HAVE I GOT A DEAL FOR YOU—
FRADULENT FORECLOSURE INVESTMENT SCHEMES THAT ARE ACTUALLY PYRAMID INVESTMENT SCAMS

There has been a recent proliferation of investment schemes that focus on the purchase and sale of properties in foreclosure. There is nothing new about such schemes; it is simply that they have become more prevalent as investors take more money out of the stock market and search for alternative investments.

Here's a typical pitch. Are you looking for an attractive return on your investment? Are you looking to buy a great home in a nice neighborhood at a low price? Or an apartment building with great upside potential? What is more solid than the bricks and mortar of real estate? Who is making the pitch and why? It is the trap for the unwary. Someone with tremendous legitimacy it the "salesperson." A large suite of offices on the floor of a high rise in Century City or Beverly Hills gives additional credibility. It may be a professional. A well-spoken, well-dressed accountant or real estate broker or lawyer or investment advisor fits the description.

Here's what happened to one of our clients. A lawyer made the initial pitch. Are you interested in a partnership to buy foreclosed homes and apartment buildings from auctions held by banks or from court-ordered foreclosures? We'll turn them around and sell the properties at discount prices but with a great profit. I'll provide you with lists of these properties. We'll decide together which ones to buy. For a small initial investment you can acquire a share in real estate that will multiply your investment faster than you can sign a check.

Our client went for it. He signed up for an investment deal. He wrote a check for $125,000 and handed it over to the lawyer. The lawyer said he too would contribute $125,000 and together they had enough to be off and running. A few weeks went by. No lists were sent to our client. He inquired. Oh, we sent them, but maybe they got lost in the mail. A month went by. No lists. Then the other shoe dropped. The lawyer asked for an additional $25,000 to add to the initial investment. "Why?" our client asked. "I haven't seen anything from my $125,000 yet; why should I give you more?"

After another month of no lists and more excuses our client asked for his money back. Promises and more promises, but the money was not returned. Our client made an appointment to meet with come in and discuss the problem, brought in his paperwork and asked, how can I get my money back? The lawyer and his cohorts had in fact bought property with our client's money, but had never disclosed that fact. We filed a lawsuit and placed a lis pendens on the properties the lawyer had acquired, which he purchased after our client had handed over his "investment" check. It appears that what our client had invested in was not a sound investment in real estate, but rather the funding to enable the lawyer to buy his first home. This is an especially vulnerable time for real estate investors. They are many unscrupulous schemes out there. Too frequently the money they take in from you for the purported "investment" goes to the disgruntled investor who preceded you and who has already retained an attorney to get his money back. The only person to profit is the one who made the initial pitch. Investors beware! We have learned through this and other experiences representing defrauded investors that it is difficult to get the money back, but easy to give the money to the "salesman." "Potential victims" have a built-in bias, having acquired wealth over the years from modest real estate investments. Moreover, they have substantial equity from which they can borrow funds to make these investments.

Before you make any investment in real estate foreclosure deals or any real estate deal, ask for the names of current or past investors as references. If the person making the pitch is a lawyer, check on his credentials with the State Bar. If he or she is a real estate broker, check with the State of California to determine if his license is in order or if there are disciplinary proceedings pending.

In addition, ask for professional references. Ask for the addresses of properties purchased in foreclosure and sold for profit. Ask for a comprehensive list of their track record.