Seenos face scrutiny over allegations of inflated home prices
By Matthias Gafni
Posted: 04/13/2012 09:00:00 AM PDT
A document from a home Darren and Stacey Nash bought from Seeno Homes in 2006 is photographed...«12345»In June 2006, Antioch residents Stacey and Darren Nash received an enticing letter in the mail from Discovery Builders. The one-page flier from the Seeno Homes company exclaimed, "NEW INCENTIVE ALERT!!!!"
For the Nashes, that promotion led to the promise of a $100,000 incentive that would make their dream home affordable, according to their 2008 lawsuit alleging mortgage fraud. The incentive had a special benefit for Seeno Homes, as well -- it allowed the company to record a handsome sales price of $773,000 on the home it sold to the Nashes, even though the couple was getting a six-figure rebate they were told must "remain confidential between sellers and buyers."
Now, evidence is emerging that Seeno Homes repeatedly used such incentives to help keep home prices high in a down real estate market. An ongoing FBI investigation recently led to the arrest on fraud charges of a Seeno Homes sales executive who received incentives on three homes she purchased herself. A supporting FBI affidavit, two civil lawsuits, and other interviews show a pattern of real estate deals by the East Bay's largest developer that bears the hallmarks of an incentive scam called a "Builder Bailout," as described in a 2007 FBI Mortgage Fraud report.
No charges have been filed beyond those against Seeno sales executive Carey Hendrickson, but the FBI affidavit hints at a widening probe: "I have not included all the facts known to me concerning criminal activity that
I have discovered in this investigation," the special agent wrote.
Multiple emails to a Seeno family attorney seeking comment were not returned.
Builder Bailout frauds proliferate during down housing markets when builders have trouble moving inventory, according to mortgage giant Freddie Mac. Builders often take out large lines of credit to maintain a cash flow, offset losses and avoid bankruptcy, and to keep that money coming in they must demonstrate to their banks that they are selling houses at high, profitable prices. Offering buyers hidden incentives allows builders to record sales prices that are higher than the buyers are actually willing to pay. But failing to disclose those incentives to banks is illegal.
How it works
In fall 2007 as the recession started to hit, most builders across the Bay Area and nation hit a housing roadblock. New homes gathered cobwebs and prices plummeted -- but not for the Seenos, who somehow kept selling homes. In 2005, Seeno Homes/Discovery Builders ranked ninth on the San Francisco Business Times list of largest residential builders. By 2008, the company grabbed the top spot, selling 242 new homes that year, often for between $700,000
A document from a home Darren and Stacey Nash bought from Seeno Homes in 2006 is photographed on Tuesday, Feb. 28, 2012, in Antioch Calif. (Dan Rosenstrauch/Staff) and $800,000, despite the Bay Area's median home price dropping to an eight-year low of $350,000.
In summer 2007, Hendrickson, the Seeno sales manager and licensed real estate agent, sent an email to her sales staff titled "Appraisers." The Aug. 23, 2007, email, confiscated as part of the FBI investigation, offered a peek into the company's sales program, as Hendrickson ordered her staff to withhold incentive information from appraisers to keep values high.
"Only relay design credits and/or closing costs, should you be asked about community incentives," she wrote. "Your detail (sales information sheet) could show special builder discounts that could also destroy the appraisal."
Two appraisers had caught wind of the hidden incentives, which killed two home sales, she wrote. In February, two years after federal agents raided the developer's headquarters on Port Chicago Highway in Concord, the FBI arrested Hendrickson. The 36-year-old Martinez resident is out on bail and could face up to 50 years in prison. In Oakland federal court April 5, a prosecutor said he planned to bring her complaint to a grand jury April 24 to get an indictment, the federal court equivalent of a preliminary hearing.
According to published descriptions of the Builder Bailout scheme, hiding large incentives from appraisers forces them to take the inflated sales price at face value. That, in turn, leads them to send spiked-value reports to banks that are deciding whether to loan money to the buyers.
For instance, if a house sells for $500,000 but the builder gives the buyer a $100,000 incentive, the home's effective price is $400,000. The FBI alleged that Hendrickson, as Discovery Builder's licensed agent, ordered her staff to hide such incentives so banks and appraisers would believe the house was selling for a higher value than the buyer was actually paying.
