Thursday, January 22, 2009

Crisp & Cole: Lender lawsuit alleges widespread fraud

From the Californian:

Crisp & Cole: Lender lawsuit alleges widespread fraud

By GRETCHEN WENNER, Californian staff writer gwenner@bakersfield.com Wednesday, Jan 21 2009 11:30 PM
Last Updated: Thursday, Jan 22 2009 7:45 AM

A new lawsuit against Crisp, Cole & Associates alleges widespread fraud among appraisers, accountants, a homebuilder and others who worked with — or
allegedly worked with — the defunct Bakersfield real estate company.

The suit, filed Jan. 8 by a now-bankrupt subprime lender, names more than 15 people as defendants and seeks more than $4.2 million in damages from failed loans originated by Crisp & Cole’s mortgage brokering unit.
Those reached by phone Tuesday and Wednesday, including David Crisp, denied wrongdoing.


Some allegations cover territory already visited in disciplinary actions from state regulators.


But the case outlines for the first time how people from different trades allegedly schemed together to draw up bogus loan papers and milk them for cash. It also gives a taste of what might be on the table if federal officials ever file a criminal indictment. FBI and IRS agents raided 13 local Crisp & Cole-related sites in fall 2007 but have not yet filed charges.


SEVEN LOANS
The suit from the former Fremont Investment & Loan — now Fremont Reorganization Corp. — says fake employment information and fudged appraisals were submitted with seven loan applications it funded in 2005 and 2006. In one example, Crisp’s wife, Jennifer Crisp, claimed to make $25,500 a month as a self-employed consultant.


The house, at 8702 Oak Hills Ave., was appraised at $660,000. Jennifer Crisp was loaned the full sale amount, $659,340.
Fremont claims “all documentation ... including the CPA letter, was falsified” and the appraiser “assisted” the scheme “by falsely stating the value” of the home.
What’s more, the transaction wasn’t a “true sale” but was staged to benefit the builder and Crisp & Cole.


Similar allegations — that the sales pumped cash into Crisp & Cole coffers — were made regarding the six other loans. Defendants have not yet been served with the suit.


REBUTTALS
David Crisp, whose real estate sales license was revoked by regulators last fall, said Wednesday he is “just trying to get my life back together.” “I’m trying to pick up the pieces to pay everybody back,” Crisp said, “but I can’t do that when the newspaper keeps blasting me.” Cole, whose broker’s license was also revoked but who is challenging the revocation in court, did not return a message seeking comment.


The homebuilder, John Balfanz of John Balfanz Homes Inc., said he’s done nothing wrong. “There is nothing fishy on my end,” Balfanz said.
The appraiser on the Oak Hills property, James Rudick, did not return a message seeking comment. Rudick is named once. Another appraiser named once, Gary Killian, did not return a call.


Five of the contested appraisals were done by San Joaquin Appraisals Inc.
San Joaquin’s owner, Kirksey J. “Mark” Newton Jr., who is named as a defendant, also has a pending accusation from state regulators seeking to revoke or suspend his license. Newton is fighting the charges.


San Joaquin’s offices were among the Crisp-related sites raided by the FBI in September 2007. Newton did not return a message seeking comment.
The accountant who allegedly penned the employment verification letter, Timothy Hubbell, declined to comment. Hubbell testified during Cole and Crisp’s license hearings that his former business partner, Kevin Sluga — Jennifer Crisp’s father and Crisp & Cole’s CPA — had admitted to creating forged letters bearing Hubbell’s
name.


Sluga’s home was among sites raided by federal agents. Fremont names Sluga and his company as defendants in multiple transactions. Sluga did not return calls seeking comment, nor did his attorney.


Two other people named in the case as CPAs who submitted employment-verification letters don’t have CPA licenses, state records show. Haysar Lopez of H & E Lopez Income Tax Service in Bakersfield said she wasn’t familiar with the transaction in question and has never written such documents. The other, Hilda Gonzalez, could not be located.


The suit also names former Crisp & Cole employees and associates Jayson Costa, Justin Eddleman, Robinson D. Nguyen, Lynnmai Nguyen, Christopher Stovall, Jerald Teixeira and David Bruce Whisler. None could be reached for comment.


An ongoing Californian tally counts at least 126 properties, most single-family homes in metro Bakersfield, tied to bad loans totaling more than $84.5 million. Of those, 110 have been foreclosed on.



LMAO. Everyone except the Kern County District Attorney is going after these guys.

