HUD's Broken System
Texas Homeowners Clash With Builder Over Tract Houses
QUEENA SOOK KIM
Reporter of THE WALL STREET JOURNAL
SAN ANTONIO, Texas -- KB Home promotes
itself as a company that builds inexpensive tract homes for
people such as Elena C. Rocha. The 68-year-old restaurant
worker spent her life's savings of $123,000 on a new KB home
here last year. But soon after she and two grown daughters
moved in last September, problems surfaced. She says a toilet
malfunctioned, a hallway wall separated from the ceiling, and
water leaked in beneath the front door. The Rochas made
repeated complaints to KB, some of which the company now
acknowledges it ignored. Frustrated, Mrs. Rocha and her older
daughter, Grace, joined about 15 protesters, including other
disgruntled KB customers and homeowner activists, on a road
leading to a nearby company sales center.
In March, KB responded. The Los
Angeles-based homebuilder, one of the nation's five biggest,
sued Mrs. Rocha and eight other alleged protesters in a state
court in Tarrant County, Texas. The suit seeks $20 million in
damages for what the company says was the malicious damage the
defendants did to its reputation and business.
KB has since dropped Mrs. Rocha and some
others from the suit, leaving only one KB homeowner among the
remaining defendants. But sitting at her dining room table,
Mrs. Rocha recounts many sleepless nights and worries that
somehow the company will take away her house.
Builders say they are facing an increasing
number of construction-related lawsuits as new homes go up at
a record pace nationwide. But disputes involving KB in Texas
-- where the company sells nearly a third of its homes --
stand out for the aggressiveness displayed by both sides.
In addition to twice taking the rare step
of suing customers, KB has threatened to publicize two
adversaries' criminal records. It has snapped pictures of
protesters and their car license plates. KB has also tangled
with the Army Corps of Engineers over the safety of a KB
development in Arlington, Texas, built on the site of a former
Since late 2001, more than 100 homeowners
have filed suit against KB in Texas, plaintiffs' lawyers say.
The vast majority of those plaintiffs are involved in a pair
of suits concerning whether KB made sufficient disclosure of
conditions at the subdivision in Arlington, which opened in
2000. A KB spokeswoman declines to say how many customers are
suing the company nationwide, but adds that the litigation
"doesn't have a material effect on the company." KB sold 7,873
homes in Texas last year -- 31% of its nationwide total of
The company attributes most of its
problems in Texas to Janet Ahmad, an amateur consumer activist
from San Antonio. She has never owned a KB house but has made
a personal mission of going after the company. KB named Mrs.
Ahmad in the Tarrant County lawsuit, accusing her of slander
and employing sensationalist tactics to draw media attention.
Last week, a Tarrant County grand jury indicted her on charges
of planting a small World War II-era bomb at the Arlington
subdivision in January 2002. She faces two felony counts for
fabricating or tampering with evidence to influence a civil
lawsuit and a police investigation. KB has also accused Mrs.
Ahmad of orchestrating pickets and hiring day laborers to
bolster their numbers. Mrs. Ahmad denies planting the bomb or
hiring stand-in protesters. "This is nonsense," she says of
the indictment. "How do you accuse someone of planting a bomb
on a bombing range?"
John J. Walsh, an outside lawyer for KB,
said in a letter Friday that "Ms. Ahmad's credibility is under
clear and direct attack from the Texas authorities." He
condemned "her sheer recklessness, her lack of acquaintance
with the truth, and the fact that her picketing and
media-generating campaigns are causing great distress and
pain, and threatening economic loss of value to the satisfied
KB Home buyers in the Texas subdivisions she has singled out."
The company makes no apologies for using
tough tactics when faced with what it considers false
accusations concerning a small fraction of its customers. "KB
has an obligation to protect its institutional integrity, its
shareholder value, its employees and its thousands of
satisfied purchasers," Mr. Walsh said in an earlier letter.
The company says it carefully tracks repair requests and tries
to respond quickly.
Mrs. Ahmad and her allies say their
tactics are legal. The 61-year-old wife of a physician began
her campaign against builders and contractors in the 1970s,
after a protracted fight with the builder of her own home. She
heads Homeowners for Better Building, an advocacy group based
in San Antonio.
Formerly known as Kaufman & Broad Home
Corp., KB was started in 1957 by developers Donald Kaufman and
Eli Broad to build a limited selection of inexpensive houses.
KB's sales in Texas have slumped lately because it has sold
out of houses in San Antonio and has struggled in the Austin
area, where a technology-heavy local economy is limping, says
Larry Oglesby, KB's regional general manager. Bad publicity
from protests and suits has also hurt, he says.
But nationwide, KB's revenue rose 10%, to
$5.03 billion, in the fiscal year that ended Nov. 30, 2002.