The lender would issue a mortgage based on the bogus sales price to complete the sale, and the builder could report a sale at an inflated price to appease their own banks, according to the FBI mortgage fraud report.
Keeping the banks happy was critical for Seeno Homes. Seeno subsidiaries borrowed more than $5.18 billion on 18 loans in Contra Costa County from Sept. 18, 2007, to Oct. 30, 2009, from Wells Fargo Bank, with all the notes signed by Albert Seeno III, according to county records. After the FBI raid in early 2010, the size and frequency of the 15 Seeno companies' loans from Wells Fargo diminished significantly.
In addition to her policy directive to sales agents, Hendrickson took advantage of the system herself, the FBI alleges. Hendrickson tried to buy four houses at once in August 2008 in the Seenos' San Marcos development off Highway 4 in Pittsburg, according to the FBI affidavit. Three transactions went through and Hendrickson received more than $600,000 in incentives that was never reported to the banks lending her money.
Oakland case
A clearer glimpse of how the Seenos' incentive system allegedly worked emerges from a civil suit filed by another buyer who says she was defrauded, Xiaofang Bai, of Oakland.
Bai and a partner paid $775,000 for an Oakland condominium in November 2007, and the Seeno company that sold it offered a $150,000 incentive, the suit says. Bai's story is complicated by the fact that her partner allegedly turned out to be a con artist, and Bai herself never received any of the incentive money. But the suit makes clear the incentive's impact: It raised the price of the Seeno condominium on Old Quarry Loop alongside the MacArthur Freeway "to about $150,000 more than its market value."
Bai's suit goes on to describe a March 17, 2008, phone conversation with Tracey Randolph, an officer with Collateral Financing Group -- an arm of Discovery Builders and the Seeno empire. As she asked Bai to sign documents altering the terms of a loan, Randolph informed Bai that Discovery Builders was running what she called an Existing Mortgage Assistance Program, or "EMAP," to "provide incentives to purchasers of various properties they (the builders) could not otherwise sell."
Bai, 39, sued Discovery Sales, Seeno entities and other individuals Nov. 10, 2008, for almost $10 million, claiming fraudulent, illegal, negligent and predatory lending and real estate sales. The Seenos settled without responding legally to the suit.
"A mutually satisfactory settlement was reached," said Antonio Cortes, Bai's attorney now with Smith Dollar PC, who declined to disclose the settlement amount. "It didn't smell right. I knew she was getting cheated by somebody.
"What was Discovery Builders thinking when they came up with this EMAP program? It's pretty suicidal," Cortes added. "Why would they need to do this? A probability is that they are doing this so they can convince their lenders they are selling these places for a lot more than they really are selling them for."
Defining the problem
The Builder Bailout often targets unqualified or unsophisticated buyers who may have no money to put down or not enough income, according to Freddie Mac.
The hidden incentives often go toward a down payment, which creates the appearance of equity from the buyer and gives banks a false sense of security. But, soon after buying the property, these buyers often find they cannot afford the loan payments and it falls into foreclosure, a Freddie Mac spokesman said.
Much the same thing happened to the Nashes, with a twist. Stacey, a San Francisco MUNI supervisor, and Darren, 47, a PG&E foreman, earned about $8,600 a month at the time, but on the loan applications Seeno representatives wrote that they earned $12,783 a month for the first loan and $24,754 for the second, the couple claimed in their lawsuit.
Their home loans turned out to be unmanageable and they lost the house in 2008 to foreclosure. The property sold to a bank for $312,000, more than $450,000 less than the recorded purchase price two years earlier.
"At the time, it was very, very stressful," said Stacey, a diabetic. "I lost sleep, my blood sugar was out of control, I lost weight."
They had trouble breaking the news to their three young daughters.
"We waited until the last minute to tell them we were losing the house because it was our dream house," Stacey said. "It was scary. Every time I would leave the house, I was worried I'd come back and there would be a lock on the door."
