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Investors Made Millions from People Facing Eviction
‘Crime of Greed’ Deprived Local Governments of Revenue, Prosecutors Allege
A six-year conspiracy by veteran real estate investors to rig bids and stifle competition at tax sale auctions made two chief organizers at least $10 million, largely from fees homeowners paid to keep from losing their properties, according to federal prosecutors.
Every year, local governments in Maryland sell investors the right to collect unpaid taxes and municipal fees, often for a few hundred dollars or less. Lien holders can sue to take the property of those who fail to pay them. (Photo by Lagan Sebert / Investigative Fund)
Though many details remain under seal in U.S. District Court in Baltimore, prosecutors allege that from 2002 through 2007 the pair acted to corrupt nearly two dozen municipal tax sales in Baltimore and five other Maryland jurisdictions, including Montgomery and Prince George’s counties in the Washington, D.C. suburbs.
Every year, local governments in Maryland sell investors the right to collect unpaid taxes and municipal fees, often for a few hundred dollars or less. Lien holders can sue to take the property of those who fail to pay them.
The tax sale conspiracy deprived local governments of revenue from higher bids even as it enriched Baltimore County lawyer Harvey M. Nusbaum and his longtime real estate investment partner Jack W. Stollof, court records show.
“This was a crime of greed,” prosecutors wrote in court papers.
Both men have pleaded guilty to felony charges of bid rigging. On May 4, U.S. District Court Judge J. Frederick Motz sentenced Nusbaum, 72, to a year and a day in federal prison as well as an $800,000 fine. Stollof is awaiting sentencing.
Prosecutors won court approval earlier this year to seal records naming most of the co-conspirators and outlining their roles, citing an ongoing criminal investigation by the Justice Department’s antitrust division in Washington.
Yet court filings provide a glimpse inside the scheme that, prosecutors allege, evolved into a “gentleman’s agreement” to split up the property liens for sale and refrain from bidding on liens assigned to other members of the conspiracy.
According to the government, Stollof and Nusbaum bought thousands of municipal liens and then used the court system to threaten homeowners with seizure of their properties unless they paid legal fees, interest and other charges. These fees often totaled 10 times the original debt.
Nusbaum, a former Internal Revenue Service agent, filed some 6,000 lawsuits over the six-year period to foreclose on the property on which the men held liens, according to the government. He generated an estimated $6 million in legal fees as a result. The men split about $1.5 million in interest charges, according to prosecutors.
The homeowners cited in the case ranged from several Baltimore residents stuck with thousands of dollars in fees after they failed to pay water bills of a few hundred dollars to the owners of a parking space at a North Bethesda condominium. In that case, a $199.57 lien on the parking space cost $3,697 to redeem, according to court records.
In court documents, one man said he owed a water bill on a property on South Warner Street in Baltimore and ended up in the tax sale as a result. He said that when he called the Nusbaum law office and demanded an explanation for $4,000 in charges he was told: “You will pay, everybody does.”
In a second case cited by prosecutors, an 80-year-old widow with a $369.86 outstanding water bill sold in the 2005 Baltimore tax sale was billed more than $5,000, according to court records.
In another case, Rosa D. Carmon wrote that she had received a call from Stollof in October 2007, telling her he had bought a $346 water bill lien on a home she owned on Nuth Avenue in Baltimore. Her cousin was renting the property at the time and had failed to pay the bill.
Stollof later told the divorced mother of four that it would take $4,256 to redeem the property, according to Carmon’s affidavit. “I shared with him that I thought this was outrageous and that I didn’t have that kind of money,” she wrote.
Stollof and Nusbaum’s role in the tax sale business first came to light in 2007, when The Baltimore Sun exposed how three investment groups had won about two-thirds of the liens auctioned off. Later that year, the FBI raided Stolloff’s and Nusbaum’s offices and that of a third man as part of the bid rigging investigation that prompted the criminal charges in 2009.
