Vicki Kahia’s Agent: Justin Earley of Capital Real Estate Ventures Inc

Vicki Kahia had $860,000 to invest. She decided to buy the property The Estate Sale is on.

She had to be a bit sneaky to do it. The owner of The Estate Sale had a right of first refusal to buy the property. That means when the original owner accepted an offer to buy the property, he would give the holder of the right of first refusal a copy of the accepted offer and 30 days to meet the same price and terms to buy it.

Vicki wanted the property and somehow the original owner “forgot” to give notice of the pending sale.

Kahia’s agent, Justin Earley introduced himself to the rightful buyers sometime between going into escrow and closing. He told the rightful buyers that he and the woman who came with him to the store were thinking of buying the property. He didn’t mention that they were in escrow or what price they were offering.

If there is not a good reason to broadcast their business to the world in general, the rightful buyers, Mike and Laura, keep their personal information to themselves. They would not tell some stranger who walked in off the street that they were eager to buy the property themselves, that they had the ability to buy it cash and that they held a right of first refusal.

It is not wise to tell prospective buyers about a ROFR. Serious buyers, who might need to invest their money right away for tax purposes, would hesitate to put in an offer if they knew someone else took precedence to buying at the same price. They might also fudge a bit, by offering more than they were willing to pay, and working a price concession during escrow. Kahia got a $30,000 price concession during escrow. Whether the new price triggers the ROFR agains is a matter for the court to decide.

After the offer is accepted, it is customary and often a contractual obligation, as in this case, that the potential buyer receive a copy of leases on the property. The law presumes the buyer reads the leases, otherwise, everyone could feign ignorance to get around other people’s rights.

If you read this far, the boring build-up, you now get to read some gems found in emails that look to be from Justin Earley to other participants in the sales transaction.

“What is the family name of these people again? I am going to hunt down the mom and sister and mess up Laura’s little world. She pissed me off this morning so now I am like a pitbull.”

Several times Earley refers to the rightful buyers as “con artists”. Apparently he thinks the con artists “laid in wait” for someone to buy the property and not give them their ROFR, just to have the pleasure of suing the actual buyer and her team of attorneys. Earley aknowledges that Mike and Laura offered to buy from Kahia for the same price she paid, if she would agree to carry a note until the rightful buyers could arrange other financing. Since Mike and Laura’s most likely source of cash bought a different property almost the day this one sold, her cash was not available. (The potential source of cash actually put in a full list price offer on this property about a month before Kahia made her above list price offer. The original owner never gave the source a counter offer. Sounds like insider trading to us.)

Earley, like many brokers, touts himself as being a great business man. Yet he wrote this to Mike: “You have wasted too much time already and involving me is about as smart as suing a tree…I am insolvent and have no assets which has forced me into bankruptcy long before I knew you two even existed. You will prevail at nothing in court except spending a ton of money that could have been made better use of and even if by some miracle of God you did, then there is nothing I have that you could take anyway so carry on…”

Earley alluded to the fact that abusing the court system by defending a non-defensible case might starve Mike and Laura out. He wrote “…in case she is actually stupid enough to actually waste what little money she has on a million dollar lawsuit.” Since all costs of the suit will be paid by the loser, and Mike and Laura have an absolute slam dunk case, it is Kahia and her insurance company defense team that are wasting what little money they have. Mike and Laura just need to come up with the costs in advance, knowing they will be reimbursed when this case is over.

Mike and Laura would take it personally, but Earley seems to use a nasty tone with anyone who does not give him what he wants, when he wants it. Here is an email to the escrow agent, Alicia Ramirez of Allison-McCloskey Escrow. Poor Alicia did not warn Mike and Laura of the sneaky deal, because it appears she did not think she was legally obligated to. She knew there might be what we allege was a fraudulent short sale flipping scheme going on, but again, didn’t realize she might need to disclose that fact to law enforcement. She was like one of the three monkeys who see no evil…

“So let me get this straight. You charged me $2k for escrow fees of which $300 is some bs ‘buffer’. I just closed a $3.6M deal last week that cost the same for escrow. You forgot about a tax lien that cost the seller $11k at the llast minute. this was something I pointed out to you on December 17th, the day I received title. You still haven’t sent me the final closing statement for the deal. Comparatively speaking, this was a very EASY deal for you to get paid on because Anthony and I did all the work and had to push everyone to get all the neccessary tasks done to close. AND you now want to inform me that it will cost me $35 to get my money that should have been wired or had a check printed for on Monday? [deal closed Monday, December 31, and this email was sent on Wednesday, January 2.]