Wednesday, January 21, 2009

Keep it in the family

From the Salt Lake Tribune:

Flying J CEO is replaced by founder's daughter

By Paul Beebe
The Salt Lake Tribune

Posted: 01/20/2009 04:57:00 PM MST

Flying J's longtime president and chief executive officer has resigned
abruptly, less than a month after the oil company was forced to file for
bankruptcy.
J. Phillip Adams was replaced by Crystal Call Maggelet, chairman
of the board and daughter of Flying J founder Jay Call, the company announced
Tuesday.
Last month, Ogden-based Flying J and two of its subsidiariess filed for Chapter 11 bankruptcy protection, citing a steep drop in oil prices and the lack of available financing tied to disruptions in the credit markets.
Adams was unavailable for comment Tuesday. In a brief interview last month, he said the decision to seek bankruptcy protection was painful for Flying J, which has
grown to be one of the 20 largest private companies in the United States.
Peter Hill, a Flying J spokesman, said the company would not discuss the
reasons for Adams's departure.
In a statement, the company thanked Adams for his contributions during his 26-year career and wished him well.
"Given the challenges our company is facing, however, it is essential that we look
forward," Maggelet said in the statement.
Maggelet has served on Flying J's board for more than 20 years. With her husband she owns a regional chain of hotels called Crystal Inn and has a masters of business administration degree from Harvard University.
Flying J's Dec. 22 bankruptcy applies to it and the company's Big West refining and Longhorn pipeline subsidiaries. No other subsidiaries, including its chain of more than 250 travel centers, are involved.
None of the company's 16,000 employees has been laid off.
Flying J is one of the first energy companies to file for bankruptcy after an extraordinary year that saw crude oil prices streak to a record high of $147 a barrel in July, only to fall to under $40 by the close of 2008.
At the same time, the U.S. had entered a deep recession sparked by falling real estate prices that led banks to freeze most lending.
In the statement, Maggelet said Flying J is "receiving tremendous counsel and support from our team of restructuring experts."
She said John Boken is the company's new chief restructuring officer.
Boken is a managing director at New York-based Kroll Zolfo Cooper. He specializes in providing restructuring and crisis management services to financially distressed
companies.

Monday, January 19, 2009

Old Salon Article on David Crisp


We are here to please ;) I don't have any new news on Mr. Crisp, but here's a fun Salon article...

When David Crisp was only 25 years old, the Bakersfield, Calif., real estate star tooled around town in a $560,000 Mercedes-Benz McLaren sports car, along with a cohort of "black-suited bodyguards." He sported a $50,000 Chanel watch and Armani suits. His company, Crisp & Cole, leased Gulfstream jets to fly prospective investors into Bakersfield and Las Vegas and fronted money to its team of agents so they could sport their own luxury cars and designer clothes. In 2005, he started building a mansion in the Bakersfield gated community of Seven Oaks, breathlessly described in the local press as likely to include an escalator, an NBA-size indoor basketball court and a movie room. "The young hot shot of Bakersfield real estate" modeled himself on Las Vegas mogul Steve Wynn and planned to be a billionaire by age 35.

In October 2005, the Sacramento Bee proved unintentionally prophetic:


Crisp personifies the California housing boom at its most extreme -- a boom so powerful that it's turning even places like Bakersfield into hotbeds of high-end homes and gated communities. In this city of long-standing economic stagnation and a cowtown reputation, the median home price has nearly tripled in four years to $293,765.

In those same four years, Crisp has gone from waiting tables and loading UPS trucks to co-owning a firm that figures to sell $300 million in real estate in 2005. He's building a $5 million mansion in Bakersfield's ritziest development and planning a high-rise condominium-retail tower.


On Monday, Crisp's mansion was put up for auction with a starting bid of $1.8 million. Nobody bit, and the home was repossessed by the lender. According to the Bakersfield Californian, more than 100 defaulted and foreclosed-upon properties can be traced to associates of Crisp & Cole. (Thanks to the Housing Bubble blog for the tip.)

It gets better. In September, the California Department of Real Estate filed a formal complaint against the company alleging multiple instances of fraud and the FBI raided the company's offices. Bakersfield's contingent of housing bubble bloggers (every decent-size town's got one!) are drowning in schadenfreude, and the drooling newspaper profiles have been replaced by a relentless series of case studies in housing boom excess. (Much of the credit for originally reporting the Crisp & Cole story should go to Bakersfield Californian reporters Gretchen Wenner and Vanessa Gregory.)

