Friday, May 23, 2008 | In a real estate office in Carlsbad on the evening of April 2, John Woodall watched homeowners, dozens of them, flooding to the back of a room, waiting in line to sign over their properties to the men hosting the event.

The room was full of about 50 homeowners, Woodall remembered. Most were Hispanic. They’d been invited because their homes were in foreclosure. The night’s presentation had centered on how they could keep their homes. A man named William Hutchings spoke; his words were repeated in Spanish by a translator.

Woodall said Hutchings had called his plan a land grant program, peppering his presentation with maps and vague references to land grant transfers, antiquated property maneuvers used hundreds of years ago when the United States was still assembling land from other countries. Hutchings told the homeowners the program would allow them to deed over their property to the company, which would shield it from foreclosure.

Hutchings said the federal government had once given a land grant to California but still owned all of the land in the state, according to a court affidavit that describes the April 2 meeting. And so California could, based on the land grant, convey parcels of land to private citizens and collect property taxes. Hutchings’ program, he told the audience, would place the property in a land grant, filed with the “Bureau of Land Management” and as such, he said, the land would be given back to the government, the affidavit says.

That would keep the bank from being able to confiscate the property from the homeowner to pay off the defaulted mortgage, and Hutchings’ company would keep the property in the protected state while the homeowner lived in it for four years. After that amount of time, the bank would have to release the mortgage debt, Hutchings claimed, and the homeowner could buy out Hutchings’ share of the house and own it again free and clear, according to a court affidavit.

The homeowners thought they were being rescued. But, according to law enforcement officials, Hutchings’ program was a scam, a complicated scheme used to trick hundreds of homeowners into deeding over their houses and paying to the company upfront fees or monthly rents to stay in the house. The homeowners from that night number among nearly 400 other San Diego County homeowners who deeded over their properties to Hutchings, Martinez, and three other defendants in an alleged foreclosure rescue scam stretching back to January 2006.

Four defendants involved in the alleged scheme were arrested Wednesday, their charges announced Thursday, and their businesses’ methods described in press statements and court documents. FBI Special Agent in Charge Keith Slotter said he found it “particularly atrocious when individuals will take advantage of others who they know are experiencing extreme … financial hardship.”

Indeed, the alleged scheme comes at a time when unprecedented waves of foreclosures have doused several neighborhoods in San Diego County. Confusing loan terms, frustrating automated lender phone systems for consumers behind on their payments, and the sheer number of advertisements and offers for “foreclosure assistance” leave room for confusion on a societal level. Even some real estate professionals are unsure how to advise homeowners in default — officials said some victims of this alleged scheme were referred to Hutchings by real estate professionals, some unknowingly sending their clients to their ruin. The alleged scam targeted mostly non-English-speaking, Hispanic homeowners, officials said.

For the homeowners at that April 2 meeting, Hutchings and his associate, Edgar Martinez, had drafted up grant deed documents — the legal forms used to sign over a home’s ownership — for each property, Woodall said. And so the homeowners could, that very night, sign over their properties, recording the transaction with the notary that was present. And after the presentation, many of the homeowners flooded to the back of the room to sign over their properties and join the program. The translator was another of the defendants, Diego Gil Gil, according to the court affidavit.

The homeowners would then agree to pay monthly “rent” to the men, who promised to keep their homes out of foreclosure. And, four years later, Hutchings claimed, the lender wouldn’t be able to collect on the mortgage debt anymore, Woodall said. The company would hold the grant deed to the property and own a 50 percent share, which the homeowner could buy out after those four years, or split the proceeds from a sale.

So, the homeowner could live in the home in the meantime and expect to own the property again free and clear after four years, according to the presentation, Woodall said.

“He made it sound very official — he had little maps and you know, this kind of stuff,” said Woodall, a North County real estate agent specializing in short sales. “They believed it hook, line and sinker. Whatever skeptical people were there obviously felt themselves enough of a minority that they didn’t raise their hands.”

