It is difficult to get a man to understand something when his salary depends upon his not understanding it. –Upton Sinclair

Let’s talk about “the letter.”

Readers may not know that with your re-election campaign in full swing, your office made a very big deal about sending warning letters to some 14,000 people in foreclosure last month.

I took one look at it and thought, “not good.”

Ignorance

Here’s how the letter begins . . .

Because your home has recently appeared in public record as a foreclosed property . . .Rob McKenna
Attorney General of Washington

Foreclosed?

Their home hasn’t appeared “as a foreclosed property.” Nobody sells lists or offers websites featuring foreclosed properties.

What has happened, though, is a foreclosure action, likely a Trustee’s Sale, has been filed against their property, making their property “in foreclosure.”

Not “foreclosed,” Rob, but “in foreclosure.” There’s a dif, and it’s huge.

In real estate parlance, you’re telling these 14,000 people they’ve already lost their homes. Some will find it offensive and some will scream bloody murder.

Obviously, you have no idea who you’re dealing with or what’s at stake.

Expect calls

And that’s just the beginning . . .

Foreclosure lists are notoriously bad, but you don’t know that. So, you naively blasted the entire state with your letter, and I’m guessing about half the people receiving it weren’t actually in foreclosure.

They may have been at one time, but they’ve either corrected it by now or they’ve tried to put it past them and have moved on to other things, which means they, too, will be offended.

Expect calls from irate owners who cannot believe you had the audacity to butt into their private lives.

Pssssst . . . avoid exclamation points

And it won’t end there.

People in foreclosure need gentle reassurances and kind suggestions. They very likely are in fragile states where a provocative, aggressive, and scary letter like yours has the power to push them to the very edge (if not over it).

Do you really think “ATTENTION: Beware of Foreclosure Rescue Scams!” is what these people need to hear?

I’ll give you a hint . . . they don’t (they already have enough problems).

And since we both know the foreclosure rescue scam hysteria your office is intent on promoting is little more than a hoax designed get your new rescue laws passed, all you’ve done is get these folks worked up over nothing.

Terrorize This

Ignorance is a dangerous thing.

The simple fact your office thinks it knows what it’s doing is proof positive it doesn’t, and sending out a letter that can accomplish nothing other than terrorize its recipient confirms you haven’t learned a thing in all of this.

Your office created foreclosure rescue laws so unfair no WA state owner in foreclosure today has much of a chance to save his home (some brokers won’t even list their property), and now you’ve terrorized these same folks into believing swarms of scam artists are ready to descend upon them and strip them of their equity.

Good grief, Rob.

Don’t you think it might be time to just stop helping them? I’m sure they’d all appreciate it.

Should we call this latest blunder a debacle or a fiasco? I’m thinking it’s time we drag out the much overused but extraordinarily appropriate: SNAFU – Situation Normal, All F#cked Up,

In the arena,

Joe Kaiser

I’ve received the public records requested about AAG Jim Sugarman’s testimony before the legislature regarding the need for the new foreclosure rescue laws.

You may remember I talked about it in the earlier post, One Tin Soldier.

And wouldn’t you know, the results once again are EXACTLY as I predicted . . . Sugarman lied.

These three things

There were three things I inquired about and requested the public record for, all related to statements Sugarman made in the video below to the legislature, namely . . .

(1) evidence the so-called sale/lease-back scam is now, as Sugarman stated, “a thriving industry,” and,

(2) evidence the AG’s office was litigating against investors flipping sale/lease-back deals to other investors, telling them, as Sugarman suggested, “they will never be able to buy the property back, it’s designed to fail,” and,

(3) evidence that, as Sugarman suggested, “we have found that there are quite a few perpetrators on that side [tax sale foreclosures] of the equation as well.”

Let’s look at them one at a time . . .

#1 – the “thriving industry” lie

Sugarman’s contention the so-called sale/lease-back scam is a thriving industry is nonsense.

Having reviewed the public record provided to me by his office, there are a very limited number of people doing these kinds of transactions, and there are relatively few complaints.

With over 100,000 foreclosures in our state over the last five years, this so-called scam affects, at most, 1 in 2,500 foreclosures.

And the notion it’s a thriving industry?

Pure BS. He simply made it up.

#2 – the “litigating against other investors” lie

The AG’s office responded to my public records request about transactions involving investors selling to other investors by telling me, “there are no such records.” No, not one.