As he stood before Motz at the May 4 sentencing hearing, Nusbaum said he was “stunned” by the FBI raid because he didn’t realize his conduct in bidding for tax liens had been illegal. He called it the “worst moment of my life.”
Stollof also contends that he didn’t know he was violating any laws.
Legal papers filed by his defense team describe him as a “not highly educated man” who relied on lawyers around him for advice. Stollof, his lawyers wrote, “achieved his success through hard work, handshakes and honesty.”
10 Comments so far
Show AllHmmm
Equal justice in America.....not today. These scumbags stole millions (literally) from people who where facing perhaps the most trying and stressfull time of their life. These people were facing the loss of their homes and in reality their way of life. And these 2 were preying on the victims.
So what does the judge give out for stealing millions and destroying people's lives.....366 days and a fine of perhaps 15% of what he stole. My my white collar crime really does pay in American.
On the other had in America if you are a black man caught with 2oz. of cocaine you can spend 5 years at hard labor in a work camp. (prison these days is another money making machine) of course you need a continual supply of free labor to get the easy money. Idiotic laws that target them, the judges that sentence them and the public which tolerates the outcome, create a caste system in this country. One set of laws and enforcement for some and another much much harsher one for the rest of us.
This is typical of *White* white-collar crime, anyway. A fine that's a small part of the illegal gains, and a wrist-slap sentence at a country-club prison. Then it's back to business as usual.
One of the things that would be interesting to know is how much a part, if any, their shared ethnic identity (from their surnames, they're all Ashkenazi Jews) played in the light sentence.
We know from experiment as well as massive amounts of real-life evidence that the visible characteristics of race and sex kept non-Whites and women out of good jobs for ages (and names kept certain categories of Whites --Jews, but occasionally Catholics, too-- out of academia and quasi-business organisations such as country clubs. Whence all the jokes about Jews changing their names, getting nose jobs, etc.).
Even when people aren't aware of their bias, they "somehow" evaluate people like themselves to be better-qualified...even when the situation is experimentally rigged such that the confederate "candidates" are of identical qualifications.
A name is sometimes another "visible" characteristic. If I'm a devout Catholic, might I not pre- or subconsciously evaluate Francis Xavier Meehan as being more qualified than, say, Hyman Warszawski? Especially if I'm a *fundy* Catholic, who still believes Jews are Christ-killers as the 'good nuns' used to teach? Alternatively, if I'm a Jew who was raised to first ask "is it good for the Jews?", am I not likely to "somehow" prefer a Hyman Warszawski to an F. X. Meehan?
We know that aptitudes and skills are randomly distributed. So what produces the disproportionate number of Jews in certain professions? Some of it can be explained by cultural prescriptions ("My son, the doctor"), but why the heavy loading in media-related fields and the apparent dearth at the top of corporations (Sumner Redstone stands out like a sore thumb)? It's unrealistic to suppose it happens by accident.
So did a similar recognition of a shared ethnic identity cause the judge to feel "they've suffered enough"? It would be interesting to know.
I just finished reading about this at HuffPo. Here's their story with a video about one of the victims. Like I've often said to people who think they are so smart because they "own" homes, they don't own anything really. If they have a mortgage technically the bank owns the home, and even after they pay the mortgage off, they are indebted forever with the taxes or other municipal bills, as in these sick cases.
The story that I've cited here is even more heartbreaking than the ones on CD. I could definitely identify with this woman regarding her loss -- how could anybody not? -- unless, of course, they have no heart.
http://www.huffingtonpost.com/2010/05/18/the-other-foreclosure-men_n_579936.html
The scary thing is that they probably really didn't think they were doing anything wrong. If Wall Street, Big Oil, and insurance companies do it, then "gaming the system" is ok. I'm sure their lawyers and accountants were well paid too.
Mairead writes:
"One of the things that would be interesting to know is how much a part, if any, their shared ethnic identity (from their surnames, they're all Ashkenazi Jews) played in the light sentence."
