Wednesday, Aug. 20, 2008 | In 1981, Russian musical composer Vladimir Shainskiy won the USSR State Prize, an honor bestowed for achievements in sciences and arts.
Twenty-six years later, Shainskiy found himself enmeshed in what his attorneys call a “swift and calculated swindle” in San Diego. It all started when an Armenian woman, a stranger, claimed to recognize the composer in a mall in Carmel Valley. She and her husband befriended him, her husband saying he was the son of a KGB vice minister, all to curry favor with Shainskiy to the point that he unwittingly surrendered control of his finances to the husband and a web of associates, his attorneys say.
At the end, Shainskiy, who’d never had a mortgage in his life, was left holding $1.2 million in mortgage debt in late 2007. He faced unaffordable loan payments on not only the condo he’d previously owned outright but also a house in Santaluz, a North County subdivision, sold to him by the man’s son at an inflated price. His bank accounts had been tapped; his mental state was in shambles.
The story of this case, as outlined in court documents, yields a look through the lens of real estate at a high-drama tale of family, finances and the sometimes tenuous ties of cultural kinship.
Shainskiy, retired and 82 years old, has now alleged he was taken advantage of because of his age. He claims in a lawsuit that a group of associates duped him into the purchases, fraudulently securing exorbitant mortgages on his behalf, without his knowledge.
They were loans that he claims he and his wife did not want, at terms and interest rates they couldn’t afford. The suit, filed in November, also claims the defendants exploited Shainskiy’s trust in them, and that they took advantage of the fact that he didn’t speak English well.
Shainskiy and his wife, Svetlana Shainskaya, filed suit late last year against several real estate and mortgage professionals and their associated companies. The parties have agreed to settle the suit, the details of which are currently being worked out and which are subject to a confidentiality agreement.
The Shainskiys’ suit asked for damages related to charges of fraud, elder abuse, and “unconscionable” lending and real estate practices. The suit also requests the sale of the house be voided and the mortgages be rescinded. For their roles in each of the financial transactions outlined in the suit, the Shainskiys contend that these defendants garnered personal financial gains ranging from real estate agent commissions to mortgage fees to incentives for arranging high-interest loans.
The Shainskiy case connects a number of trends in a bursting category of litigation: mortgage fraud. Stories abound of borrowers who signed mortgage documents in English even when they couldn’t read the language, trusting that the verbal statements of real estate agents and loan officers in their native tongue matched the foreign words and terms on the paper.
Later, many have discovered the interest and payment terms of the money they borrowed differ greatly from what they remember hearing. And, experts say, as mortgage fraud cases increase in number, those claiming elder abuse are also multiplying.
In a 40-year career, Shainskiy composed popular songs, wrote string quartets, scored films and musicals and won national prizes as a well-known Russian and Ukrainian composer. The 81-year-old Shainskiy moved from Russia to San Diego in 2006 with his wife and children, paying cash for a condo in Carmel Valley.
In July 2007, a woman named Angelika Vartan introduced herself in Russian to Shainskiy at a mall in Carmel Valley. She said she recognized the well-known composer and exchanged phone numbers with him, calling him soon after to invite him to a Fourth of July party she and her husband, George Vartan, were throwing, according to the lawsuit. It’s unclear how she knew to introduce herself to Shainskiy.
Shainskiy attended with his wife. At the party, George Vartan told Shainskiy his father had been a Soviet general and vice minister of the KGB, which Shainskiy’s lawsuit claims “caused Mr. Shainskiy to trust Vartan in a way he would otherwise not have done.”
It was at that party, the Shainskiys allege, that Vartan began to try to convince the Shainskiys that their condo was too small. Vartan and his son, real estate agent Michael Vartani, took the Shainskiys on a tour to show them two houses they should buy. One of them was 14638 Via Monteverde, a 3,700 square-foot, five-bedroom, four-bathroom home in the Santaluz subdivision in Rancho Bernardo. Shainskaya protested against Vartan’s pressure; the house was too big and too expensive, she said, according to the suit.
Vartan and his son didn’t disclose that the Via Monteverde house was owned by his son’s twin, Andrew Vartani, the court papers allege. Andrew Vartani is also a real estate agent. He and his brother are employed by the Real Estate Office of Rancho Santa Fe, a brokerage also named in the suit.
Andrew Vartani had purchased the Via Monteverde home for $950,000 in December 2003 and had refinanced it. He had listed it for $1.199 million in July 2007 as a “short sale,” a transaction subject to review by a bank because the asking price is less than is owed on the mortgage.
Vartan began to spend more time with Shainskiy, learning about his finances — including Svetlana’s impending trip to Russia to sell their house there. He and Michael Vartani met up with the Shainskiys at a mortgage office in Del Mar called Equity Max, telling the couple they could use a friend, Konstantin Dubinin, as their mortgage broker to figure out what kind of mortgage they were qualified to borrow.