“Sounds a bit greedy but okay. I chose the check. Please print it and let me know when I can pick it up.

“Your company and your favorite title company have some serious issues with your process. I hope you get them fixed. I can tell you with 100% certainty I will not work on any deal that involves California Title again, ever. Thank you for at least being responsive.

“Justin”

Escrow did end up giving in on the $35 fee.

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Someone’s Already Thought of It; And Already Been Busted…Bankruptcy Fraud, Under-reporting of Income and Other Collateral Schemes

Murietta Man Who Duped Struggling Homeowners into Handing Over Their Homes to Him Pleads Guilty to Tax and Bankruptcy Fraud
U.S. Attorney’s Office March 27, 2014

Southern District of California (619) 557-5610

Today, United States Attorney Laura E. Duffy announced the arraignment and guilty plea of William Barry Blythe for carrying out a scheme to defraud homeowners, mortgage lenders, and the U.S. Bankruptcy courts in the Southern and Central Districts of California. He also admitted that he willfully failed to adequately report over $175,000 in taxes owed on his income.

According to court documents, Blythe created multiple trusts, including “R-C Business Trust,” “Phoenix Business Trust,” “GB Business Trust,” “GBB1,” “GBB2,” “GBB3,” and others. Blythe approached homeowners who were behind on their mortgage payments and offered to take ownership of their homes and negotiate better terms on their mortgages. To carry out his scheme, he directed the homeowners to deed their homes to one of Blythe’s trusts. Blythe then generously allowed the homeowners to stay in the homes if they paid a monthly fee to the trust that owned the house.

But the defendant knew that the trusts did not assume responsibility for the mortgages and, accordingly, that he could not negotiate better terms with lenders. In fact, when homeowners gave Blythe the monthly payments, he deposited the payments into his own Blythe Family Trust Account, instead of the bank accounts for the trust entity that supposedly held title to that homeowner’s property.

Blythe then filed bankruptcy for each of his trusts, first in the Central District of California and then in the Southern District of California. In each of the San Diego bankruptcy petitions, Blythe misrepresented to the U.S. Bankruptcy Trustee that the trust seeking bankruptcy protection had purchased real properties, owed mortgages on those properties, made no income from the properties, and had numerous unsecured debts. Ultimately, each of the bankruptcy petitions was dismissed.

As part of his scheme, Blythe misrepresented to mortgage lenders that he had purchased the properties encumbered by mortgages, when in fact he had paid nothing for the properties but instead had duped homeowners into deeding those properties to him by misrepresenting that he would assume responsibility for their mortgages.

Blythe admitted in his plea agreement that the monthly payments he received from homeowners as part of his scheme constituted income to him. He admitted that he filed false tax returns for tax years 2010, 2011, and 2012, omitting a total of at least $177,499 in taxes.

Blythe agreed to pay restitution to any victims of his bankruptcy fraud. He also agreed to pay a total of $320,257.25 in restitution to the IRS for back taxes, interest, and penalties. He is scheduled to be sentenced by U.S. District Judge Anthony J. Battaglia on June 13 at 9 a.m.

Defendant

William Barry Blythe
67
Murrieta, California

Charges

Count one: bankruptcy fraud, Title 18, United States Code, Section 157
Maximum penalties: five years in prison, $250,000 fine, three years of supervised release, and restitution

Count two: subscribing to a false tax return, Title 26, United States Code, Section 7206(1)
Maximum penalties: three years in prison, $100,000 fine, one year of supervised release, and restitution to the IRS

Investigating Agencies

Federal Bureau of Investigation
Internal Revenue Service-Criminal Investigation

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Closing Brief: Reprint of the Rock-O-Plane Parable with Annotation

Mike, the owner of The Estate Sale in San Diego, went to work at the carnival when he was 12 years old.