I find this a very strange comment, esp. as I have some Sephardic background but you wouldn't know it from either family surname. Also, as the story makes clear this was a 6-year conspiracy that had to involve many more people than the two named. The money they allegedly obtained had to have been spread around.
"U.S. District Court Judge J. Frederick Motz" is an Ashkenazi Jew?
Given your previous posts I remain a bit surprised. Given the way our courts handle "white-collar crime," a year and a day and an $800,000 fine isn't a light sentence. After all, look at the bigger crooks still running free.
I suspect that there is far more to the real story in this case, esp. given that federal records remain sealed. RSVP...
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Sephardic naming conventions are a total mystery to me -- I haven't a hope of recognising a Sephardic family name when I see it.
Ashkenazi names are easier, possibly because I speak the languages those names came from but not the languages Sephardic names come from, and the shift from patronyms to fixed family names in 17th-18th c. Germany, Poland, and the Russias is an interesting story all by itself.
But even with Ashkenazi names I sometimes have to guess, and sometimes I guess wrong because there's no bright-line division of names between the subcultures. And it could be that Motz might be one of those wrong guesses...in which case my whole question evaporates with respect to this particular sentencing!
But a-year-and-a-day is the absolute-minimum felony sentence, and to fine someone less than $1M who's stolen >>$1M still seems quite light to me, even given, as you note, the way the system virtually rewards white-collar crime that exploits the poor (exploitation of the rich is of course handled very differently).
Mairead wrote:
"One of the things that would be interesting to know is how much a part, if any, their shared ethnic identity (from their surnames, they're all Ashkenazi Jews) played in the light sentence."
Being brought up in an Orthodox Jewish congregation, as I was, I find that statement very offensive. Given what I was taught by my Rabbi, if I was the judge in this case, I would have thrown the book at these two criminals and forced them to pay back every cent they extorted from their victims. I certainly would not have looked at their names and let them off the hook with a slap on the wrist. If they are Jewish, they should be twice as ashamed of themselves, once for victimizing people against the teachings of their religion and secondly for giving that religion a bad name.
If you Google Judge J. Frederick Motz, you will find he graduated from Wesleyan University and was a Board member of the Friends School of Baltimore. While this is not conclusive, there is no mention in biographical statements that the Judge has had any affiliation with any Jewish schools or charities.
Furthermore, you would have found that Motz was made a US District Court Judge by Ronald Reagan. Since 70% of American Jews vote Democratic, and the Gipper would likely favor a Republican for a judicial position, it is statistically unlikely that Motz is Jewish. Your statement that "they're all Ashkenazi Jews" is totally unwarranted.
Whatever his religious background, this judge was apparently not interested in justice. Every cent should have been returned to those poor people. Furthermore, the law should not allow a government to unleash predators on honest people in debt. I thought we had abolished debtor's prison a long time ago.
Sure, *you* would have thrown the book at them. I accept that. I accept that *many* Jews would, in that judge's place, have thrown the book at them. Probably most of the Jews I've ever met in my life would, just as I and most of the non-Jews would.
But not all Jews or non-Jews would, as I hope is obvious. So please don't attack *me* for the words *you* put in my mouth (not "they are" but "from their surnames, they are" which is quite different: it expresses an appropriate uncertainty), or for pointing out that some Jews are criminals (there were apparently two of them in the dock that day, you'll recall, one of them an officer of the court).
As a Jewish acquaintance once pointed out, apropos reactions such as yours: it was the Jews on whom ha-Shem imposed the Ten Commandments, and He didn't do it as a prize for good conduct.
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Whatever his religious background, this judge was apparently not interested in justice. Every cent should have been returned to those poor people. Furthermore, the law should not allow a government to unleash predators on honest people in debt. I thought we had abolished debtor's prison a long time ago.
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Here I couldn't possibly agree with you more. Well said.
Mairead---
The openness of your replies (including to Liberalis) is somewhat refreshing.