Yet Sugarman told the legislature, point blank, his office was “litigating” against these very fellows.

Clearly, no such litigation ever took place, making this yet another example of him lying to the legislature.

#3 – the “quite a few perpetrators” lie

And, predictably, the “quite a few perpetrators” I suggested would amount to me and my associates and no one else . . . is exactly the response I got.

Here’s my earlier prediction . . .

“I’m willing to bet it amounts to me and my former partners and that’s about it.”

The reply to my public records request was that the group of so-called “perpetrators” included no one other than me and my handful of staff and occasional partners.

And that makes Sugarman three-for-three in the deception department.

For the Record

So, it’s yet again abundantly clear this entire foreclosure rescue nonsense is pretty much a fantasy made up by an AG’s office determined to ram-rod through unneeded legislation simply to make itself look good . . . and that very office was willing to make up lies in order to deceive the legislature into believing the need was real.

It isn’t.

That being said, it’s equally clear (1) there is no evidence this is a thriving industry, (2) there is no “litigating” taking place against investors flipping “designed to fail” deals to other investors, and (3) aside from me and a few of my investor friends, there are not “quite a few other perpetrators” in the tax sale business.

But there are, at least from the AG’s office and AAG Jim Sugarman in particular, no shortage of lies about it.

In the arena,

Joe Kaiser

During your recent campaign debate in Gig Harbor with John Ladenburg, you discussed this case and got everything completely wrong, again.

And you did it with a smug look on your face.

Attorney General Rob McKenna, having not a clue

How could you not, by now, have a clue? You’ve spent a million taxpayer dollars on this bogus investigation and you still have no idea what it’s all about?

No one could get it this wrong, this often, Rob. No, not even you.

Clueless in Seattle

Let’s parse it . . . word for word, with my comments following.

For those of you who read the papers you’re also aware that we brought a series of actions here in Washington State against mortgage rescue scammers.

Yes, it’s all about the papers, isn’t it Rob? That’s pretty much what matters to you . . . getting your “I’m Rob McKenna, aren’t I wonderful? Vote for me” stories into the newspapers. Why am I not surprised?

And no Rob, you didn’t bring “a series of actions.” You brought “an” action (yes, one, as far as I can tell) against my partners and me. And, we are not mortgage foreclosure investors, we are tax sale investors.

Suggesting we’re “mortgage rescue scammers” shows you have no idea what we do.

We’re gonna be announcing the latest of these actions against a scammer operating out of Florida in the next few weeks.

Whoopie. One can only wonder how badly you’ve screwed up that one.

But the first actions we brought happened to be against mortgage rescue scammers in Pierce County and King County.

Again, not in the mortgage foreclosure business. It’s not that difficult, really, to wrap your head around this “tax sale investor does not equal mortgage foreclosure investor” concept.

These are the folks who approach people in foreclosure and they say, “You’re in foreclosure. I’m gonna help you out.”

No, we say nothing of the kind. We make proposals to folks in tax foreclosure and if they decide our proposal works for them, we deliver on our promises and make their problems go away.

And no one we’ve rescued has ever suggested otherwise.

“All you have to do is sign your property over to me. I’ll take title to it. I’ll pay the back taxes. I’ll refinance it. You can rent it back. You can still live there. You’ll have an option to buy it back when you get back on your feet.”

“All you have to do is . . . ?” Sick. Again, you’re demonstrating how completely clueless you are about this case.

We take title, typically in a trust, obtain an interest, typically 50%, and allow our partners to stay in their homes.

We’ll refinance? Huh?

And we don’t offer any sort of “buy it back when you get back on your feet” option. We’re simply co-owners of these properties, a concept your office cannot possibly begin to understand (I won’t attempt to explain fractional ownership, again).

And what the scammers have done and and we’ve proven in a series of actions that we brought . . .

No, you have not “proven” anything of the sort.

You successfully intimidated my ex-partners into settling with threats of financial ruin. And when they settled they did so admitting no wrong-doing whatsoever. Suggesting you’ve somehow “proven” a scam took place is an extraordinary inaccurate portrayal of what happened.

Turns out it’s difficult, if not impossible, to prove a scam that never happened, happened.

. . . is they have taken title to the property and had the owner sign a lease frequently for a rental amount larger than their old mortgage payment . . .