Contact Matthias Gafni at 925-952-5026. Follow him at Twitter.com/mgafni.
http://www.mercurynews.com/news/ci_20384669/seenos-face-scrutiny-over-allegations-inflated-home-prices?source=most_emailed There is good reason for Mr. Seeno to be angry with Mr. Whittemore regarding the Coyote Springs development, as the details of the upcoming expenses in court against the SNWA pipeline were most likely understated by Mr. Whittemore. Activists are just as committed to fighting the "new boss" as we were to fighting the "old boss".
Fed investigations hover over developer suits
Sandra Chereb
Allegations of corruption, embezzlement, death threats and criminal associations are flying in dueling lawsuits between high-profile former partners locked in a legal fight over a stalled Nevada land development.
But those claims may be just a sideshow after federal authorities launched unrelated investigations into business practices connected to both parties.
One inquiry into the political contributions of Harvey Whittemore, a once powerful Nevada lobbyist, lawyer and land developer, prompted prominent Nevada politicians, including Senate Majority Leader Harry Reid, a Democrat, and Republican Sen. Dean Heller, to shed thousands of dollars in campaign contributions to charity.
At issue is whether employees of Whittemore's former company and its subsidiaries contributed to political campaigns and were then illegally reimbursed with company money, according to Las Vegas Review-Journal reports that relied on anonymous sources.
The FBI is investigating Whittemore contributions, according to a person with knowledge of the case who confirmed the probe to The Associated Press on the condition of anonymity because the person was not authorized to speak about it publically.
On the other side of the fractured Nevada community development _ which once envisioned 160,000 homes on 43,000 desert acres _ are California homebuilders Tom Seeno and his brother, Albert Seeno Jr., owners of Seeno Homes and subsidiaries. They were partners with Whittemore in Wingfield Nevada Group Holding Co. from 2004 until the relationship imploded in 2010.
The Seenos also hold Nevada gambling licenses and are part owners of six casino properties, including the Peppermill in Reno.
The Seenos have had their own share of controversy, and company subsidiaries are referenced in a recent FBI affidavit filed in federal court in San Francisco, where a top sales executive for Discovery Homes, a subsidiary of Seeno Homes, is facing charges of wire and bank fraud. The Seenos are not charged in the case.
The Whittemore case is expected to be presented to a federal grand jury in Reno on Wednesday. However, officials with the FBI and Nevada U.S. Attorney Daniel Bogden's office in Las Vegas have said they could not confirm the investigation.
Whittemore was once an influential figure in Nevada politics and legal circles. As a lobbyist, he represented big casino clients and tobacco companies, and was a partner in the powerful Lionel, Sawyer & Collins law firm. He now has a small private law office in Reno.
Whittemore's lawyer, Dominic Gentile in Las Vegas, declined requests for comment. A Whittemore spokeswoman said previously that the federal investigation stemmed from a legal battle between Whittemore and former partners in the Coyote Springs master-planned community about 60 miles north of Las Vegas.
Federal Election Commission records show Whittemore, family members and employees contributed nearly $150,000 to Reid's campaign on a single day, March 31, 2007. Most of the donations were for $4,600, the maximum amount allowed for a primary and general election cycle. Reid and other Nevada politicians who received contributions from Whittemore, including Heller and Rep. Shelley Berkley, said they were donating the funds to charity.
"We believe it's the right thing to do," said Stewart Bybee, Heller's communications director.
Federal records also show members of the Seeno family contributed at least $38,800 to Reid three days earlier, on March 28, 2007.
At the time, the Wingfield partners were developing the massive Coyote Springs community, but the collapse of Nevada's housing market a year later has the project in limbo.
Whittemore obtained water use rights and overcame federal land use restrictions including an agreement with the federal Bureau of Land Management to swap land at the center of the 67-square-mile Coyote Springs site for land on the fringes to be designated as a preserve for the endangered desert tortoise.
In 2004, Congress agreed to accept $10.4 million from Whittemore to move a federal power line easement across U.S. 93 to allow the development to proceed.
Wingfield also developed Wingfield Springs and the Red Hawk golf course in northern Nevada.