The company improved its profits by 47%, to $314.4 million, by
raising prices, mostly in California, and offering upgrades,
such as whirlpool tubs. Its stock closed at $56.94 Friday in
composite 4 p.m. NYSE trading, down from a 52-week high of
$71.55 in June. Analysts attribute the stock's slide to rising
interest rates, among other factors.
In the late 1970s, the Federal Trade
Commission accused KB of selling homes in Illinois with
serious defects. Without admitting or denying liability, the
company settled the allegations in 1979 by agreeing to a
consent decree. The judicially enforced decree prohibited KB
from requiring that consumers submit complaints to binding
arbitration. This cleared the way for unhappy customers to sue
KB in court. Companies generally see expert arbitrators as
more sympathetic to them than lay jurors are.
A homeowner's suit, filed in March in
federal court in Laredo, Texas, showed that KB was enforcing
mandatory-arbitration clauses. After much wrangling over what
the consent decree forbade, KB has reaffirmed that the decree
broadly bans mandatory arbitration. In July, the company began
sending letters to tens of thousands of homebuyers, telling
them they need not submit to binding arbitration if they
prefer to sue.
Almost all of the more than 100 homebuyers
suing KB in Texas live in Southridge Hills, the subdivision in
Arlington. KB built the development on land used by the Navy
in the 1940s as a practice-bombing range, and people still
occasionally find ordnance in the area. The explosives are
about eight inches long and resemble tiny torpedoes. The Army
Corps of Engineers has said in public meetings that people who
come across the practice bombs should call 911, so emergency
workers can dispose of them safely. There haven't been any
explosions at Southridge Hills.
About 550 families have moved into
Southridge Hills so far. The homeowner suits filed in Tarrant
County allege that KB failed to disclose fully the presence of
the ordnance. The suits had been held up by legal skirmishing
over the arbitration issue, but with that issue now resolved,
plaintiffs' attorneys say they hope the cases will move
KB says the suits are baseless, asserting
that it has made all proper disclosures in its sales
documents. KB's outside lawyer, Mr. Walsh, said in his letter
that "the site was long ago remediated and certified by the
U.S. government and the [Army] Corps of Engineers as free of
any hazards from its former use."
But the Army Corps of Engineers disagrees.
In a September 2001 letter, the corps responded to an inquiry
from a plaintiffs' lawyer by saying that there wasn't a danger
of chemical contamination at Southridge Hills. KB obtained a
copy of the letter and began distributing it to buttress the
contention that there was no safety risk at the subdivision.
This prompted the corps to send KB a
letter in November 2001, demanding that the company cease
misrepresenting the government's position. The corps said that
any old bombs remaining at the subdivision could pose "a
potential safety hazard, i.e., one which could hurt or kill
someone if not properly handled."
Brian Condike, a project manager with the
corps, says in an interview that the agency recently awarded a
contract valued at nearly $1 million to clear Southridge Hills
of remaining ordnance. "If we thought this site was safe, we
wouldn't be awarding all this money to remove these items,"
Mr. Condike says. The cleanup is scheduled to start in
Mr. Condike says that the remediation and
certification to which KB referred is a clearance issued in
1956 by an Army bomb-removal group. That unit cleared the
area's surface of bombs and said it could be used "for any
above-surface use to which the land is suited." But Mr.
Condike says that building homes is "absolutely not an
above-surface use" and that KB is "misrepresenting" the 1956
The company says that before acquiring the
land, it had thorough environmental testing done. KB adds that
its employees didn't find a single explosive when moving
"miles of earth" and digging "deep trenches" as the land was
prepared for construction.
In its suit in Tarrant County, KB alleges
that its antagonists have deceitfully tried to ignite panic
over Southridge Hills. The suit says that Mrs. Ahmad planted
one of the small bombs at Southridge Hills and called 911 to
draw emergency workers and media attention. That allegation
was reinforced by last week's criminal indictment of Mrs.
Ahmad, who faces up to 10 years in prison if convicted.
An Arlington police officer who responded
to the 911 call said in a civil deposition in December 2002
that he believed that the bomb had been brought to the site,
not found there. A police report about the incident said that
the bomb recovered was "very dry," even though it had been
removed from "rather wet black clay since it had been raining
the previous day." In a separate civil deposition taken last
November, an acquaintance of Mrs. Ahmad's testified that the
activist told her she had planted the bomb.
Mrs. Ahmad says in an interview that,
contrary to the accounts of others at the scene, she
legitimately discovered the bomb at the site and then dialed
911. But the criminal charges could hurt the credibility of
those homeowners who have worked with the activist.