Shainskiy signed documents that he thought were for his credit check, the suit alleges. It’s not clear from court documents what he actually signed that night.
A few days later, his wife left for Russia. Vartan allegedly started lying to Shainskiy, telling him that Shainskaya planned to stay in Russia, and that she was going to leave him. Those statements, combined with his wife’s absence, laid the foundation for Shainskiy to “rely completely on George Vartan to advise and guide him,” according to the lawsuit.
That involved taking out two mortgages, the lawsuit alleges. One was to withdraw equity from the condo, in order to have money to make a down payment on Andrew Vartani’s Santaluz home, using Dubinin as broker. All of the parties — Vartan, his sons and Dubinin — spoke with Shainskiy in Russian, according to the suit, while the mortgage documents were in English, with no translation given for Shainskiy.
The defendants allegedly worked to have the ownership of the condo transferred into just Shainskiy’s name, forging his wife’s signature on that transfer of ownership. Vartan then had himself named power of attorney for Shainskiy, the suit alleges, so that he could sign the loan documents in Shainskiy’s name to get the mortgage on the condo.
To get the second mortgage on the condo from IndyMac Bank required five forms of credit. To meet that condition, the defendants allegedly faked five letters from various utility companies that stated the Shainskiys had made their payments on time for at least a year. The Shainskiys didn’t know about those letters, their attorneys contend, nor did either of them understand that a mortgage was being taken out against their condo.
Shainskiy went to Russia to join his wife on Aug. 14 for three weeks. Before he did, Vartan had him split some of the joint bank accounts he had with his wife for the purpose of buying his son’s house on Via Monteverde, the suit alleges. He doesn’t remember signing the purchase papers for the Via Monteverde house, nor does he remember signing the power of attorney a few days before he left, according to the suit.
But with that power of attorney, Vartan allegedly conspired with his sons so that Shainskiy would pay $1.299 million for Andrew Vartani’s house — a total of $100,000 more than the asking price. The suit alleges that Michael Vartani used his broker’s login to the Multiple Listing Service to change his brother’s asking price to a range of $1.299 million to $1.399 million, to cover the fact that they were charging Shainskiy the extra amount.
Michael Vartani acted as agent for both his brother, the seller, and Shainskiy, the buyer, netting commissions on the transaction.
While he was out of the country, the defendants obtained the two mortgages for the condo and house without the Shainskiys’ knowledge, using false information about who Shainskiy was and how much he was worth. They said he was single, with no dependents, and that he earned $50,000 a month, the suit alleges, even though Shainskiy is retired and only earns occasional royalties on his composed works.
Dubinin and Michael Vartani allegedly forged Shainskiy’s signature on the loan application for the Via Monteverde mortgage from World Savings Bank.
Both loans had unfavorable interest rates that would balloon after a number of years. The loan for the Via Monteverde property was negatively amortized, meaning Shainskiy’s monthly payments of $4,900 wouldn’t cover even the interest accrued on the loan each month, and his principal would grow by $3,000 each month. Because they were high-interest loans, Dubinin and Equity Max were rewarded with financial bonuses from the banks, the suit alleges.
The total mortgage debt for the retired composer thus became $1,176,300, the suit states. Shainskiy didn’t receive copies of those mortgage documents until after the deals closed. For their roles in the transactions, the suit alleges Dubinin, Equity Max, the Vartani brothers and their brokerage received commissions, fees and incentives from lenders as “unjust enrichment” at the Shainskiys’ expense.
Shainskaya returned to the United States to find her husband’s mental faculties “overpowered,” according to the suit. She’d seen her husband just a week earlier in Russia, but when she got to San Diego, her condo had been vacated and her joint bank accounts with her husband had been tapped.
And the Santaluz house had a leaky water supply that required the water be cut off — a costly problem the suit alleges the defendants knew about but didn’t disclose.
The couple has since moved back into the condo. They filed suit in November 2007.
Financial crimes against the elderly have in the past five years supplanted physical abuse in nursing homes as the most commonly thought of crime against seniors, said local elder abuse attorney Linda Robinson.
“All of a sudden — in the last five, six years, predators figured this out that these elderly people have a lot of financial gain, and it just evolved,” she said. “Not to say there still isn’t a lot of nursing home abuse, that’s sadly still continuing. But definitely the evolution has been to this financial sector.”
An attorney for the Real Estate Office of Rancho Santa Fe, Michael Vartani’s employing broker, declined comment, citing confidentiality on the resolution of the case.
John Cogger, attorney for Equity Max Mortgage Inc. and Dubinin, said his clients deny the allegations contained in the lawsuit. Attorneys for George Vartan, for the Vartanis, and for the banks named as defendants in the suit — IndyMac Bank and World Savings Bank — did not return calls for comment.
Shainskiys’ attorneys also declined comment, citing the settlement.