million in Sarasota and Manatee                than he paid. At the same
counties. Along the way, he made               time, he sold houses to
more than $1 million in profits,               himself and his wife at
court records show.
   He did it by recruiting more                higher prices than he
than 30 investors into a property-             originally paid, allowing
sharing venture that guaranteed                him to obtain larger loans.
him a profit and left his so-called
partners to bear the brunt of the
                                        SOURCE: Manatee County Property Appraiser
                                         OURCE: Manatee County Property Appraiser
                                        SOURCE: Manatee County Property Appraiser                                                                                                    STAFF GRAPHIC / JENNIFER F. A. BORRESEN
real estate collapse.
   In summer 2006, when prices
were already declining, Seaborne                                                                                                         Claeys said Seaborne stopped           for mortgages.
started buying dozens of new                                                                                                          paying his share of the mortgage             Beyond the houses he sold to in-
houses in Ellenton and Venice. He                                                                                                     and he found himself with a house         vestment      clients,    Seaborne
marked up the price by $8,000 to                                                                                                      he could no longer afford.                bought property through his cor-
$75,000 and, within a few months,                                                                                                        “Like a lot of scams, this one is a    porations and transferred them to
sold them to people who came to                                                                                                       hundred years old,” said Dennis           himself or his wife at increased
his real estate seminars.                                                                                                             Black, a Port Charlotte real estate       values.
   He promised his investors they                                                                                                     consultant and appraiser instruc-            He and his wife bought 11
would pay no money down and he                                                                                                        tor. The organizer cannot qualify         houses in 2007 for $2.8 million
would pay most of the monthly                                                                                                         for mortgages to buy dozens of            and then, in essence, re-pur-
mortgage bills by finding renters.                                                                                                    houses, Black said, “so he goes out       chased each one a few months
All they had to do was take out a                                                                                                     and finds people to borrow for            later for a total of $3.4 million.
loan in their name.                                                                                                                   him. He does a seminar and tells          Based on the sale prices, banks
   Seaborne even lined up financ-                                                                                                     them he will help them get loans.         or private lenders gave the
ing through his own mortgage bro-                                                                                                     If the market goes down, he bails.”       Seabornes $2.6 million in loans.
kerage, directing buyers to exotic                                                                                                       Seaborne said his investment              Seaborne says that all of his
mortgages that paid him a higher                                                                                                      program was intended to make              property sales reflected the mar-
commission up front and reduced                                                                                                       money for everyone involved. He           ket at the time. Sale prices on his
the monthly payment he had                                                                                                            said the only reason it did not           homes increased only because he
promised to pay, eight of his inves-                                                                                                  work was because the real estate          originally bought the houses in
tors told the Herald-Tribune.                                                                                                         market declined too fast.                 bulk and the builder gave him a
   By using his brokerage, South-                                                                                                        Seaborne said he has attempted         discount, he said.
east Capital Mortgage, Seaborne                                                                                                       to help his clients refinance debt,          But a Herald-Tribune compari-
was able to deposit his own cash                                                                                                      but said he does not have the mon-        son of Seaborne’s sales in two
in at least seven investors’ bank ac-                                                                                                 ey to bail them out.                      neighborhoods to other houses in
counts so banks would approve                                                                                                                                                   those same subdivisions shows
loans, according to a 2007 state li-                                                                                                  WAVE OF FORECLOSURES                      otherwise. Seaborne’s houses, on
censing investigation that led                                                                                                           Seaborne used a number of tech-        average, sold for 8 percent more
Seaborne to surrender his mort-                                                                                                       niques that allowed him to inflate        than the going rate, regardless of
gage broker’s license.                  Advice Arthur Seaborne offered to real estate investors through his Web                       real estate values and make mon-          what he originally paid for the
   Seaborne paid his share of the       page can still be found on the Internet. SOUTHEASTCAPITAL.COM                                 ey on property flips.                     property, the Herald-Tribune
mortgages at first, but stopped in                                                                                                       By buying houses and selling           analysis shows.