Some KB customers wish Mrs. Ahmad would
just go away. Mark S. Herrera, who owns a home in the San
Antonio subdivision of Bridgewood, says the activist used
"scare tactics" when she led a demonstration in his
neighborhood in July. He fears such protests will bring down
Robert Collins, a plaintiffs' lawyer in
Houston who has consulted with Mrs. Ahmad, says people
elsewhere in Texas with complaints about KB homes have held
off on filing suit because of the uncertainty about mandatory
arbitration. Now that it is clear that customers may go to
court, Mr. Collins and a small group of other Texas attorneys
he is working with have begun to file suits on behalf of about
200 disgruntled KB homebuyers they say they have signed up as
clients. Twelve of these suits have been filed in state court
in Bexar County. One of those attorneys is defending Mrs.
Ahmad in the $20 million lawsuit and against the felony
One disgruntled homeowner is Mrs. Rocha,
although a suit hasn't yet been filed on her behalf. Her
problems began last year, shortly after she bought her house
in Tara West, a community of 130 KB homes in San Antonio named
for the plantation in "Gone with the Wind." More troubling
than the toilet that didn't flush properly, the bathtubs that
drained too slowly, and even the water that seeped in through
the front door after rainstorms, she says, was the wall in the
hallway upstairs that started to tear away from the ceiling.
The Rochas lodged a series of complaints
with KB. At one point, KB sent a plumber to fix the bath
drains, but nothing more. A KB spokeswoman confirms that the
company "dropped the ball" on some early requests by the
Rochas. The company tried to make up for that by installing a
free sink in the bathroom of the master bedroom, the
One block away, Roberto and Nubel
Rodriguez discovered last November that the foundation of
their one-story $104,000 house was buckling. The couple had
purchased the new dwelling and moved in with their two
daughters only a year earlier.
KB offered to install underground supports
for the foundation. But Mr. Rodriguez says KB then delayed,
and he ran out of patience. The company had already irritated
him by trying to fix cracks in his walls with only tape and
paint, he says. "I started thinking, chances are they're going
to do another [bad] job," Mr. Rodriguez, a 33-year-old
KB says its repairs have been consistent
with the standards of its wallboard manufacturer. The company
says Mr. Rodriguez requested the delay in fixing the
foundation during the Christmas holiday. The company also says
the Rodriguezes are an example of customers who have signed on
with Mr. Collins and then stalled on needed repairs in the
interest of bolstering possible lawsuits.
The Rodriguezes say they signed on with
Mr. Collins in January, after telling KB not to repair the
foundation. The Rochas say they hired the attorney after KB
sued them in March.
Mr. Rodriguez got in touch with Mrs. Ahmad
after finding a Web site she operated. She came to his house
in February for a meeting with about 40 Tara West homeowners,
including Mrs. Rocha. Mrs. Ahmad told the KB customers that
the quickest way to get a builder's attention is attracting
the media. "It's the homeowners who picket that get
something," she says in an interview.
A few days later, Mrs. Rocha decided to
join protesters under a KB billboard that directed drivers to
a new home development. Mrs. Rocha held a sign her
granddaughter had made on yellow poster board, showing a house
splitting in two.
Suddenly, the Rochas say they got
attention. KB employees came knocking to see if they needed
repairs. But then in March, the Rochas heard on the radio that
KB had sued a group of protesters who allegedly posed as
homeowners. To their surprise, the Rochas later found out they
were named in the suit. In addition to seeking damages, the
suit sought a judicial injunction barring the Rochas, Mrs.
Ahmad and others from demonstrating.
In June, KB dropped six of the nine
defendants, including Mrs. Rocha and one of her daughters. The
remaining defendants are Mrs. Ahmad, her son and a KB
homeowner in Arlington who accompanied Mrs. Ahmad on the day
she allegedly planted the bomb.
KB says it made a mistake naming the six
people in the suit who have since been dropped. The company
says it hired a private investigator to photograph
demonstrators and their license plates to figure out who they
were. Outdated motor-vehicle records apparently showed the
dropped defendants as not living in KB Homes. That led company
employees to conclude that they weren't really unhappy
homeowners, but had been hired to picket, the company says. KB
sued even though its repair people were simultaneously
offering to fix the Rocha house.
KB critics don't buy the explanation. "KB
is ruthless; they filed the lawsuit to shut the protesters
up," says John R. Cobarruvias, president of the Texas chapter
of Homeowners Against Deficient Dwellings, a nonprofit
The feuding has been fierce elsewhere in
Texas, too. Last fall, KB homeowners Yolanda and Andrew
Brammer started organizing pickets in their tract, located in
the small town of Kyle, near Austin. The Brammers bought their
two-story house in December 2000. KB made some repairs at
their request and in July 2001, paid the couple $2,000 for
wages the Brammers said they lost while supervising the
repairs. The Brammers agreed to keep the deal confidential.