Again, completely wrong. You’re confusing us with all the other mortgage foreclosure rescue guys who do sale/lease-backs. We ask our partners to pay us a fair rent for our share, and it’s often a few hundred dollars a month, at most.

And, if they don’t pay, we don’t give them any grief about it. We’re simply hoping to cover the tax payments we know will be coming due.

As to “their old mortgage payment,” again, completely inaccurate. The vast majority of the properties we deal with are free and clear.

. . . and in some cases they’ll go ahead and let the property go into tax foreclosure anyway and the people lose their property.

A complete lie, and you know it. We’ve documented this again and again. No one we promised to rescue was not rescued, and they’re all pretty much still in their homes today (as you well know).

Properties we let go to tax foreclosure are properties we owned outright, with the seller have no ongoing interest, having sold all interest to us.

This is the same story you told the Spokane Review, and the same story I asked you to document, and we all know how that turned out (through a public records request your office admitted this sort of thing never happened).

Smugless in Seattle

It is incredible how badly this story gets botched every time you tell it. Again, after these many months I’m unwilling to believe it’s by accident.

Sooner than later, Rob, this thing ends and your office is exposed for the lies and deceptions it’s foisted upon all of us.

I wonder if that smug look of yours goes away right about then?

I’m guessing it does the very same moment they throw this stupid case out of court and tell you to write me a very big check for my time and trouble.

In the arena,

Joe Kaiser

That Bobo is at it again, sending out what AAG Jim Sugarman will certainly say are “unfair and deceptive” postcards.

And do you know why they’re deceptive?

Psssst . . . between you and me (and please keep this under your hat), there is no Bobo. He’s just a figment of my imagination.

The postcard

Here’s his latest postcard . . .

BOBO BUYS REAL ESTATE

No foolin’ . . . I work for a chimp.

And at this very moment Bobo is on a mission to buy up every piece of property he can swing (he’s asked me to check to see if you’re interested in selling yours).

Condition doesn’t matter. He’ll look at unbuildable lots, wetlands, junkyards or pretty much anything you’ve got. Of course, nice properties are okay, too.

He’s paying cash (or bananas – your choice) and closing in 72 hrs. So, don’t wait a minute longer. Call Bobo right now and get that property out of your hair today!

BOBO THE CHIMP
888-232-8654

What’s another $2 mil among friends?

Wow, I wonder if saying I work for a non-existent chimp, and saying “no foolin’” is proof positive this postcard is 100% deceptive?

I’m sending out at least a thousand of them, so feel free to add another two million dollars onto what I owe the state for my unfair and deceptive actions.

And, why do I think you probably will?

Because from what I’ve seen . . . your office is crazy enough to do just that.

In the arena,

Joe Kaiser

I see you’ve recorded a video detailing the HB 2791 debacle and suggesting there’s a very simple fix . . . going back to the original version your office “crafted.”

Crafted?

The original version was a total mess, and going back to it isn’t what most of us consider a fix.

Remember the original version?

that 82% thing

The original version talked about minimum acceptable purchase prices, eliminating the owner’s rights to freely contract and setting the number as a percentage, 82%.

It was so bungled you’d based it on the owner’s equity and not the market value of the property. That means to do a distressed property transaction, investors are required to pay what is, effectively, more than full price.

Embarrassing.

foreclosure is better

And let’s not forget, your original version, sponsored by Rep. Pat Lanzt, was based on the ridiculous notion that “foreclosure is better.”

Is that the original premise we’re returning to?

And, if so, does it really make sense to put your staff in charge of fixing this mess?

A Very Simple Bill

Does that also mean AAG Jim Sugarman, who appeared before the Legislature in support of the final version of this bill, will be involved?

He demonstrated how little the truth mattered when he called it “a very simple bill,” knowing full well it was anything but. And with him appearing on KVI radio last week saying every transaction I’ve done was a case of “equity stripping,” it’s clear he’s incapable of fair and reasoned thinking.

Putting him in charge of fixing the mess he created and encouraged the Legislature to support is a clear case of the inmates running the asylum.

The fix is in

And now, to assure us all the fix is in (as if we didn’t already know), we have you doing a video about how you’ll get it corrected by returning to the original version.

Correct me if I’m wrong, but isn’t that the version modeled after the 2004 Minnesota law that’s proven to be a disaster and has contributed to sky-rocketing foreclosures?

And isn’t that the version that restricts a homeowner’s right to freely contract and sell the property as he see’s fit?