The Department of Real Estate accuses Crisp & Cole of paying employees to sign loan applications for homes they never intended to live in, falsifying income and employment information, and deceiving mortgage lenders, although one suspects that in the California housing market, a fair number of lenders had a pretty good idea of exactly what kind of activities they were aiding and abetting. Family members, including Crisp's mother, mother-in-law and wife, were frequently employed as dummy buyers.

Here's how one scam worked, as reported by the Bakersfield Californian. On July 12, 2006, Crisp & Cole sales agent Jeriel Salinas bought a Bakersfield home for $620,000. The deal was "fully financed" -- meaning Salinas put no money down. On Aug. 21, Salinas granted -- for no apparent compensation -- a 99 percent interest in the home to Aiden, Logan & Associates Inc., another company affiliated with Crisp & Cole. The very next day, on Aug. 22, Aiden, Logan sold the home to David Crisp's mother, Tu Crisp, for $959,000 -- a 55 percent markup in just one month. Again, the deal was fully financed. Both the Salinas and the Tu Crisp transactions were notarized by Crisp & Cole employees.

On May 10, 2007, Tu Crisp's loan defaulted. On Sept. 17, the lender foreclosed.

The rise and fall of David Crisp is quite a saga, and How the World Works looks forward to the TV movie adaptation. The handsome slick son of a Vietnamese immigrant in his Armani duds and flanked by a cohort of black-suited bodyguards who planned to rebuild Bakersfield in his own image! It simply can't miss, even if Buck Owens is undoubtedly spinning in his grave.

But what does it all mean? How many other David Crisps ran wild in the great housing boom of the early 21st century? How many of the collateralized debt obligations made out of repackaged subprime mortgage securities were built from loans made to similar scammers? Certainly, there are details to Crisp's story that can safely be dismissed as "extreme." But as he told the Bakersfield Californian in 2006, as a real estate agent just starting out he bought a Corvette he couldn't afford and hired an assistant he didn't need because his strategy was to fake it until he made it. And there's something emblematically American about that credo, which holds just as true for hedge funds and investment banks as it does for Bakersfield real estate agents. We love the former waiter who transforms himself, à la Horatio Alger, into a mogul. But we also love stomping all over him when he screws up.

Obviously, David Crisp's family should be at the top of the list of people who should not be bailed out by the homeowner rescue plan to be announced by President Bush on Thursday. But what makes the whole housing saga of such enduring fascination is that the mess partially caused by Crisp and a million other small-time flippers got big enough to threaten the health of the entire economy. You could argue that every single would-be homeowner who misstated their income or took on a loan that they knew they couldn't pay or simply mistakenly believed that they would be able to refinance before the bill arrived should be left to twist slowly in the wind. But if the consequences of doing that grease the overall economy's slide into recession, who ends up really paying the price? Them, or all of us?

Fake it until you make it, it's the American way. Whether you're David Crisp, or Citigroup. And when you stumble, somebody will be there to lend a hand, because as Benjamin Franklin once noted, if we don't all hang together, we will most assuredly all hang separately.

― Andrew Leonard

Raw land values in Kern sink

From the Californian:

"Raw land that sold for upward of $100,000 an acre during the boom has come
back to earth in hard fashion, results of a county assessment review indicate.
Prime parcels are now worth about $35,000 an acre, with less desirable sites pegged at $20,000, said Tony Ansolabehere, assistant assessor for Kern County.
The numbers come from a recent revaluation of undeveloped land and residential subdivisions held mostly by housing developers.
Only holdings where values had been appealed or where property owners asked the Kern County Assessor-Recorder’s office for a reduction were included in the review, Ansolabehere said.
The process reduced the county’s assessment roll for the current fiscal year by $260
million. This fiscal year started July 1.
Most of the reduction — about $224 million — came from changes to raw land. Some 3,243 acres of such properties were revalued.
The average reduction per acre of raw land was $69,000, Ansolabehere said.
Details on specific projects weren’t immediately available as results still need to be entered into the county’s computer system, he said.
One subdivision included in the review was McAllister Ranch, which on its own totals 2,070 acres. The planned 6,000-home tract in far southwest Bakersfield is currently slated for public auction Aug. 22 after its developer defaulted on a $235 million loan.
The drop came on the heels of reductions for 40,000 Kern homeowners. Next on the
horizon are business and commercial properties.
“This is the first time we’ve ever been through anything like this,” Ansolabehere said of the widespread reductions.
The office expects additional declines next year.
For now, smaller plots are on the menu.
“This week, I’m looking at mobile homes,” Ansolabehere said."