And Hutchings’ promises fell flat. Land grant transfers aren’t recognized in court. The foreclosure process wasn’t thwarted and some of the homeowners from that night have already lost their homes and whatever rent they paid in the meantime.

The defendants allegedly found new clients at the seminars or otherwise through word of mouth. They earned their money by charging homeowners $10,000 up front or by setting up leases with the homeowners, charging them monthly “rent” in order to stay in their homes, officials allege. They calculated the rent they’d charge using an online search tool called

The defendants likely netted “hundreds of thousands of dollars,” the District Attorney’s Office said. They will be arraigned Friday. Two of the defendants were conducting a seminar for another potential 50 victims when law enforcement arrested them Wednesday, District Attorney Bonnie Dumanis said.

Compared to other investigations into alleged real estate fraud, the agencies involved in this one said they worked quickly in order to keep the defendants from allegedly victimizing anyone else. The law enforcement operation was a joint undertaking by the district attorney, the state attorney general and the FBI.

Mike Groch, economic crimes division chief for the district attorney, said a lot of real estate fraud cases involved investigating deals that are already done and closed.

“But this one was still going hot and heavy,” he said.

The scam targeted additional victims in other counties, officials said.

The program, though coated in legalese by the defendants, has no legitimacy in the state for privately held land, the Attorney General’s Office said.

“There hasn’t been a legitimate use of the land grant since the conclusion of the Mexican-American war,” said Attorney General Jerry Brown, in a statement. “If some fast talking scam artist offers a quick escape from foreclosure using archaic documents, be extremely suspicious.”

The defendants allegedly scammed distressed homeowners — mostly non-English-speaking, Hispanic homeowners — by acquiring grant deeds to homes in foreclosure. They allegedly told victims their “land grant program” would keep the homeowners from losing their homes in foreclosure, the District Attorney’s Office said.

The program must have sounded to victims like the complicated real estate transactions in Mexico, where homeowners lease the land under their homes from the Mexican government, said Angela Rosenau, deputy attorney general.

Law enforcement Wednesday night arrested William J. Hutchings, his wife Xiaoke Li, Edgar Martinez and Diego Gil Gil. An arrest warrant was issued and is still outstanding for another defendant, Shawna Landis, Hutchings’ ex-wife. Attempts to reach defendants Hutchings and Li for comment were unsuccessful.

The companies involved were called Land Grant Services LLC, Federal Land Grant Company LLC (or FLG Co. LLC), and KBS Resources LLC. They’d been operating the alleged scam in one form or another since January 2006, though it especially ramped up in the last six months, officials said.

Indeed, 178 properties in San Diego County had been deeded over to just one of the LLCs — Federal Land Grant Company LLC — just since March 7, according to the County Recorder’s Office.

The defendants face more than 100 felony charges so far. The defendants have had their assets frozen to preserve them for restitution to the victims, should such a financial award be made in court.

Woodall, the real estate agent who attended the presentation, found out about the LLCs in March from a client whose house he was going to sell as a short sale. When Woodall tried to start the negotiations, his client showed him a grant deed where he’d signed his house over to FLG — Federal Land Grant Company, one of Hutchings’ companies — because he thought it would save his property.

Woodall’s own research into the company pointed him to Hutchings. He called him and set up a meeting with him at a Coco’s restaurant in Escondido at the end of March. Hutchings gave Woodall his spiel as if to pitch the company to Woodall as a potential franchisee, Woodall said.

Hutchings invited Woodall to the April 2 meeting. Woodall contacted the Attorney General’s Office and offered to take someone from the office along to the invitation-only meeting, and an investigator joined him, posing as one of Woodall’s clients.

Please contact Kelly Bennett directly at with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.

Leave a comment

We expect all commenters to be constructive and civil. We reserve the right to delete comments without explanation. You are welcome to flag comments to us. You are welcome to submit an opinion piece for our editors to review.

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.