And isn’t that the version that’s based on Pat Lantz’s “foreclosure is better” notion that is nothing short of absurd?

And isn’t that the version that Northwest Justice Project helped to create, the same group that believes making ANY profit is unfair and that we Westerners lag behind our Islamic counterparts?

And isn’t that the version that banned the use of valid Powers of Attorneys and required sellers to personally attend closing, even if they’d long since moved away?

And isn’t that the version that effectively prevents owners from staying in their homes by barring investors from doing deals both owners and investors deem fair and acceptable?

And isn’t that the version your office created for nothing other than to gain political points for the upcoming election, knowing full well that only four foreclosure rescue scam complaints had been registered with your office?

The True Fix

There is an opportunity for a real fix, Rob, and it’s very simple.

To preserve our real east marketplace, take investors and agents out of the line of fire, and allow owners in foreclosure the right to freely contract (and at least have a shot at saving their homes), all you have to do is admit the whole thing was a mistake and end it.

We don’t need a foreclosure rescue scam law. ANY law like it has proven to be ineffective and cause more problems than it solves.

You proved it yourself, and it will be interesting to see what, if anything, you’ve learned from this multi-million dollar foreclosure rescue scam mess your office foisted upon us.

The fix?

Just say “no,” Rob.

Simple as that.

In the arena,

Joe Kaiser

Received your latest 30 page interrogatories today and I’m guessing asking for copies of all our post 2006, 2007, and 2008 files will amount to another output of thousands upon thousands of pages of needless discovery.

And, of course, the end result will be more and more sellers reporting (1) I delivered on every promise I made, and (2) they were paid every nickel they were due.

But what else is new?

Bury me?

Asking me to essentially close up my business and spend another month gathering your requested documents is, undoubtedly, a means to bury me. And if that’s the way you want to play this game, that’s fine.

I’m convinced it’s unethical and unfair, but coming from your office, I’d have to say I’m used to it by now.

And, I’m convinced that once the hours and time and taxpayer money wasted on this case are made public, those thousand and thousands of pages of documents you’ve demanded won’t seem like such a hot idea.

30 for 30

But, enough of that.

What interests me the most about your newest demand is the copy of a blog post Jim Sugarman included as an Exhibit.

Does Jim actually read this blog every day?

Has he got nothing better to do?

The post he referenced was about the 30 partnership deals we did, and he’s asked for the list.

Rob, he’s already got that spreadsheet as well as all the files of those transactions, and all he has to do to find 30 satisfied clients is to pick any one of those transactions and give that seller a call.

Of course, it’s probably not hard to intimidate those sellers and convince them they’re victims (you’ve listed them as such), but if they’re telling the truth, they’ll all say we came through for them, exactly as promised.

Find me even one

I doubt you’ll be able to find even one genuinely unhappy client.

Not one.

So, Rob, my challenge to you is to find me one unhappy client who participated in a partnership transaction.

Yes, just one.

You can’t and you won’t, because no such person exists, (and no fair having Renee twist their arms).

In the arena,

Joe Kaiser

Yes, I know as the unintended consequences of HB 2791 start to add up, it gets more and more obvious that putting consumer protection attorneys in charge of drafting real estate law was a really bad idea.

The Email

How bad?

Here’s my recent email to county treasurers . . .

Dear County Treasurer,

Heads up . . .

As you may know, the Office of the Washington State Attorney General asked for a new “foreclosure rescue scam” law. The bill, HB 2791 was passed and signed into law earlier this year, becoming effective June 12, 2008.

I encourage you to read it, (a copy of which is attached). Kindly note pages two and three, particularly the following language which will be of interest to you:

(3) “Distressed home consultant” means a person who:

(b) Systematically contacts owners of property that court records, newspaper advertisements, or any other source demonstrate are in foreclosure or are in danger of foreclosure.

As such, the new law makes county treasurers “distressed home consultants.”

The law imposes certain obligations upon distressed home consultants, in particular fiduciary responsibilities. Here’s the pertinent part of that section of the new law:

Sec. 3. A distressed home consultant has a fiduciary relationship with the distressed homeowner, and each distressed home consultant is subject to all requirements for fiduciaries otherwise applicable under state law. A distressed home consultant’s fiduciary duties include, but are not limited to, the following:

(1) To act in the distressed homeowner’s best interest and in utmost good faith toward the distressed homeowner, and not compromise a distressed homeowner’s right or interest in favor of another’s right or interest, including a right or interest of the distressed home consultant;

Although an unintended consequence of the new law, you appear to be barred from holding tax sales and foreclosing on properties with delinquent taxes unless and until this law is changed.