late 2007 as the real estate market     ured she had nothing to lose.               debt now,” she said.                              them to investment partners, he              In one of those neighborhoods,
worsened.                                  The widow of a police officer               Leis and seven other investors                 was able to mark up the prices on         Covered Bridge Estates in Ellen-
   “He’s a pretty slick charac-         who died from injuries sustained            told the newspaper that Seaborne                  houses that might not have sold           ton, Seaborne flipped more than a
ter,” said Dr. Mark Walter, a con-      during a 1990 rescue, Leis had a            put them in negative amortization                 on the open market. In 2006 and           dozen houses for an average of
nective-tissue specialist who           nest egg to invest. Real estate             loans without telling them. Such                  2007, when real estate prices             $140 per square foot in 2006 and
bought a Palmetto house with            seemed like a smart choice.                 loans reduced Seaborne’s mort-                    across the region were falling and        2007. The average sales price of
Seaborne. “He comes off as very            So she gathered with a handful           gage payments so they did not cov-                many new houses could not be              other homes in the subdivision
nice and very up front — like he        of others in Arthur Seaborne’s              er the interest owed each month                   sold, Seaborne was able to buy 41         during the same years was about
has nothing to hide. But he end-        downtown Sarasota office and lis-           and the borrowed amount actual-                   and quickly resell at a profit.           $130 per square foot.
ed up stiffing a lot of people. In-     tened intently to his “no money             ly increased over time.                              In addition, four former clients          Today, Seaborne’s mortgage
stead of acting in our interests,       down” investment pitch.                        Bradenton resident Gerry                       told the Herald-Tribune he direct-        brokerage is closed. Records
it turned out he was only out for          An hour later she was hooked,            Claeys said he attended a                         ed them to lie on mortgage appli-         show Seaborne and his wife have
himself.”                               convinced she could make money              Seaborne seminar and bought a                     cations so that they would qualify        defaulted on three mortgage loans
   Nearly half of the homes             with no financial risk.                     house on the promise that he                      for loans on properties he was sell-      in recent weeks. Manatee County
Seaborne sold to investors are             “He kept saying ‘no money                would only pay $200 a month to-                   ing to them.                              Sheriff’s spokesman Dave Bris-
now in foreclosure. All told, peo-      down’ and I kept thinking I can’t           ward the mortgage. Claeys said                       “He falsified my income and            tow told the Herald-Tribune that
ple who bought into his invest-         lose,” Leis said. “I think some             Seaborne directed him into an in-                 the amount of money I had in the          sheriff’s detectives have been part
ment plan have defaulted on 16          women want someone to take                  terest-only loan, which reduces                   bank,” said Bart Borriello, who in-       of an multi-agency investigation
loans totaling $4.9 million.            care of them and I was definitely           monthly payments but give larger                  vested in two houses with                 into Seaborne since April.
   More defaults may be coming,         suffering from that. Here was this          upfront fees to mortgage brokers.                 Seaborne. “He said he was doing              Seaborne’s business phone still
according to Anthony Lefco, a Sa-       nice, rich man who talked about                “I asked how he was making                     that to keep the payments down.”          operates and offers callers exten-
rasota attorney whose client, Jessi-    how he made his wife rich and               money on this and he said all he                     In the 2007 complaint that cost        sions to reach his property man-
ca Leis, sued Seaborne in 2008.         how he wanted to make us rich,              got was a real estate commission,”                Seaborne his mortgage license,            agement and real estate divi-
   As part of the suit filed in Sara-   too. And I wouldn’t have to think           Claeys said. “But later he told me                the state Office of Financial Regu-       sions.
sota County’s circuit court,            or do anything.”                            that the bank paid him a sizable                  lation concluded that Seaborne               Since an interview earlier this
Seaborne stated in a sworn deposi-         Leis bought her first house with         fee for arranging the financing                   failed to tell World Savings Bank         year, Seaborne has not returned
tion that he recently stopped pay-      Seaborne on French Creek Court,             through him. He came out like a                   he had lent the required down pay-        repeated calls from the Herald-
ing his mortgages, Lefco said.          a quarter-mile stretch of North             bandit.”                                          ment to seven people who applied          Tribune.
That could lead to another $5 mil-      Manatee        suburbia      where
lion in defaults.                       Seaborne bought at least 15 houses                                                                                                      THE REPORTERS
   Seaborne told the Herald-Tri-        he planned to sell to investors.
                                                                                                                                                                                            Michael Braga
bune that every real estate deal he        Within a year, she bought two
                                                                                                                                                                                            has been a reporter at
struck was legitimate, backed by        more houses from Seaborne. Not
                                                                                                                                                                                            the Herald-Tribune
bank appraisals and paid for by         long after she closed on the last
                                                                                                                                                                                            since 2001, and has
willing investors.                      one, in August 2007, things start-
                                                                                                                                                                                            covered real estate since
   He denied inflating property         ed to go wrong.