His life was colorful, to say the least. Here is one story he can tell in his own words:

*******************************************************
I was working the basket-store game, two balls in to win, where you toss a softball in a basket and it bounces out every time.

I looked up from my work and saw the guy on the Rock-O-Plane ferris wheel letting a little boy out of the cage. The ride started by accident and the out of shape ride jock pushed the boy back inside the cage and held on to the handle that locked it.

At that point I jumped on my counter to see over the crowd. I watched him and he kept holding onto the handle, when he shoulda let go. He rode it all the way to the top. Somebody shut the ride off abruptly. They shut it off wrong. They should have eased it off.

At the jostle, he lost his grip and fell from 55 feet. I don’t think he lived.

The crowd was going crazy. My boss walked by and yelled at me. “Get back to work and make me some money!”
*************************************************
When pushed for more detail, Mike said the ride jock’s head hit the gang plank and there was blood. “Yeah, lots of blood, everywhere.”

It would have been better to let go early. He may have only suffered a few broken bones.

When the alleged bank fraudsters who interfered with our contract to buy the property The Estate Sale is on found out their bad, sneaky behavior was actually a tort and a crime, they should have “let go”. Apparently, they were convinced by the “bosses” that they should keep their eye on the big money that was to be made if they got away with it.

James Jordan’s breach of contract was not a tort or a crime. (The government might decide it was part of a short-sale flipping scheme, and pursue an action of their own against Mr. Jordan, but that is not being decided here. The tort by the other defendants in 37-2013-00041919 and alleged crime are just an important contextual backdrop to the breach of contract and conversion of funds to be adjudicated here.)

For instance, the respondent brought up the claimants’ refusal to accept a settlement offer to purchase the property from Kahia in the end of March, 2013. No transcript of the settlement proceedings was produced as evidence. That is because the transcript would show that, in context, the settlement offer might have been just another trick. Kahia could have delayed closing, and then when the 30 day deadline was not met, she could have refused to transfer the property. The actual purchase agreement was never presented, so claimants did not know what they did not know. (As it turns out, the original Kahia agreement had a name crossed out that looks quite a bit like “Tony Brawl”, a misspelling of “Tony Bral”. That clue for the criminal aspect of the case would not be discovered if claimants accepted the offer.) The settlement offer also excluded claimants from pursuing any other action, such as intentional infliction of emotional distress and attorney fees. So, just making a statement that claimants turned down an offer to buy the property after the fact, without offering any evidence of what the details of the offer were, does not provide any defense at all.

Respondent asked Lynn if her mother had cut her out of the trust. Lynn said that her father’s trust is irrevocable and she expects to receive a sizeable distribution on her mother’s passing. No evidence was given to contradict Lynn’s claim.

Respondent asked Lynn if her mother and sister were actually angry with her and would not have included her in the transaction if they had bought the property. Lynn denied this allegation and presented documentary evidence that she told her mother not to contact her any more on December 12, 2012, days after the Kahia trigger and 11 months after the Bral trigger to the ROFR contractual clause. “The saddest words of quill and pen are these the words, it might have been.” If only Jordan had notified claimants of the accepted offers, perhaps Lynn would have put up with her mother’s behavior a little bit longer and the back-story would have a different ending.

Respondent presented no evidence that the family falling out occurred any earlier than Lynn claims. Attorney idler commented off the record that Laura’s mother was ill, implying that is why she did not come to testify. There was no evidence presented that Sandi Kramer would have testified in any way if she was not ill. Sandi could have told Mr. Idler that she was ill, because she did not want to show up, and as Laura testified, Sandi often makes up little lies to get out of something she does not want to do.

Respondent claimed that some un-named persons at some un-known time made some unspecified question or comment to the claimants about whether or not these unknown persons should buy the building for some unspecified price. Respondent claims that the unknown, unspecified persons told him that one or the other of the claimants told them that the building was “falling apart” and overpriced. The implication seems to be that the claimants were not acting in good faith.