Since then, the Brammers said they found
more problems. After they appeared on a local television-news
program last October, complaining about a leaky roof and
dipping floors, they received a letter from KB, threatening to
reveal Mr. Brammer's criminal record "to any media who happen
to inquire" about the demonstrations. Public records show that
Mr. Brammer, 34, was convicted for misdemeanor marijuana
possession in 1997 in a Texas court.
In December, KB obtained an order from a
state-court judge in Travis County, Texas, barring the
Brammers and their attorneys from discussing the matter. A
state appellate court later narrowed that order. KB says it
checked Mr. Brammer's background only after he intimidated KB
employees near the company's office in Kyle last November.
During a court hearing in December on KB's injunction request,
Judge Paul Davis concluded from the bench that Mr. Brammer
"has physically threatened and verbally abused" KB's employees
and customers. In recent weeks, the Brammers reached an
out-of-court settlement with KB, which both sides decline to
Corrections & Amplifications:
The Online Journal, in a headline in an
early edition on the Web site, incorrectly characterized the
legal situation of a consumer activist from San Antonio. Janet
Ahmad has been indicted for allegedly fabricating or tampering
with evidence to influence a civil lawsuit and a police
investigation. She denies the charges, and the criminal case
has not been concluded.
Write to Queena Sook Kim at firstname.lastname@example.org
Updated August 18, 2003 1:10 p.m.
Arlington Woman Who Claims She Found Bomb Accused Of Planting
*****August 15, 2003 -
NBC Channel 5
Arlington Woman Who Claims She Found Bomb Accused Of Planting
Woman Faces Up To 10 Years In Prison POSTED: 9:49 a.m. CDT
August 15, 2003 ARLINGTON, Texas -- A woman who claims she
found an old military bomb in a south Arlington neighborhood
is now accused of planting that device. Police say Janet Ahmad
planted the bomb to influence a lawsuit brought against the
owner of KB Homes. Ahmad is president of a consumer watchdog
group. She faces two felony counts of tampering with evidence
and possibly 10 years in prison.
Another military bomb found in Arlington neighborhood
SOUTH ARLINGTON, Dec. 5
Two neighborhood dogs love to dig holes -
but this time they made more than just a mess. They made a
scare - exposing a dummy bomb like those found in other parts
of the neighborhood. Shedonna and Quincy Mason discovered the
bomb, exposed in their backyard after school. I picked it up
and put it in a bag and brought it in the garage, Quincy said.
He said he didn't know what it was. Their dad, Edward, called
police who blocked off the street and evacuated surrounding
homes. Realize, I got kids around here, but I never thought
I'd find one in my yard, Edward said. Last month, neighbors
found bombs nearby in a new development built over a practice
bombing range used in the 1940's. The area is located between
Matlock and Cooper and south of Sublett Road in South
Arlington just north of Mansfield. I don't feel comfortable
but I know they're here and there's nothing I can do about it,
Edward said. Area residents say they've already warned their
children to tell them immediately if they find anything that
may look like a bomb.
NBC Channel 5
ARLINGTON, Oct. 31 -2001
It turns out one new neighborhood in South Arlington off
Matlock was a practice bombing range for the U.S. military
back in the 1940's.
Government experts say the land was cleaned years ago, but
undetected bombs still remain.
US Army Corps of Engineers Bill Sargent said, "It is just
waiting to go 50-60 years later. I mean they're ready to
function. We have people that get killed by these items or get
mamed and injured!"