                                                                                                                                                                                2004. He is also an assistant business
values and said his financial trou-        Leis’ deal with Seaborne re-
                                                                                                                                                                                editor.
bles came from an unforeseen            quired her to buy a house from
downturn in the real estate mar-        him for a set price — as much as                                                                                                                   Matthew Doig
ket that forced him to stop paying      30 percent more than Seaborne                                                                                                                      has been a reporter at
his investors’ mortgages.               paid a few months before.                                                                                                                          the Herald-Tribune since
   “We certainly would not have         Seaborne retained part-interest in                                                                                                                 2001 and has been on the
done some of the buying we did if       the house. In return, he agreed to                                                                                                                 newspaper’s investigative
we knew we’d be where we are to-        find renters and to pay most of the                                                                                                     team since 2004.
day,” Seaborne said.                    monthly mortgage.                                                                                                                                     Chris Davis
                                           But in late 2007, Seaborne                                                                                                                         is investigations editor
SELLING THE FLIP                        stopped paying his bills, Leis                                                                                                                        at the Herald-Tribune,
  When a trusted friend told Jessi-     claims in her lawsuit. Leis told the                                                                                                                  where he has worked
ca Leis in 2006 about a seminar         Herald-Tribune she has been                                                                                                                           as a reporter or editor
that could make her money, the          struggling to avoid foreclosure.            Jerry Claeys says attorneys have told him he has little chance of                           since 1997.
57-year-old Sarasota resident fig-         “I’m almost a million dollars in         recovering money from Arthur Seaborne. STAFF PHOTO / THOMAS BENDER
www.heraldtribune.com                                                                                                                                                         Monday, July 20, 2009 9A

HERALD-TRIBUNE INVESTIGATION: FLIPPING FRAUD



Gulf Coast
easy target
for flips
T      he Herald-Tribune identified at least 37 groups of property
       flippers operating in Sarasota and Manatee counties during
       this decade. Several people involved in local property flips
are profiled on this page.

PATRICK BRESTER
Real estate agent and mortgage
                                       the same last name of Makki,” he
                                       said. “It’s like Smith.”
                                                                               Online: interactive guide to flips
broker                                    Lawsuits and counter suits filed        The people involved in proper-      real estate agents, for example —        name. Click once on the dot to re-
Defaults – 9 – $3.9 million            between the two in Sarasota Coun-       ty flipping in Sarasota and Mana-      involved in the transactions.            configure the network with that
   Brester formerly worked as an       ty’s circuit court show that Da-        tee counties did not operate in iso-      Some people on the list were          person at the center, showing the
                 agent for Florida     wood was Hussein Makki’s girl-          lation. In some cases, key players     merely speculators hoping real es-       others who that person did busi-
                 Sun Realty Corp.      friend.                                 within each loose group social-        tate prices would continue to rise.      ness with. Double-click on an indi-
                 and was once the                                              ized or conducted business with        Others knew they were bending            vidual’s dot for more information.
                 strength and con-     RICH BOBKA                              people in other groups.                the rules but played the game any-
                 ditioning coach       Real estate agent                          To track the connections, the       way.                                     CIRCLE
                 for the Cincinnati    Defaults — 13 — $7.8 million            Herald-Tribune built an exten-            Hover over a name to see a per-          Think of this as the “six degrees
                 Reds. More re-           Bobka, who worked at Re/Max          sive interactive guide to flipping     son’s connections. Double-click          of separation” analysis. Click the
                 cently, he worked     Properties and at Paradigm              in Sarasota and Manatee coun-          to read more details about the in-       circle tab to see how any person
for Executive Property Manage-         Group in Sarasota, bought rental        ties. Go to heraldtribune.com/flip-    dividual’s involvement.                  in the database is connected with
ment.                                  properties during the boom with         ping for:                                                                       the others. Connections are
   In an October 2004 Sarasota         little or no money down.                                                       NETWORK                                  drawn between buyers and sell-
Magazine profile, Brester recom-          Between 1993 and 2007, Bobka         LIST                                     Click the network tab for a so-        ers of flipped properties and be-
mended borrowing as much mon-          bought 24 properties for $14.3 mil-        Click the list tab for the names    cial network analysis. In this           tween flippers and the real estate
ey as possible to make money in        lion. He sold a half-dozen of them      of more than 100 local people          view, you can choose any name in         professionals they hired to com-
the real estate business.              for a $600,000 profit and kept refi-    who were involved in property          the database and find who they           plete transactions.