The evidence presented by the respondent is hearsay of hearsay, vague and ambiguous, and probably exaggerated. Claimants did not know the role of any person coming into their store and asking questions about the business or real estate. Claimants were under no obligation to answer any questions. Though claimants choose not to lie, if not under oath, they are not required to give “the whole truth”. It would be odd to tell a complete stranger who makes some comment about the difficult ingress or egress that “section 14.01 of our lease includes a right of first refusal to purchase the property, and if anyone puts in an accepted offer, we would consider the ingress and egress in our calculation of value, when deciding whether to exercise our right.” It is more likely the claimants would say “yeah, it is really hard to get in, but once people know how to find us, they keep coming back.”

Respondent’s witness Anthony Carnevale said Mike gave him a tour of the property. Mike was proud of the work he did to turn an eyesore next to the freeway into a fun and exciting place to find great deals on interesting stuff. He was proud of the “free area” where we passed on the more mundane items to charity. He was proud of his restoration area, where he turned junk for the landfill into heirloom pieces for other people’s homes. He was proud of the shelving he added and the roof he fixed. He might have explained that he intended to fix the faulty electrical wiring and rickety stairs in back. Earley testified that some improvements to the electrical system were being made when he visited the property. Even though his client was in escrow to purchase the property, there was no evidence presented that he asked the claimants to get permits to do the work. And whatever negative comments the claimants supposedly made about the property did not deter Kahia from moving forward with the purchase.

All parties agree on the basic facts. There was a lease with a ROFR clause and a time is of the essence clause. Jordan never complained to the claimants of late payments nor charged late fees. There were two accepted offers for the property. Jordan did not give the claimants written notice of the accepted offers.

Jordan presented no evidence, besides his word, that any payments were late. Claimants gave Jordan a copy of their bank statements as far back as the bank had them pursuant to respondent’s request for production of records. There was no evidence presented of any late payments or any other negative financial issue, such as overdrafts.

Laura offered her entire dissolution of marriage case file to respondent pursuant to his request for production of documents. There was no evidence that Laura was not paying required child support presented. In fact, the record in PD 016769 shows that a OSC re contempt for not paying child support against Laura was recently dismissed. Claimants did take the precaution of keeping Laura off Mike’s bank account, in case Laura’s “ex” was successful in some sneaky trick to get at Laura’s accounts.

Jordan implied the claimants should have known about the accepted offers because there was a sign on the building and a lock box. The claimants were well aware the property was for sale for the entire 19 months before the breach. But claimants are not mind readers. Without being told of the offers, and given written copies of the purchase agreements, there is no way the claimants would have known that their right of first refusal was triggered. (In fact, even at the settlement hearing of the UD case, no copy of the actual written offer was presented.)

And the lock box is still on the property, giving more credibility to the claimants’ claim that the property was relisted immediately by Kahia.

At the time of the breach, Claimants were ready, willing and able to purchase the property. They may have assumed the loans. They may have been gifted or borrowed from the Norman and Sandra Kramer Family Trust. They could have gone to Laura’s past investors, like (name omitted to protect his privacy). They could have gone to anyone who knew Mike’s business and knew Mike, and would be happy to give a loan or form a partnership. Laura could have sold her share of Silver Strand Plaza LLC to the SSP, LLC partners.

When claimants found out about the sale to Kahia, they immediately wrote to James Jordan, Daryl Idler and Justin Earley, who they thought to be the new owner. They asked for a settlement conference, in case the breach was just a mistake. Jordan ignored the letter. Kahia and Earley responded by filing a three day notice to pay or quit. Earley told the claimants that they would be out, that he evicted people hundreds of times. He goaded the claimants to go ahead and buy it now. There was no purchase agreement presented, no terms offered; claimants did not even know who owned the property yet. Earley’s offer to sell the property that he didn’t own was nothing more than a bully on the school yard saying “nanny, nanny, I’m gonna hurt you and there is nothing you can do about it.”