The government says they are cleaning up the area again. But
residents are worried many bombs will be left under the homes
Defrauded borrowers vow to fight lender
By Tom Kelly
Consumer Real Estate News
Most of these consumers are now
faced with a "Catch 22" situation – if they accept the
settlement, they must waive the right to file additional
claims against Household or its partner, Beneficial Finance
Corp. For example, the estimated 11,000 consumers in
Washington State involved in the national settlement are
expected to receive between $1,800 and $6,000 apiece – far
less than needed to reach their equity stake before the loans
were originated. In addition, some potential lawsuits failed
to gain class-action status, leaving some borrowers to fight
the predatory charges by themselves in separate and
independent actions. Many – especially seniors in retirement –
do not have the means to continue the battle and could be
facing foreclosure and bankruptcy. One of several attorneys
choosing to go the individual route is Montgomery, Ala.-based
Tom Methvin (1-800-898-2034) who has signed up a growing list
of 1,800 consumers in more than two years of working on
actions aimed at Beneficial. "The despicable part of all of
this is that these lenders go after a lot of older people who
don't often understand what they are getting into," Methvin
said. "They seek the most vulnerable individuals because they
know they stand the best chance of deceiving them." Methvin's
team tells its clients up front that if they have accepted
payment in the national settlement (each state was allotted a
specific amount) that they are not eligible for additional
relief. "Borrowers really need to read the fine print,"
Methvin said. "Most of the documents now call for arbitration
instead of litigation. If they sign on the bottom line, they
give up the right of ever bringing a lawsuit against the
lender. The problem is some of the arbitrators are too
friendly with the lender's side and the consumer doesn't get a
fair shake." Attorneys say "flipping loans" was one of several
popular avenues Household Finance Corp. and Beneficial Finance
Corp. used to lure thousands of borrowers into refinancing
their homes at higher-than-market rates and fees. Sometimes,
the lender would start this flipping chain of expensive
refinancings by sending a "live" check in the mail in an
attempt to get consumers to pay outstanding bills from the
proceeds of the check. Once the check was endorsed, consumers
were on the hook for high-interest rate loans that were
subsequently refinanced, or "flipped," into a longer-term
loan. All transactions carried fees usually financed into the
balance, thereby creating a debt load significantly greater
than the combined amounts of the loans. Another wrinkle to the
"flip" was promoted as a "debt reduction loan." The lender
often would offer a credit-poor borrower a higher-than-market
rate to consolidate the first mortgage and outstanding
consumer (credit card) debt, stating the borrower could not
qualify for a better rate because of a blemished credit
history. Later in the process, the lender would surface and
inform the borrower that the house did not appraise at an
amount large enough to justify the loan. The lender would then
grant the borrower a second mortgage – sometimes at an
interest rate greater than 20 percent. According to some state
investigators, the amount on the second mortgage was the exact
amount of the lender's points and fees of the first mortgage.
The lenders were simply making the borrower pay fees by taking
out a second mortgage with wrenching terms.Insurance is key to
older folks and it also has been a big part of the predatory
picture. According to claims against Beneficial in Mississippi
and Alabama, insurance coverages were "packed" on to mortgage
applications, leading consumers to believe the insurance was
necessary to close the loan. The pitches included the need for
collateral protection insurance, credit life insurance, credit
accident and health insurance, accidental death and
dismemberment insurance, involuntary unemployment insurance
and property insurance. Do business with a lender that you
know or trust. When in doubt, ask friends and business
associates. Be leery of unwanted solicitations boasting new
ways to get you into a favorable financial position. The old
saying – not classified as ancient – still is true: if the
deal sounds too good to be true, it probably is.
Tom Kelly, former real
estate editor for The Seattle Times, is a syndicated columnist
and talk show host. Tom can be reached at
guilty plea in house-flip scheme
Published in the Asbury Park Press 8/12/03
KEY FIGURE: After years of contradictions,
admits to wire fraud, tax evasion in vast
plot to obtain fraudulent mortgages
He subsequently was indicted on 31 counts
and pleaded guilty yesterday to three -- but without any
sentencing agreement. Sentencing is scheduled for Nov. 17.
The charges stem from a land scam known as the "House of
Cards," a scheme involving purchase and resale of rundown
properties in Asbury Park and several other towns, and carried
out in 1996 and 1997. Grieser, 48, had been scheduled for
trial Sept. 3 on the long-pending charges, but surprised
authorities early yesterday when he notified them he wanted to
plead guilty. Dressed in dark green prison garb, his hands and
feet shackled, Grieser, a former Sea Bright resident, pleaded
guilty before U.S. District Judge John C. Lifland to
conspiracy to commit wire fraud, engaging in money deals
involving criminally derived property, and income tax evasion.
'Justice is served' "I think
justice is served by this plea and whatever sentence this
court imposes," said Assistant U.S. Attorney Alain Leibman,
who has prosecuted 19 participants convicted so far in the
mortgage scheme. The scam involved appraisers, lawyers, real
estate investors and real estate agents and began by duping
first-time home buyers into buying overappraised properties.
Grieser helped expand the scheme. He helped recruit straw
buyers who were paid $4,000 per transaction, in exchange for
the use of their name and credit. Several were involved in
multiple purchases. Those buyers told authorities they thought
they were participating in some "vague" urban real estate
investment, but they were left holding the bag when the scheme
collapsed, Leibman said. They were not prosecuted but many
still experience credit problems, he said. "Gary Grieser is a
two-time loser," Leibman said, citing his earlier sentencing
in 2001 after he admitted to using his infant son's name and
Social Security number to obtain fraudulent mortgage loans on
13 different properties. Now, Leibman said, Grieser has
admitted to defrauding dozens of straw buyers and dozens of
lending institutions that bought the bad loans from Walsh
Securities Inc., the now-defunct warehouse mortgage lender
that provided the money for each house in the scheme. James
Patton, Grieser's attorney, said after the hearing that his
client had acted because "he wanted to acknowledge
responsibility." The plea was not a formal plea agreement but
the government agreed to drop the other charges.