   “The more you can leverage the      nancing the rest until he had $1.6      flipping, the people who some-         did business with — the direct              Hover over an individual’s dot
money, the more property you           million more in loans than he origi-    times innocently bought their          connections between people in-           to see how they are connected.
can control,” Brester was quoted       nally paid for the properties.          properties and the real estate pro-    volved in Sarasota-area flip deals.      Double-click on the dot for more
as saying. “If you are making 10          At the same time, Bobka acted        fessionals — closing agents and          Hover over a dot to find a             information.
percent, it’s better to make 10 per-   as a real estate agent for his broth-
cent on someone else’s money.”         er, George Cavallo, helping him to
   Though most of Brester’s de-        buy 15 properties for $5.3 million.     to $2.7 million.                       money down, according to two at-         were partners in corporations he
faults result from buying proper-      Cavallo financed the purchases             Brivik has disputed the Herald-     torneys who handled the closings.        controlled.
ties at the height of the boom,        with $5.6 million in loans.             Tribune’s characterization of him         Couch bought 30 units for an av-         In one deal, Reynolds and his
court records show he defaulted           During his 13-year real estate in-   as a “flipper.” He says he always      erage price of about $300,000. He        brother-in-law, Donald Golder,
after buying a property being re-      vesting career, Bobka bought and        reinvested borrowed funds into         then marked up the price as much         bought a property at 217 N.E. 22nd
sold by his one-time business part-    sold properties with associates and     the properties he purchased.           as $400,000 and sold them to in-         Court in Bradenton through their
ner Richard Dear.                      family members at higher prices 12         But Sarasota County and Long-       vestors he recruited. Deed               company for $82,600 in Novem-
   Dear bought a house on Suntan       times, records show. Five of those      boat Key government documents          records show that the units were         ber 2000.
Avenue in Sarasota for $125,000 in     deals involved three properties         show that Brivik spent $1.2 million    sold to those investors for                 The company sold the property
June 2004 and sold it to Brester       that were bought and sold between       improving the properties he pur-       $450,000 to $700,000.                    to Golder and Reynolds in April
for $179,000 six months later.         Bobka and his brother and sister-in-    chased, while extracting $9.3 mil-        The higher prices allowed             2001, years before the height of
Brester financed his purchase          law. All ended in default.              lion in loan proceeds above what       Couch and his investors to obtain        the boom, for $167,000. Golder ob-
with $161,100 in loans and default-       In one of the deals, Bobka           he paid.                               loans that more than covered the         tained a $125,250 loan.
ed in December 2007.                   bought a house on Southpointe              Brivik said he used much of the     actual sale price.                          “We would buy a property
   Brester also made money by          Drive in Sarasota in February           extra money to make interest pay-         According to attorneys who            through our investment company
buying and quickly reselling prop-     2003 for $1 million and sold it a       ments and to pay for architectural     handled some of the initial clos-        and flip it into one of our names
erties. The Herald-Tribune identi-     week later to his brother and his       and engineering fees and other im-     ings, the extra money was sup-           and then take equity out that we
fied more than a half-dozen indi-      brother’s wife, Paula Hornberger,       provements that were made to his       posed to be put into an escrow ac-       would use to remodel the house,”
viduals — including his sister-in-     for $1.15 million.                      investment houses without the          count and used to build amenities        Golder said. “Then we would sell
law — who bought a flipped prop-          The couple borrowed $1.0325          need of a permit.                      and turn the complex into a senior       it.”
erty from Brester and later default-   million, $32,500 more than Bobka           Brivik has since defaulted on       living facility.                            Golder said he has long since
ed on their loans. Those defaults      originally paid for the property.       eight loans and filed for bankrupt-       But neither of the attorneys —        split with Reynolds. “He’s a hack,”
totaled more than $4 million.          Cavallo and his wife later built a      cy, listing $16 million in debts and   Will Schlotthauer of Williams            Golder said. “He took $140,000
   In one of those deals, Brester      house on the property and ob-           $2.7 million in assets.                Parker and Chad Gates of Tyler           from me. I just washed my hands
bought a three-bedroom house at        tained $3.125 million in fresh             He defaulted on two loans           Betterton & Gates — knew where           of it and walked away.”
5310 Matthew Court in Sarasota in      loans, on which they defaulted in       worth $6.9 million from First Pri-     the amenity fund was located or             Reynolds declined to comment.