The claimants have been completely transparent in their attempt to gain ownership of the property through legal channels. They filed a suit as part of the stipulated agreement in the UD case. They told all involved that they were going to the FBI and sharing any information found through discovery. They offered to purchase the property if given adequate notice and some concession for losing the Kramer Family Trust financing opportunity. The response received was “sue us.”

There is no way to treat the damages, except to assume claimants will be paying rent for the next thirty years and having nothing to show for it at the end, instead of paying a mortgage, collecting rents from the other tenants and owning the building in the end.

Respondent brought up the fact that the claimants’ calculation of damages did not give a present value to the damages. At first draft, the claimants also tried to make a present value calculation. Instead, the claimants agreed to forego any appreciation of the property. The interest on the loan is the same or close to the increase in rents. Two further scenarios that would alleviate the respondent’s worry about the time value of money is to remove any increases in rent and any interest on the loans, then run the numbers using the Bral purchase price of $1,205,000 and the Kahia original purchase price of $890,000.

Renting the $1,205,000 property for 30 years at $6,000 per month would cost claimants $2,160,000.

Owning with principal only payments would cost $3,348 per month. Income from the other tenants would be $4,000 per month. Claimants would be up $653 per month X 360 months = $235,000 plus have the remainder of $1,205,000, yielding a difference, the damages, of $3,600,000.

If the $890,000 scenario is used, total rent would be $6,360 X 360 = $2,289,600.

Principle payments would be $2,472 per month. The income from other tenants would net claimants $1,527 per month for 360 months = $550,000 plus $890,000 remainder, for a total asset of $1,440,000. The difference, damages, would be $3,729,600.

Those are the two scenarios taking out any time value of money in either direction.

Respondent also owes claimants $6,000 for their security deposit.

In addition, parties agreed in the lease to the party in default paying attorney fees and costs. Excluding the costs of the eviction proceedings (in keeping with our scenarios that we became renters instead of owners), claimants have paid filing fees in court of $870 for the initial complaint, $360 for other motions, $900 for subpoenas to a deposition officer, $2,000 to Mr. Briggs (less any refund), $720 to the court reporter for the arbitration, $720 for the court reporter to generate a record that respondent referred to in his presentation, though he decided not to enter a copy as evidence), $170 reporter fee for case management conference, $3,000 in copies, $120 in parking fees downtown, $36 for copies of deeds used as evidence, $400 administrative assistance, $360 serving subpoenas. The total of fees and costs is $9,656.

Since the respondent claimed to Comerica Bank VP Lamar Hervey that he had no assets and his attorney was recommending bankruptcy, it is unlikely claimants will ever collect a penny from this defendant. But, the results of the arbitration will send a big message to the other defendants; the ones who may need to pay punitive damages. Claimants therefore request the award reflect the actual damages. This amount, though seemingly quite high, is reasonable because it is what the defendants stood to gain by denying the claimants’ rights. Their risk should equal their reward.

Mr. Jordan should have let go when his error was caught and cooperated in convincing the buyer to disgorge herself of the unjust enrichment.

If Mr. Jordan took a copy of his bank records to the FBI, if he shared his copy of the Bral agreement and any communications about that deal, if he beseeched Earley not to call Laura’s mother and sister and “mess up Laura’s little world”, or wrote a letter to Sandi telling her that her daughter did pay her bills on time, if Jordan put as much energy and money into mitigating damages as he put into defending himself from this claim, there may have been a better outcome.

But Jordan chose to hang on til he was dangling 55 feet in the air.

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Building Inspector Ask For Extra “Fees”? Report All Building Inspector Bribes.

Former Los Angeles City Building Inspector Sentenced to Federal Prison for Taking Tens of Thousands of Dollars in Bribe Payments
U.S. Attorney’s Office
March 24, 2014

Central District of California
(213) 894-2434
LOS ANGELES—A former inspector with the Los Angeles Department of Building and Safety (LADBS) was sentenced today to 30 months in federal prison for taking more than $30,000 in bribes in relation to at least a dozen properties in and around the Koreatown District of Los Angeles.

Samuel In, 66, of Glendale, a 37-year veteran of LADBS, pleaded guilty just over one year ago to one count of bribery. According to court documents, In took bribe payments—which he described to some victims as “fees”—from 2007 through the end of 2010. In admitted that he solicited and accepted bribery payments totaling more than $30,000 in connection with his official duties in relation to at least a dozen Koreatown properties.