Could get 20
years Grieser claimed his
innocence for many years after the Asbury Park Press first
reported on the inflated appraisals and sales on deteriorated
properties, the mortgage transactions and straw buyers in
1997. He faces up to 20 years on the three charges and up to
$350,000 in fines. With Grieser's case now settled, Leibman
has one prosecution left -- the trial of Elizabeth Ann Demola,
the national sales manager and a principal of Walsh
Securities, who was charged in the scam. That trial is set for
December. Demola's brothers, Robert and James Walsh, who were
the top two Walsh officials, have not been charged. Grieser,
who lived in Sea Bright at the time of the scam, formed a
company called Capital Assets Property Management and
Investment in Red Bank, which began to identify run-down
properties which were then appraised much higher than their
worth, he said in answering Lifland's questions in court
yesterday. Grieser said he helped line up the straw buyers for
more than 200 transactions. After the closings, the straw
buyers conveyed a 60 percent interest in the properties to his
company but their names were left on the loan documents. He
admitted to providing checks to be held but then returned by a
closing attorney. Those checks were used to generate letters
that falsely claimed a buyer had deposited funds with the
attorney and that funds were being held in escrow. Grieser
said he used a portion of the mortgage loans and rents
collected to make some of the mortgage payments and repairs on
some properties but stopped making payments in 1997. Grieser
also admitted that in April 1997, he used several hundred
thousand dollars derived from the scheme to establish a
tanning salon in Eatontown called the Tanning Factory. He said
he used funds from Capital Assets and the Tanning Factory for
his personal benefit and attempted to evade a large part of
income tax due on his 1997 federal taxes.
unfolds over 4 years in builders probe
Illegal alien exploitation, charges of corruption examined
By Paul Pinkham
Times-Union staff writer
A seedy melodrama
has quietly played out at Northeast Florida construction sites
the past four years involving allegations of murder-for-hire,
racketeering and the laundering of millions of dollars. One participant
even compared it to The
Sopranos. As yet, the plot
has no end, despite years of investigation by a federal grand
jury in Jacksonville. A few details
emerged after a government investigator was charged with robbing
and attempting to kill a target of the investigation in 2000. A
few more surfaced when another target was charged last year with
trying to arrange the contract killing of a state agent.
But those were state charges. Federal authorities have tried to
keep a tight lid on their massive probe into Northeast Florida's
building industry, even refusing to return documents to the
State Attorney's Office that would be public under Florida law.
In a nutshell, grand jurors are investigating the use of illegal
aliens by building subcontractors and the laundering of their
paychecks to avoid paying federal taxes or workers compensation,
court records show.
But while many in the construction industry and their lawyers
know what the grand jury is looking at, few if any know when --
or how -- the sprawling investigation will end. A spokeswoman
for the Internal Revenue Service, which is spearheading the
probe, said last week the investigative phase is nearing a
Several defense lawyers said they were told a year ago that
indictments were a month away. There still have been no federal
"The attorneys assigned in the U.S. Attorney's Office are very
thorough," said Curtis Fallgatter, a former federal prosecutor
who represents what he called several "well-established"
building contractors. "I'm confident the U.S. attorney will be
able to discern the difference between a disreputable contractor
and one who's making a good-faith effort to comply with the
The West case
While he's not the central figure of the probe, Robert A. West
Jr.'s case provides a glimpse into the workings of the
West, a Neptune Beach accountant, was charged in September with
paying an undercover officer $10,000 to kill a state workers
compensation investigator. That case is pending in state court.
West, 44, told a government informant he wanted the investigator
eliminated because her stop-work orders at construction sites
where illegal aliens worked were costing him money, according to
transcripts of conversations recorded by the Florida Department
of Law Enforcement. The informant was one of several men whom
investigators said West paid to help exchange cash for checks.
"You got a little more Tony Soprano in you than I do," the
informant said in the transcript.
"I'd hate to have to do it but, hey. That versus vs. poor? Hmm.
Not really difficult to choose ..." West said. "We just need a
... chain saw; chainsaw; gators will be happy."
West stood to lose a lot of money, according to a declaration
filed in federal court by IRS Special Agent Frank Odom.
Odom estimated that West laundered more than $18 million since
1999 through his check-cashing business, Maxim Financial Corp.
Maxim was one of at least two check-cashing businesses
authorities tied to the investigation.
"West participated in a conspiracy with representatives of the
construction companies and others to harbor illegal aliens and
evade required federal and state withholdings for federal income
and employment tax from the wages of the illegal alien workers,"
Odom wrote without naming the other businesses. "The contractors
and West also engaged in the purchase and use of false workers
compensation insurance policies."
Florida workers compensation premiums for framing contractors
are 45 percent of each worker's salary, Odom said.