The point I made earlier still stands:
* The court records remain sealed, so we do not know the details. I suggested that in 6 years of criminal activity, the money had to have been spread around, so the alleged millions illegally obtained were/are no longer available to those deemed guilty, and thus they are incapable of genuine restitution.
Another aspect of this issue has bothered me for a long time, namely, when a court imposes such as an $800,000 fine, who actually gets the money (assuming it is ever paid)? The victims, or the court?
In the instant case, it would take some hard-hitting reporting to find out... If ever.
From the article:
"Every year, local governments in Maryland sell investors the right to collect unpaid taxes and municipal fees, often for a few hundred dollars or less. Lien holders can sue to take the property of those who fail to pay them.
"The tax sale conspiracy deprived local governments of revenue from higher bids even as it enriched Baltimore County lawyer Harvey M. Nusbaum and his longtime real estate investment partner Jack W. Stollof, court records show."
The corruption was systemic, with local governments treating property liens like "derivatives."
From the article:
"Lien holders can sue to take the property of those who fail to pay them."
This is probably a bit simplistic. If I repair your roof I can put a contractor's lien on your title/mortgage for the amount you owe me, but at least in most states I can't seize your property.
In the case of this story, if an unpaid utility bill can lead to foreclosure, the government itself is corrupt. Which would help to explain why the court records remain sealed!
Meanwhile, shame on you for suggesting this was a Jewish conspiracy. In Maryland, no less! First kill all the lawyers, then the Realtors! In some communities this Combine exists in a culture of corruption, but not in all. Where I grew up the Methodists were as corrupt as the Presbyterians, and just as self-righteous! There were no Jewish Realtors or even bankers, and the nearest practicing Jewish attorney was at the county seat, 17 miles away. Even so, the locals blamed "Jewish Bankers" for their credit problems.
In retrospect, at the macro level (Rubin, Summers, et al) perhaps they had a point, although today it would be less the question whether the Treasury and Fed bankers are Jewish, or Israeli Zionist.
Regardless of religion, some people will destroy you with a ballpoint pen.
Ask any Palestinian. You thought you had a Quit-Claim Deed? Ha.
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The point I made earlier still stands:
* The court records remain sealed, so we do not know the details. I suggested that in 6 years of criminal activity, the money had to have been spread around, so the alleged millions illegally obtained were/are no longer available to those deemed guilty, and thus they are incapable of genuine restitution.
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Well, of course we've nothing to go on but the (quite possibly inaccurate) reportage, but it says that *they* got 10M, by which I understood the two in the dock pocketed that much and that it didn't include their expenses. But who knows whether my understanding is correct.
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Another aspect of this issue has bothered me for a long time, namely, when a court imposes such as an $800,000 fine, who actually gets the money (assuming it is ever paid)? The victims, or the court?
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In a criminal case, the state gets it. In a tort (civil) action the plaintif does (in which case it's not called a fine).
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"Lien holders can sue to take the property of those who fail to pay them."
This is probably a bit simplistic. If I repair your roof I can put a contractor's lien on your title/mortgage for the amount you owe me, but at least in most states I can't seize your property.
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That's my understanding, too. But maybe in Maryland it's different?
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Meanwhile, shame on you for suggesting this was a Jewish conspiracy.
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I can't tell whether you're being serious. On the chance that you are, I'll point out that a "conspiracy between Jews" (my tentative interpretation) is surely very different to "a Jewish conspiracy", the latter suggesting a conspiracy whose fundamental qualification is that the conspirers be Jews and that the conspiracy is in some sense driven by Jewishness. Whereas "a conspiracy between Jews" is a conspiracy where the Jewishness of the conspirers is either accidental or a subsidiary requirement.
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In retrospect, at the macro level (Rubin, Summers, et al) perhaps they had a point, although today it would be less the question whether the Treasury and Fed bankers are Jewish, or Israeli Zionist.
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You raise an interesting point. I wonder to what extent the nominally-Jewish predators identify as Zionists rather than Jews. It would explain a lot.