Federal prosecutors asked United States District Judge Dean D. Pregerson to impose a 30-month prison term, reasoning that In took bribes as part of a “deliberate, long-running pattern of corruption.”

In a sentencing memo filed with the court, prosecutor wrote: “This recommended sentence appropriately accounts for the serious nature of defendant’s illegal course of conduct—abusing his position as a senior building inspector over a number of years to solicit and take bribes in return for approving numerous building projects that may or may not have been safe.”

The case against In is the result of an investigation by the Federal Bureau of Investigation.

The FBI urges anyone with information about building inspectors or other officials accepting bribes to contact the FBI by calling its Los Angeles Field Office at its toll-free corruption hotline—(855) 5-BRIBES (855-527-4237)—or sending an e-mail to ReportBribes@ic.fbi.gov.

Contact:
Assistant United States Attorney Margaret L. Carter
Public Corruption and Civil Rights Section
(213) 894-7413

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Hardball: How The City of San Diego Responds to Credible Allegations of Misconduct by Inspectors

2950 Garnet Avenue Recently inspected and approved by Phil Myers and Bryan Monaghan

2950 Garnet Avenue
Recently inspected and approved by Phil Myers and Bryan Monaghan

Email sent to Acting Something or Other at the City of San Diego Development Services Department before working hours Monday, March 17, 2014:

Dear Ms. Temple,

My son and I went into the DSD office about a week ago and tried to serve a subpoena on Mr. Myers for an arbitration hearing on March 20, 2014. Mr. Myers did not come to the reception window when paged. He did not answer his phone. My son sent a text asking him how we could serve the subpoena and I left a similar message. There was no response to either of us.

Is there a way we can serve Mr. Myers?

We want to ask him about the chain of events that led to signing off open code violations, why he approved habitation of 2950 Garnet while 2946 was cited as not zoned for habitation, if he thinks the damage to the North East corner of 2950 Garnet may be a result of a slab that was poured with no engineered design to tie it into the foundation and overloading the roof with two large billboards, why he signed off power on 2950 Garnet while their circuit was coming out of 2946′s service panel, why he signed off on non-permitted signs for 2950 Garnet and why he called us on a Saturday, his day off, to warn us verbally about possible code violations on the property he knew we did not own yet.

Thank you,

Laura Lynn (and Mike Pietrczak)
********************************

The response:

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Poor Vicki Kahia: How Justin Earley Helped Her Spend Her Last $860,000 Cash

Justin Earley, a commercial real estate broker we are suing, said, on tape, that Vicki Kahia was a little old lady, well she is not so old, but the $860,000 she paid to buy a property on Garnet, was the last money she had in the world.

It probably would have been a great investment. She had at least one investor, Tony Bral, interested in buying the property for $1.2 million. Earley represented Bral in an escrow on the property about nine months earlier. That escrow cancelled, then the cancellation was rescinded, and that is where our paper trail ends…until Kahia went into escrow with Bral as a possible assignee.

The trouble with the deal was twofold. First, it was allegedly a fraudulent short sale flip. That is where the purchaser is not bonifide or arms length from the seller. In this kind of transaction, the negotiations did not operate in a free open market. In this particular case, full list price offers were ignored from buyers outside the click.

The second problem was that we had a right of first refusal to purchase the property at accepted price and terms, but we were not given notice of the sale.

Vicki, who seems to be a woman who gets her way, convinced Travellers insurance to pay her legal expenses.

One of the team of attorneys for Kahia sent her the following letter attached to an email on November 27, 2013:

Dear Ms. Kahia,

You recently saw the letter that I sent to the City of San Diego regarding the enclosed invoice for $250.00 regarding the administrative citation. I received a voice mail back from Mr. Brian Monaghan (City of San Diego, Code Enforcement Officer). He informed me that the subject penalty is not for the portion of the property used by Lynn but the other tenant that you have leasing from you. Accordingly, this penalty is not “on hold” pending the litigation. It must be taken care of as soon as possible. Since it appears as though Mr. Earley is no longer properly managing the property, I would recommend you retain the following attorney or someone else who regularly handles these types of issues with the City and will be able to make sure that you, as the property owner, are in compliance with the City’s requirements.