Odom's declaration said West would cash large checks issued by
builders to shell companies West controlled with names such as
like Coastal Construction, IN2IT Inc. and Final Draw. Then West
would pay cash to subcontractors to pay illegal aliens, Odom
Crew leaders working for construction companies met with West
"weekly or biweeklybi-weekly" in various parking lots around
Duval County to cash checks and pick up currency, Odom said.
Surveillance of Maxim showed "virtually no other business
conducted from this office," Odom said.
"The evidence obtained in the investigation revealed that these
shell entities served as a conduit through which the
construction companies wrote their payroll checks for the
illegal aliens' wages which, in turn were cashed by West after
deducting his 7 percent to 10 percent commission," Odom said.
"The cash provided by West's financial transactions were then
delivered to various parties who paid the illegal aliens for
their work without any accounting or payment for federal and
state deductions and withholding required by law for taxes,
Social Security, unemployment taxes, and without payment of
insurance premiums for state workers compensation."
West's murder-for-hire case is set for trial before Judge Peter
Dearing in October.
Odom's declaration was filed in a forfeiture case in which the
government was trying to keep more than $200,000 seized from
"When the federal forfeiture suit surfaced, we asked Judge
Dearing to temporarily delay the state proceedings in order to
address the federal issues, and he was considerate enough to
accommodate for a short period," said West's attorney, Hank Coxe.
Last month, Coxe also asked a federal judge to postpone the
forfeiture case, saying it would "burden the right of Robert
West against self-incrimination in the related criminal case in
state court and in the ongoing federal criminal investigation."
Their petition describes him as a target of the federal probe.
Federal prosecutors, who initiated the forfeiture proceeding in
March, agreed to the stay, saying the case would "adversely
affect the ability of the government to
conduct a related criminal investigation."
Attorney Robert Willis, who represents several people in the
construction industry questioned by federal authorities, said
one of his clients complained to federal authorities years ago
about the use of illegal aliens to avoid paying taxes and
workers compensation. The client said the practice made it
impossible for a law-abiding contractor to bid competitively on
construction jobs but was ignored by authorities, Willis said.
"There's no question this is a long-standing longstanding and
widespread practice in the construction industry," Willis said.
Fallgatter said some builders have been victimized by
"There may have been some abuses by certain select contractors
or subcontractors ... but the established companies in this
field, based on my investigation, seem to be doing an admirable
job of complying with the law," Fallgatter said. "My clients
have offered ... to help identify problems in the industry."
Arnold Tritt, executive vice president of the Northeast Florida
Builders Association, said if there are abuses, they're
occurring at the subcontractor level and below. While builders
are responsible for ensuring everyone on a job site is covered
by workers compensation, Tritt said builders rely on
subcontractors to keep track of the work crews they hire and
make sure the paperwork is in order.
"Is there a law that says, 'Mr. Builder, you need to know who
you're paying'?" Tritt said.
Tritt, who said he knew nothing about the federal probe,
said builders are no more liable than the city was when U.S.
Border Patrol agents arrested illegal aliens near city job sites
Investigators used news reports about those arrests to get West
to talk to the informant about his own activities. At one point
last August, the informant was instructed to tell West the news
made him nervous about whether investigators were closing in.
"They came as hard as they could. They got nowhere," West
A few weeks later, after meeting with an FDLE agent posing as a
hit man, he wasn't so sure, the FDLE transcripts show.
"I'd really like to know what's going on with that ...
investigation," West said. "Because, you know, that guy got off,
which indicates to me that they're pulling strings to keep it
The transcript doesn't say what case he's referring to, but
months earlier, a Jacksonville jury had acquitted a state
insurance fraud investigator of attempted murder charges. Arthur
Picklo was charged with robbing and shooting a house framer whom
that he and other investigators had just watched exchange a
check for more than $20,000 cash at French's Check Cashing in
The framer, Guadalupe Frausto, was being watched as part of the
federal investigation and is now cooperating with federal
authorities. The grand jury is investigating Picklo, who once
would have been a key witness in the construction industry
probe, for federal civil rights violations.
State Attorney Harry Shorstein said he turned his office's files
on Picklo over to the U.S. Attorney's Office last year. When the
Times-Union requested the files under Florida's public records
act, Shorstein said federal prosecutors refused to return them.
He has petitioned a federal judge to order the files returned.
"The only strategy ... which the state's files could reveal is
one which wound up with Picklo being found not guilty," the
petition says. "It cannot be imagined that the U.S. attorney
plans to follow a similar strategy."
Staff writer Rich Tucker contributed to this report.
Staff writer Paul Pinkham can be reached at (904) 359-4107 or
By DINA CAPPIELLO
Copyright 2003 Houston
A home builder that allowed debris from two local construction
sites to spill into neighborhood streets and area bayous has
agreed to pay $50,000 in civil penalties as part of a settlement
with the Harris County Attorney's office.
