Part one of a two-part series. Read part two.
Friday, April 10, 2009 | Jim McConville arrived an hour late to the gathering in Vicki Jenkins’ Capistrano Beach living room. When he finally walked through the door, a driver and two employees in tow, he didn’t look like the real estate mogul the crowd expected.
In his late 50s, McConville wore boots, jeans and a casual shirt. His salt-and-pepper hair hung in a ponytail and he sported a Fu Manchu mustache, a look more aging rocker than businessman. But when the charismatic investor from the Bay Area introduced his plan, the living room hushed.
He’d come that evening in January 2008 to court partners for a massive real estate purchase. They needn’t invest any of their own money — just allow their good credit and identities to be used to obtain mortgages. McConville told the crowd that he wanted to buy more properties than the bank would allow him to, and he needed help. He promised to make the mortgage payments and to pay the partners $10,000 for each property bought in their names.
Jenkins, a 63-year-old retired businesswoman, had met McConville a few weeks earlier and liked the sound of his proposition so much she invited him down to Orange County to pitch her friends, too. McConville netted three new recruits that night, Jenkins included.
Over the next several months, McConville’s team arranged for Jenkins to obtain five mortgages. The loans were used to purchase five condos in Escondido in March and April last year, four for $337,000 and one for $370,000, while other similar units in the same complex were listed or sold for much less.
McConville had already agreed to buy those five condos for $187,560 each from the project’s developers. The difference allowed McConville’s company to collect more than $120,000 out of each of the five transactions after paying the developer, according to the developers’ records.
But, Jenkins and five other buyers said, he never made good on his promises. McConville didn’t pay the $10,000 per condo for their identities, they said. After making no more than three of the mortgage payments on Jenkins’ units and those of several other buyers, McConville quit paying, the buyers said. The defaulting loans left the buyers to deal with ruined credit, the lenders to absorb more toxic loans, and North County neighborhoods to brace for more foreclosures.
The pitch to Jenkins and many others was a key component of a staggering real estate swindle, uncovered by a three-month voiceofsandiego.org investigation, involving fake buyers, duped lenders, forged documents and extravagant purchase prices, that has infected two condo projects in Escondido and one in San Marcos.
Over the course of several months last year, McConville picked up at least 81 condo conversions from distressed developers and orchestrated their sale to more than 20 buyers who’d rented him their identities, according to a review of hundreds of public and private records and interviews with lenders, developers, former McConville employees, and six of the more than 20 buyers.
By arranging purchase prices well above market value, McConville was able to pay off the developers and capture what the developers’ records state as more than $12.5 million. Now, 74 of the 81 homes involved in the deals in Sommerset Villas and Sommerset Woods in Escondido and Westlake Ranch in San Marcos are in the first stage of foreclosure.
McConville, who didn’t respond to repeated interview requests for this story, has sent word to many of those involved that he’s working to pull together the funds to pay off their mortgages and pull the condos out of foreclosure.
At the same time, McConville has employed a property management company to lease out the buyers’ condos and collect rents on them.
One lender said the fallout has already forced him to shut the doors of his mortgage business after 17 years. That lender and another say they were tricked by McConville and the buyers into making these loans and they now face losses of millions of dollars. And because the federal government has assumed greater responsibility for the mortgage finance industry, the American taxpayer is likely on the hook for the toxic debt.
And then there are the buyers like Jenkins, whose signatures on documents enabled McConville to carry out his plan. Jenkins and her husband, who worked in construction, had seen their finances fall along with the housing market. Now, she has begun to reckon with her own participation, her susceptibility to one man who played on her greed and fear.
Robert Martinez, a local real estate analyst, said he isn’t surprised such a get-rich-quick operation could take hold in the wake of the housing boom’s excesses.
“When times are good, people get greedy. When times are bad, people get desperate,” he said.
Convinced the Deal Would Work
To Frances Greenspan, Jim McConville was a godsend.
Greenspan, a 53-year-old animal portraitist and consultant, met McConville that January night in Vicki Jenkins’ living room.
Some of the assembled friends were skeptical about the program, but Greenspan, Jenkins and friend Annemarie Miller-Jones had immaculate credit scores and were convinced the deal would work. They agreed to rent him their identities to help him expand his real estate empire.
Greenspan saw the money as a way to pay off the seemingly insurmountable debt she had built up paying for her mother’s last few months of care in an assisted living home. Three months after her mother died in November 2005, Greenspan lost her job. She hasn’t found a fulltime job since.
“It was like ‘Thank goodness!’ I can pay off a good chunk of my credit cards,” Greenspan said.
|Frances Greenspan agreed to let her identity be used to purchase this condo in Sommerset Villas. Photo: Sam Hodgson|
The man she was putting her faith in was rumored to be second only to Donald Trump in his real estate prowess. But he also had a criminal record.
James D. McConville had served 51 days in jail for felony grand theft and been ordered to pay $262,000 in restitution a decade earlier, according to the Alameda County District Attorney’s Office. After a fire destroyed a hotel he owned in Richmond, he had diverted insurance proceeds to himself rather than paying banks he owed money, according to the D.A.’s Office. The D.A.’s Office said the felony was reduced to a misdemeanor in 2006.
Five months after the meeting in Jenkins’ living room, an employee who notarized documents for one of McConville’s companies, Diamond House Development, flew to Orange County with a stack of loan documents. Greenspan said she spent an hour and a half signing her name again and again while the employee, Bahareh Shamlou, notarized each document.
Shamlou said that over several years, she held many such meetings. She said she just handled the paperwork, that she was just one member of McConville’s team.
“Nobody knew exactly how he did things,” said Shamlou, who no longer works for McConville. “He kept everything secret. He brought in different people and we all did a different portion. Everybody had a small part so nobody knew everything.”
Shamlou and two other members of McConville’s team — Raymond Davoudi, who also coordinated paperwork, and Charlene Lujan, who helped McConville round up buyers — said they saw nothing improper in the way McConville was purchasing properties. Each even recruited members of their own families to serve as buyers.
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