John M. Turner / 550 West C Street / Suite 1160 / San Diego, California 92101 / (619) 237-1212 Ext. 107 / [website address]

I have already spoken with Mr. Turner and he is expecting your call. He may be able to obtain an extension from the City in order to address and cure the deficiencies. As I previously mentioned, my office was retained through your insurance to defend Lynn’s complaint. Any issues regarding maintenance of the property and code enforcement would fall outside the scope of my office’s representation of you.

Should you have any questions, please feel free to contact me.

Very truly yours,

GRIMM, VRANJES & GREER LLP / Ryan R. Fick

This is where Kahia Ficked up. (Sorry Ryan, but I can’t resist a punny lawyer joke.)

She waived attorney-client privilege and sent the entire email to Earley. Mr. Fick wants to claim the transmission was inadvertent, but Kahia added just one line: What is this all about? Vicki

Attorneys often confuse “inadvertent” or “not on purpose” with “very, very, very foolish”. It is like the word “intentional”. Intentional infliction of emotional distress requires that the act causing the distress be intentional. It doesn’t mean the defendant intended to inflict emotional distress; it means the defendant took an action intentionally that caused emotional distress. According to http://www.law.cornell.edu, “The tort of intentional infliction of emotional distress has four elements: (1) the defendant must act intentionally or recklessly; (2) the defendant’s conduct must be extreme and outrageous; and (3) the conduct must be the cause (4) of severe emotional distress.” This does not say “the defendant must intentionally cause emotional distress.” But I digress.

Kahia purposefully sent the email to her manager and alleged partner in crime to ask his opinion of it. You’d think Kahia would realize by now that the recently bankrupted manager that jeopardized her cash and children’s inheritance, who talks a good game but has a poor performance record with her, who her attorney warned her about, was not the go to guy to explain a letter from said attorney. Vicki is no brain surgeon. She married a doctor, but as often happens, he probably fell for her good looks and fabulous entertaining skills, and not her reason and prudence.

Earley, of similar affliction in the arena of common sense and understanding of law, forwarded the emails and attachments to Bryan Monaghan of The City Code Enforcement. He wrote:

Brain: [Yes, he wrote "Brain", an anti-Freudian Slip]

Can you call me to discuss this? I still don’t get it. The case was closed by Phillip Meyers and we are still getting fines for 2950 Garnet. I know you are aware the details (sic) but obviously we had some limitations getting this done in a timely manner due to the fact that the lady next door threatens everyone who enters the property.

***********************

Earley should cut his whining. Phil Myers gave the alleged conspirators “a party bonus” by signing off obscene code violations and non-permitted work, and then only charging a $250 fine to The City to square the deal. (We have only one small clue, besides circumstantial evidence, that there was a bribe involved.)

I used to tell my kids, “act as if God is watching you.” After getting into the investigative reporting gig, I changed it to “act as if the FBI is watching you.” Just a little motherly advice.

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Briefly: How James Jordan breached his contract to help in an alleged short sale flipping scheme

BRIEF OF PIETRCZAK AND LYNN in MATTER OF LYNN v. JORDAN

This is a simple matter of breach of contract and conversion of a security deposit. The damages sustained are more difficult to determine, speculative and dependent upon how long the litigation against the other defendants continues, and if the claimants can maintain their business while fighting for their rights.

Pietrczak and Lynn signed a lease for property owned by Jordan on June 7, 2011. The original lease was for the front half of the building known as 2946 Garnet Avenue, San Diego, CA, referred to as 2946. On June 23, 2011 a revised lease was signed, adding the back half of 2946 and raising the rent accordingly, referred to as “the lease”. Both leases were written by Jordan’s attorney, Daryl Idler. There were a few typos. One was that the date on the second lease was not changed from the first lease. This did not affect the rights or duties of either party, and was never corrected.