July 2006 for $275,000 and sold it     2008.                                   ority Bank. Brivik’s defaults repre-   who controlled it.
on the same day to Doug Knipper           In May 2004, Bobka bought a          sented about 15 percent of the            One investor — Couch’s bother-        TODD KOLBE
for $385,000. Knipper borrowed         four-bedroom house at 1614 An-          bank’s nonperforming loans             in-law Christopher Woods — said          Mortgage broker
$385,000 and defaulted 16 months       chorage St. in Sarasota for $1.1 mil-   when it was shuttered by regula-       there was never an amenity fund          Defaults – 5 — $5.5 million
later.                                 lion and sold it the next day to        tors in July 2008.                     and no amenities were ever built.           Kolbe helped to manage Affini-
   After the real estate market        Hornberger for $1.35 million.                                                     Couch and 21 investors bought                          ty Homes, a home-
cooled off, Brester bought nine        Hornberger borrowed $945,000            NEIL MOHAMMAD HUSANI                   the 30 units at Bermuda on                                building company
condos at the 238-unit Vintage         and eight months later refinanced       Real estate investor                   Osprey from November 2006                                 involving Kolbe
Grand complex in Sarasota in ear-      the loan to $1.4 million.               Defaults — none                        through September 2008. In the                            family members.
ly 2007 for $1.9 million. He sold         In December 2005, Hornberger            Husani, along with Manatee          ensuing months, they defaulted                            Kolbe was also a
them the next day to Michael           sold the house back to Bobka for                         County builder        on all 30 loans, totaling $13.5 mil-                      mortgage broker
Chadwick at a $300,000 profit. A       $2 million. Bobka borrowed $1.5                          Michael Tringali      lion.                                                     at CTX Mortgage,
year later, Chadwick filed for         million      from     Countrywide,                       and Sarasota attor-      In the midst of buying the units,                      where he met and
bankruptcy and defaulted on all        $400,000 more than he had paid                           ney           John    Couch and Cheng were charged             interacted with a number of other
nine units.                            for the property 18 months earlier.                      Yanchek, is ac-       in March 2007 by the Orange              property flippers identified by the
   Brester could not be reached for    A year later, Bobka added another                        cused by federal      County District Attorney’s Office        Herald-Tribune.
comment and did not return phone       $250,000 loan from Branch Bank-                          prosecutors of or-    with running a brothel from a mas-          Kolbe organized a group that
messages left with his relatives.      ing & Trust. He defaulted on all                         chestrating some      sage clinic they operated in the         bought and sold houses among
                                       the attached loans in 2008.             of the largest fraudulent flips in     Anaheim, Calif., area. Couch was         themselves in Sarasota and Mana-
HUSSEIN MAKKI                             Bobka told the Herald-Tribune        the state.                             acquitted but Cheng was sen-             tee counties to get inflated mort-
Real estate investor                   all of his deals were legitimate. If       Between June 2004 and March         tenced to 60 days in prison.             gages. Kolbe and four other mem-
Defaults – 7 – $1.9 million            laws were broken, he said it was        2006, Husani bought nearly 2,000          Couch could not be reached for        bers of his group were sentenced
   Makki is a property investor        done by associates he trusted and       acres of land for $42.3 million. He    comment. Woods said Couch was            to prison for their roles in 27 fraud-
                  who flipped hous-    without his knowledge.                  then sold the properties, often on     “missing in action” after all the        ulent flip deals that defrauded a
                  es with Zeinab          “I don’t lie, steal or cheat,” he    the same day, to Tringali for a to-    loan defaults.                           New Jersey mortgage company
                  Makki and Zahrah     said. “Is it hard to believe you        tal of $117 million. The flips en-        Woods said the defaults were          out of $1.8 million.
                  Dawood in Mana-      trusted the people you worked           abled Tringali to borrow $83 mil-      caused by the economic down-
                  tee County.          with?”                                  lion, $40 million more than Hu-        turn. He also said the excess mon-       TINA VALENTE
                    Together, they                                             sani originally paid.                  ey group members borrowed af-            Real estate agent
                  sold at least 10     MARK BRIVIK                                Prosecutors estimated that Hu-      ter flipping the units went to mak-      Defaults – 5 – $2.2 million
                  houses back and      Disbarred lawyer and real estate        sani took the bulk of the proceeds,    ing interest payments on outstand-          Valente and Hubert Steenbak-
forth to each other between 1997       investor                                while Tringali and Yanchek             ing debts.                                                kers work togeth-
and 2001, raising the value of         Defaults – 17 – $14.9 million           wound up with about $7 million            “Everything went to keep the                           er in the same bou-
those houses from about $1.3 mil-         Brivik bought 14 houses with         each.                                  project afloat,” Woods said.                              tique real estate
lion to more than $3 million in                         partners. But in-         In July 2008, Husani, Tringali         Just after Couch started flip-                         agency, Gulf Real-
deals that occurred just weeks                          stead of selling       and Yanchek were indicted along        ping the units at Bermuda on                              ty in Sarasota.