KB Home Lone Star LP
was erecting subdivisions in southern and west Harris County in
2001 and 2002 when county inspectors say the company failed to
contain dirt, construction materials and trash from flowing
off-site into storm sewers and waterways, according to Scott
Bean, a program manager in Harris County's Engineering Division.
More than 100
violations of storm water regulations allegedly occurred at
Clearbrook Crossing, on the Harris-Galveston county line, and
Westminster Village at F.M. 529 and Texas 6. Storm water -- or
the runoff created by rainfall -- is regulated through the Clean
Once in waterways,
sediment can block sunlight from reaching plants, eventually
reducing the oxygen fish need to breathe. Besides dirt, the
runoff could also contain oil and other potentially hazardous
"They were allowing
trash and sediment to flow freely off the construction site into
storm sewers and into our bayous," said County Attorney Michael
The case was the
first filed by the county since October 2001, when enforcement
of storm water rules at construction sites bigger than five
acres was transferred from the federal to local governments.
The allegations have
prompted the company, which was working with an independent
contractor, to institute a more hands on approach to storm water
management, according to Debra Hotaling, a company spokeswoman.
As part of the
agreement, the company -- one of the largest home builders in
the United States -- will spend
$20,000 making a
video on how best to control storm water and $10,000 to
investigate the use of mulch as a silt barrier. It also paid
$5,000 in attorney's fees.
Fort Worth denies housing funds to development project
Star-Telegram Staff Writer
City Council refused Tuesday to provide $100,000 in federal housing
funds as a loan guarantee for a new southeast development.
This, even after contractor and developer Leonard Briscoe Sr. agreed
to back the deal with a letter of credit to guarantee it would be
Briscoe's company, which left six school construction projects
incomplete this year when the school board refused to pay additional
money, is listed as construction manager and developer on the
split council vote -- a 4-4 tie -- killed the measure after lengthy
discussions in public and behind closed doors Tuesday.
"Anyone who has had as much difficulty as the individual being
proposed to develop this project would have difficulty doing
business with the city," Mayor Mike Moncrief said after the meeting.
"We have a responsibility on behalf of our citizens ... to use
public dollars for the benefit of the community.
"The project itself is laudable, needed. I support the project," he
said. "I'm hopeful that [officials] can find a developer that does
meet the comfort zone of the majority of the council. And the
project can continue. "Briscoe, who sat quietly in the council chambers after the vote,
said he didn't know what his next step will be.
Moncrief, along with council members John Stevenson, Becky Haskin
and Chuck Silcox, voted against the loan guarantee. Mayor Pro Tem
Ralph McCloud and Councilmen Clyde Picht, Frank Moss and Jim Lane
voted for it."Despite the past reputation of Leonard Briscoe, I looked at the
quality -- the high quality -- of this project," Picht said. "It
would be an egregious mistake by the council" not to go forward, he
said. Councilwoman Wendy Davis, who has opposed the proposal, was not
vote came after discussions that prompted an angry Briscoe -- backed
by several local African-American civic and religious leaders -- to
tell city officials that they shouldn't worry about his job
performance." You sit there and you question my credibility," he said. "Yet you
would allow the city's credibility to be called into question." He
said that a resolution approved in April allowed for the $100,000
guarantee to secure a loan agreement with JPMorgan Chase Bank and
that the council just needed to approve the measure formally. In
April, the Fort Worth Housing Finance Corp., a nonprofit group
created by the city that helps finance low- and moderate-income
housing, approved a resolution authorizing the corporation to serve
as co-developer on the project. The
corporation, for which City Council members serve as board of
directors, authorized Housing Director Jerome Walker to execute an
agreement with the city for the corporation to receive no more than
$100,000 from city Home Investment Partnerships Program funds to
guarantee completion of the project.
"You have reneged on what you agreed to do," Briscoe told the
council. "This appears to be a political ploy to bring this back for
a vote to nullify the April action." The
project, led by Texas Housing and Economic Resources Inc., was for a
single-family residential subdivision on 36 acres between Riverside
and Campus drives. The
plan included a proposal to sell about 155 lots to KB Home, which
would build houses that could sell for $90,000 to $130,000. In
2001, the council allocated $273,500 in HOME funds for a
pre-development loan to the housing finance corporation to clear the
land, perform environmental studies, pay permitting fees and other
pre-development work on the site.
Texas Housing and Economic Resources is attempting to secure a loan
of $2.7 million to acquire and develop the Rolling Hills project,
formerly known as the Glen Eden subdivision.
Officials said this development would have created $20 million in
new residential housing and infrastructure.
Anna M. Tinsley, (817) 390-7610