We live in a small, quasi-self-managed condo building. About a year ago, I wrote about the joys of living in a small, quasi-self-managed condo building.
Well, I’m not here to tell you that things have gotten all that much better. Sure, we’ve had yet another condo meeting at which we all pinky-swore to get some things done. But it’s still the same old nada.
But, having read The King of All Vegas Real Estate Scams in a recent Business Week, I can only say that it could be worse. It could be a whole lot worse.
First off, we’re not in Las Vegas.
When there’s no boom, you don’t tend to get a bust, so property in our neck of the woods is pretty much holding its own. It sure helps that there’s not a lot of room for expansion in our neighborhood, which is well-placed, attractively quaint, and has quite a lot going for it, if you overlook the fact for that you don’t get a all that much, square-footage wise, for the money. On the upside, having no room in your particular inn really does hold the lid down on acquiring things you don’t need.
Second, our building went up when things were built to last, in 1860 or so. It’s made of granite, not stucco’d sheetrock, and it wasn’t slapped up. Sure, it could use some help. And anyone who’s owned an old building knows that they require more care and feeding than newer construction. Except when newer construction is really slap-up lousy. Which is, apparently, the case with a lot of what got glued together during the Las Vegas R.E. Boom.
And because so much of what got built during the Las Vegas R.E. Boom was built to POS standards, not built to last, many of the condo developments started falling apart immediately. And we’re not talking a few stray punch-list items here – it’s pretty much systemic.
So, to keep up with all these post-construction traumas, there emerged a:
…growing market for the contractors who fixed the construction problems, such as leaky roofs or faulty electrical outlets, that emerged at the hastily built developments.
And where there’s a growing market for post-construction contractors, there’s a growing market for lawyers specializing in post-construction “construction-defect” lawsuits to go after those shoddy developers.
Here’s where it gets interesting, i.e., down-right criminal, as one particularly cagey group came up with an idea for cashing in on the post-construction problem market.
When a new development was nearing completion, the group would buy a couple of units in the community and then transfer partial ownership of the condos to individuals secretly on its payroll, according to court documents. While pretending to be residents of the communities, these “straw buyers” would run for leadership positions on boards of the new homeowner associations. By paying off community managers, hiring private investigators to find dirt on legitimate candidates, and rigging elections, the documents allege, the straw buyers were able to infiltrate boards at several new developments in Las Vegas from 2003 to 2008. Once in control of the boards, the straw buyers would then use their governing positions to steer millions of dollars in construction and legal fees back to their co-conspirators.
Among other tricks of this new-found trade, the conspirators sometimes helped rig election by casting absentee-ballots in the name of out of state folks who had purchased condos as investment and/or vacation properties. The thinking was that out-of-staters would have a tendency to not bother to vote for board members, not wanting to get embroiled in issues on whether it was okay to plunk a pink flamingo on your square of zoysia grass, and the like. The conspirators even made trips to remote zip codes to make sure that the ballots had the correct postmark, so that no one official would suspect anything.
Some of the real-fake board members owned as little as 0.5 percent of the condo they were representing.
A number of the schemes involved a firm called Silver Lining Construction, which managed to get some of its employees on boards as 0.5 percent owners. (When it came to naming, they sure didn’t lack for a certain brazen imagination, that’s for sure.)
Lurking in the murky background here were shady political operatives, and a lawyer whose uncle was portrayed in the movie Casino. He was the guy (played by Joe Pesci) buried alive in the Indiana cornfield. And for a sunnier element of the story, a group of retirees in one of the condo complexes getting screwed starting acting as amateur detectives, and sleuthed their way into finding out all kinds of stuff (like Silver Lining’s board-packing). They then went with their findings to the police, and to the Nevada state agency that regulates real estate, and the conspiracy gradually started to unravel.
But by that point, the sleuth’s condo association had reached a hefty settlement – $19.1M – with its developers.
Sounds like enough money to fix a few leaky roofs and cracked sidewalks.
But, stunningly, $11M of that went for legal fees and expenses with a couple of law firms in cahoots on the scheme.
The money got spent down pretty rapidly, and the real-fake board members pulled a disappearing act. Their job done, they stopped showing up at board meetings.
The plot thickens – there’s definitely a book in here – with the FBI, botched suicide, arson, insurance fraud, busted kneecaps…
These days, conspirators are starting to cop pleas. One highly placed political operative – he had been the chairman of the Nevada GOP – has pled out and could be facing 30 long-ones in the state pen.
In the meantime, thousands of people who bought condos during the boom are still coping with their own financial hardship. Two-bedroom, two-bath condos at the Vistana were going for $200,000 in 2007. In November a 929-square-foot two-bedroom, two-bath unit sold for $59,000.
That can’t feel very good.
What happens in Vegas stays in Vegas. Unless the story gets told in Business Week.
This one’s a lulu. Can’t wait for the book.