apart.                                                  the houses to out-     with Tampa mortgage broker Lar-        Osprey to his family and business                         They also have
   The increased value allowed                          side buyers, Briv-     ry Nardelli on charges of mort-        associates, he filed for a protec-                        sold four proper-
the trio of investors to obtain at                      ik cashed in on        gage fraud and money laundering.       tive order against Shane Unruh in                         ties to each other
least $1.6 million more in loans                        the booming mar-       Tringali and Yanchek pleaded           Sarasota County’s circuit court.         since 2001.
than they originally paid for the                       ket by increasing      guilty.                                Couch claimed that Unruh had                In February 2007, Steenbakkers
properties.                                             the debt he car-          Husani, who fled to Jordan after    threatened him and said he feared        bought a property in Sarasota for
   By May 2001, banks had fore-        ried on the properties, or by find-     the Herald-Tribune exposed his         for his life. A judge denied the peti-   $324,300. At a time when real es-
closed on 11 of their loans worth $3   ing investors who would take on a       deals, was arrested by Jordanian       tion.                                    tate prices were in decline, he
million and Zeinab Makki had           greater share of the debt.              law enforcement officials and                                                   sold it to Valente two months lat-
filed for bankruptcy protection.          Brivik said that when a new          then released on bail. Federal pros-   JASON REYNOLDS                           er for $585,000. Valente received
   Land records show that the law      partner came in, he would ar-           ecutors say he is awaiting extradi-    Home builder                             $526,500 in loans that she default-
firm of Sarasota attorney John         range a sale or a no-cost property      tion to the United States.             Defaults — 15 — $1.8 million             ed on eight months later.
Yanchek closed more than a half-       transfer to that person. Using a                                                  Reynolds and his wife, Melissa,          In another deal, Steenbakkers
dozen of the property transac-         new appraisal, the partners would       JOHN EDWARD COUCH                                       have been active        bought a property for $135,000 in
tions involving the Makkis and Da-     get a larger mortgage. Those mort-      Real estate investor                                    real estate inves-      July 2003, when the market was
wood between December 1997             gages created a steady flow of          Defaults — 3 — $1.9 million                             tors in Sarasota        starting to heat up. He sold it to
and June 1998.                         cash — just like homeowners who           Couch and his wife, Yu Mei                            and      Manatee        Valente for $290,000 in June
   Reached by telephone in No-         take out home-equity loans to tap                      Cheng, were invit-                       counties since the      2007, long after the market had
vember 2008, Makki said all his        into the rising value of their home.                   ed to Sarasota by                        mid-1990s. Over         peaked.      Valente      borrowed
deals were legitimate and he           Brivik could pocket the money or                       another California                       that time, they         $252,000 and defaulted 10 months
agreed to explain each in detail       spend it improving his properties.                     investor, Shane                          bought 28 proper-       later.
when he returned to Bradenton.            The continual refinancing also                      Unruh, who had          ties for $4 million and resold 19           Experts say defaults within a
He has not returned five calls         allowed Brivik to shift risk to the                    been contacted by       them for $1.4 million more than          year do not necessarily indicate
since then.                            banks that lent money and to his                       Sarasota real es-       they paid.                               mortgage fraud, but they typically
   In his brief conversation with      partners, who took on more and                         tate agent Warren          The couple borrowed $1.9 mil-         trigger a close review by banks.
the Herald-Tribune, Makki de-          more debt.                              Hickernell.                            lion against the remaining proper-          Court records show Valente ul-
nied that he was related to Zeinab        Brivik flipped one of his proper-      Hickernell was trying to sell the    ties and later defaulted on those        timately defaulted on five loans to-
Makki, with whom he shared sev-        ties back and forth to partners and     units at his Bermuda on Osprey         loans.                                   taling $2.24 million. Valente and
eral addresses and participated in     companies he controlled 12 times        condo conversion project in Sara-         Among their deals are at least        Steenbakkers did not return four
seven flips.                           over a 10-year period, increasing       sota and Couch came up with a          five in which Reynolds bought or         messages left at their real estate
   “There are a lot of people with     the attached loans from $406,000        way to finance the sales with no       sold properties with people who          company’s answering service.

				
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