Your fiduciary obligation to “not compromise a distressed homeowner’s right or interest” makes all tax foreclosures illegal in this state and any county treasurer ignoring the new law is subject to treble damages and potentially $100,000 in fines.

Here is that section:

(2) In a private right of action under chapter 19.86 RCW for a violation of this chapter, the court may double or triple the award of damages pursuant to RCW 19.86.090, subject to the statutory limit. If, however, the court determines that the defendant acted in bad faith, the limit for doubling or tripling the award of damages may be increased, but shall not exceed one hundred thousand dollars. Any claim for damages brought under this chapter must be commenced within four years after the date of the alleged violation.

I’ve reviewed the new law more than I care to admit, and although I am not an attorney, I’m confident my conclusions are sound and suggest you check it out for yourself.

Joe Kaiser

Just getting started here

And by the way, I’m convinced foreclosure trustees may no longer process trustee’s sales. Since they too systematically contact owners in danger for foreclosure, they are, by law, distressed property consultants and have HB 2791-defined fiduciary responsibilities that bar them from foreclosing.

So, no tax sales this year, Rob, no new trustees sales, and yet another unintended consequence of your office’s new foreclosure law.

In the arena,

Joe Kaiser

It was good to hear AAG Jim Sugarman discussing the HB 2791 fiasco on KVI radio last Sunday. I wondered how far he’d be bending the truth and guessed it would be plenty.

He didn’t let me down.

So, even though the hosts didn’t throw anything but softballs his way, Michelle did ask the one question I’d talked to her about earlier.

The Question?

Here’s Michelle asking, “How many complaints?” and Jim’s response.

Thirty different organizations, thirty different names of people, err, of companies that people had complained about.— AAG James Sugarman
Consumer Protection Division

Thirty?

Rob, Jim knows that’s bullshit.

As late as March 31, 2008, your office provided me with copies of all foreclosure rescue complaints involving sale/leasebacks, and could only come up with four.

So, where is Jim getting this story of complaints regarding thirty different companies?

There are three possible scenarios . . .

1. 26 new complaints have been registered since April 1, 2008 (highly unlikely).

2. The four you provided earlier were the result of a botched public records production, and your office missed the other 26 (certainly possible, seeing how pretty much everything appears to be botched from your office).

3. The 30 figure is pure and simple BULLSHIT (my guess).

New PRA Request

Greetings,

AAG Jim Sugarman, on KVI radio this Sunday, told the listening audience he’d just “the other day” reviewed foreclosure rescue scam complaints made to your office involving some 30 different companies.

This is a surprise, since your office delivered only 4 relevant complaints when I asked for all copies of this very thing earlier this year.

Kindly provide copies of all such foreclosure rescue scam complaints to which Mr. Sugarman is referring. Thank you.

Joe Kaiser

Stupid is a Stupid does

And here’s where it turns ridiculous . . .

Of the 30 companies mentioned above, Jim talks of knowing of an organization that’s done two transactions, and another that’s done 300 (that would be me).

Michelle asks if this represents 300 homeowners stripped of their equity.

Jim’s response?

Right, in, one way or another . . . yeah.— AAG James Sugarman
Consumer Protection Division

An unjust, repellent, and nefarious characterization if ever there was one, Rob, and pure, unadulterated BULLSHIT.

And, it begs the question, are you people nuts?

Recklessness on Display

So in the fantasy land that is the World According to Jim, every transaction I’ve done stripped homeowners of their equity? All 300 (don’t forget to add the 100 more since my partner and I split up)?

Psssst . . . the rest of the world, (at least us Westerners), calls that “making a profit,” Rob.

Corrupt

You’re on record as saying people lost their homes when I promised I’d stop their foreclosures but didn’t, and now, every single transaction I’ve done resulted in owners being stripped of their equity.

This thing just reached a completely new level of insanity.

And it should be obvious to all, including judge Palmer Robinson, that your staff is out-of-control and will do or say anything to make a case where none exists.

Suggesting I stripped anyone of his or her equity, much less all 300 sellers I’ve dealt with in the last 10 years, Rob, is absolutely nuts . . . and I call BULLSHIT.

In the arena,

Joe Kaiser