INDIANAPOLIS – Three companies are accused of swindling struggling property owners out of potentially millions of dollars, the Indiana Attorney’s General’s Office said Tuesday morning.
In a lawsuit filed Tuesday morning, Indiana Attorney General Greg Zoeller says that the three out-of-state companies used a tax sale scheme.
According to the complaint filed today in Marion County court, the defendants perpetrated a complicated scheme that took advantage of vulnerable Hoosiers who had fallen behind in their real estate taxes and who did not understand the tax sale process. The complaint says that they deceived homeowners in Allen, Johnson, Lake and Marion counties and the attorney general’s office believes these companies conducted the same scheme in several other states as well.
The attorney general’s office explained that a tax sale scheme could start when a homeowner falls behind on their property taxes and the county lists the property at tax sale. Then, a minimum bid is set on the home in the amount owed in taxes. Banks will then bid on the property.
If the winning bid exceeds the amount of the unpaid property tax owed, the county claims only the tax amount and the original homeowner is entitled to any surplus amount beyond what may be owed to a mortgage lender. This surplus may be considered a rough equivalent to their home’s equity.
The original homeowner then has one year to redeem the property if he or she can pay back the taxes originally owed. If the homeowner can’t pay within a year, then the bidder is awarded ownership of the property. It’s during this one-year time window that the three companies allegedly committed their scheme.
Using court and public records, the three companies located and contacted the original homeowners whose properties had been sold at tax sales for large surplus amounts. According to the lawsuit, they deceived at least 48 homeowners by making misrepresentations about their legal rights to redemption or surplus in the tax sales. The scam worked best with property owners who did not have an outstanding mortgage that would have to be first paid off with the surplus.
According to the lawsuit, the companies used the homeowners’ unfamiliarity with the tax sale system and persuaded the homeowners to sign quitclaim deeds and other legal paperwork, turning over their remaining legal interest in the properties to the three companies, in exchange for $450 or less. The companies, in turn, then were able to submit claims for the tax surplus payments the 48 original owners would have been entitled to – in amounts ranging from $2,000 up to $900,000, the lawsuit alleges.
“Rarely have we seen a scam that so brazenly exploited desperate property owners and took advantage of their lack of understanding of a complicated legal process. Victims not only lost their property but money that was rightfully owed to them,” Zoeller said. “We suspect others were victimized, and my office will use every legal tool available to halt this fraud, hold the defendants accountable and assist the victims.”
The Attorney General’s Homeowner Protection Unit fielded complaints about this alleged tax sale scheme from the property owners and from county officials. Through those complaints, they were able to identify the potential scheme only after the deed exchanges were filed with the county auditor’s office.
“I am thankful the Attorney General is investigating tax sale fraud throughout Indiana,” Allen County Auditor Tera Klutz said. “My staff and I are happy to assist the AG in his investigation because we believe some of these homeowners who have lost their homes in tax sales may have been misled about the surplus funds available to them.”
It is estimated that the defendants paid the 48 original owners a combined total of $13,640 for signing the quitclaim deeds, and after defrauding the owners out of their legal rights to the tax-sale surplus amounts, the defendants were eligible to submit claims for $3,265,204 in tax-sale surplus payments.
The Attorney General’s Office is suing the three companies and is seeking more than $9 million in restitution and civil penalties.
The companies and individuals named in the lawsuit -- FLRC, LLC, Coastal Title, Inc. and Oak Tree Title, LLC, as well as Diana Castro, Craig Talkington and David Fuqua are based in Florida, Oklahoma and Nevada.
The Attorney General’s Office says it is also exploring legislative options that may help deter this fraud from occurring in the future.
Homeowners who suspect they have been defrauded are asked to file a consumer complaint with the Attorney General’s Office at www.IndianaConsumer.com or by calling 1-800-382-5516.
More information about real estate scams is located on the Attorney General’s website at http://www.in.gov/attorneygeneral/2414.htm.