The Seenos in their civil lawsuit filed Jan. 27 in Clark County District Court in Las Vegas, accuse Whittemore of bilking them out tens of millions of dollars and using Wingfield assets to finance lavish lifestyles; buy homes; subsidize a research facility at the University of Nevada, Reno; even sponsor a pro golfer.
"Whittemore made sure that friends, family and political and lobbying associates enjoyed his unauthorized expenses as well," the Seenos said in their suit, which claims Whittemore embezzled more than $40 million.
Whittemore and his wife, Annette, in turn filed suit against the Seeno brothers and Albert Seeno III in U.S. District Court in Reno. They accuse the Seenos of making death threats against their family; having ties to the Hells Angels motorcycle gang and convicted felons; and forcing them through intimidation to turn over homes, cars, jewelry, money _ even a Steinway piano.
That suit alleges Albert Seeno Jr. became "disgruntled" with his investment in Wingfield Nevada Group when the economy tanked and began falsely accusing Whittemore of embezzlement.
Meanwhile, Discovery Homes sales director Carey Hendrickson, 36, of Martinez, Calif., is accused of trying to buy four of her employer's homes simultaneously in 2008 as part of what the mortgage industry calls a "builder's bailout," described by mortgage giant Freddie Mac as a scheme in which builders provide excessive incentives to buyers that are kept secret from the lender, which can lead to inflated home appraisals and false property values.
Hendrickson maintains her innocence and intends to enter a not guilty plea at her arraignment scheduled March 8 before U.S. Magistrate Judge Laurel Beeler in federal court in Oakland, said John Runfola, the San Francisco-based defense lawyer representing her.
An FBI affidavit filed in Hendrickson's case said she received nearly $480,000 from Collateral Financing Group, a subsidiary of Seeno homes owned by Albert Seeno III. She returned $122,000 when the purchase of one home fell through.
The FBI also said she received $169,000 from another Seeno company, West Coast Homebuilders, over six months in 2008 to help her make mortgage payments on her own home.
The allegations against Hendrickson and her connections to the Seenos could draw the attention of Nevada casino regulators.
"We take a general stance that we're always monitoring the actions of our licensees," said Nevada Gaming Control Board Chairman Mark Lipparelli, who would neither confirm nor deny that his agency is looking into the California allegations.
The Seenos have come under the scrutiny of casino regulators before. In 2004, Seeno Jr. was fined $775,000 for associating with outlaw bikers. Seeno III was fined $25,000.
http://www.realclearpolitics.com/news/ap/politics/2012/Feb/28/fed_investigations_hover_over_developer_suits.html What is the Seeno track record?
The Seeno family is no stranger to law enforcement and controversy. “The Seenos are billionaire developers from Northern California who have been accused of having organized crime connections as well a close relationship with the California motorcycle gang known as the Hell’s Angels. For over a full year now, the Whittemores have been living under the threat of death, serious bodily injury and/or criminal and civil prosecution because of actions threatened by the Seenos,” alleged a former business partner in an ongoing bitter lawsuit. Just two years ago, FBI and IRS agents raided the Concord headquarters of the Seeno Construction Company. In 2006, Discovery Homes was sued by several Pittsburg homeowners on San Lucia Drive who lost their backyards to a landslide.
Seeno Construction was founded in 1938 by the late Albert D. Seeno and is now headed by his son, Albert Jr. The company’s holdings include part ownership of the Peppermill Hotel and Casino in Reno. Pleading guilty in federal court in 2002 for destroying the habitat of red-legged frogs by draining ponds at its San Marcos project in Pittsburg, Seeno Construction Company was fined $1 million. In 2003, Pittsburg City Councilman Frank Quesada pleaded no contest to conflict of interest charges for voting on Seeno projects while owing the developer $300,000. Quesada was sentenced to 300 hours of community service. Pittsburg’s former mayor, Frank Aiello, was fined $20,000 by state regulators in 2004 for failing to disclose accepting free hotel accommodations and football tickets from Albert Seeno Jr. That same year, Albert Seeno Jr. paid $775,000 in a settlement with Nevada gambling regulators, who had accused him of associating with a felon who worked for his construction company.
http://www.arounddublinblog.com/2012/02/dublin-ca-residents-not-happy-about-more-schaefer-ranch-homes/