Lynn and Pietrczak were living together as husband and wife, but complications in Lynn’s dissolution of marriage proceedings prohibited Lynn and Pietrczak from being married legally. Lynn was close to success at straightening out the 14 year long, 12 volume divorce proceedings in 2011. She was also winding down a three year stint as an investigative journalist covering white collar crime and looked forward to helping with The Estate Sale and perhaps getting back into her old career as a real estate broker and property rehabilitation specialist.

Lynn had investment income that was about $3,000 per month in 2011 and jumped to $7,078 per month in 2012. This money and all profits of The Estate Sale were reinvested to capitalize the business at 2946. Claimants live cheaply, buying their cloths and household goods at garage sales, not drinking alcohol at restaurants (or anywhere else), and even moved into 2946 as a residence, at Jordan’s encouragement. Claimants are hard workers and spent every waking moment on the business and Lynn’s court and investigative reporting.

The business was a quick success, compared with averages. Pietrczak offered a unique service that benefitted sellers by clearing out their entire property or storage unit quickly and painlessly. Buyers got interesting, unique items for their home or collections at a fraction of ebay prices. Independent contractors had a workplace that showed them respect and paid a decent wage. The majority of the labor not done personally by the claimants was done by homeless or otherwise unemployables, but they were paid well over minimum wage. Sales tax was included in the price of the goods, and claimants backed out taxes to pay to the BOE each quarter, providing needed funding for government services.

Pietrczak reroofed 2946, painted, fixed the shower so it did not get water everywhere, added shelving and three dividing walls, made obvious repairs on the dangerous electrical system, rebuilt the back deck and cleared weeds from the front landscaped area and on and on. We worked this land as if it was our own, because we knew it would be, one day. Jordan applauded each and every improvement made by Pietrczak. Jordan came to 2946 once a month to pick up the rent check of $6,000 and look around the property. He always approved of the changes Pietrczak made, and requested that Pietrczak not get inspections because there was so much illegal work already done on the property by Jordan, and he didn’t want to bring in inspectors. Because Lynn was a combination inspector for the County of Los Angeles for 10 years, specializing in property rehabilitation for a few years of that time, claimants agreed with Jordan to let Lynn ensure any new installation was safe, decide which existing installations were a serious hazard, and not apply for permits or call in inspectors when the dangerous systems were upgraded. Claimants were not aware at that time that Jordan was already cited by The City of San Diego for illegal work done on the other building on the property, 2950 Garnet Ave, referred to as 2950.

The lease had a “time is of the essence” clause and a “right of first refusal” clause. When claimants moved in, they expressed interest in buying the property. It was listed for sale for $1.2 million. Lynn’s sister Linda Kramer (who also uses the name “Lynn”), an engineer, was already interested in the property, but would need to do extensive remodeling, so the $1.2 million dollar price was not attractive enough. Claimants will present emails from Lynn Kramer to her real estate broker in July 2011 telling him their mother, Sandi Kramer, was willing to fund up to $1.5 million and to look at this property again.

January 3, 2012, Jordan accepted an offer from Tony Bral for about $1.2 million. He did not notify the claimants of the accepted offer. The escrow was cancelled in May 2012, and then the cancellation was rescinded in June 2012. Claimants are not aware of the date of cancellation of that escrow, if it ever was cancelled. Bral was represented by broker Justin Earley of CREV. Jordan was represented by Anthony Carnevale of Nautilus Real Estate. Carnevale changed supervising broker sometime before the Kahia transaction closed escrow.

About August of 2012, Jordan dropped the list price of the property to $825,000. He did not tell the claimants.
In October 2012, Linda “Lynn” Kramer caused her broker at Marcus and Millichap, Matt LoPicollo to make a written offer of $825,000 on behalf of the Norman and Sandra Kramer Family Trust. (The broker mistakenly used “Sandi” instead of “Sandra”.) Both Linda and Laura were equal beneficiaries to the trust.

Jordan’s broker did not give a counter offer or response to the full list price offer. It appears he might have told LoPicollo verbally that they were waiting on bank approval.

Instead, there is evidence beyond a reasonable doubt that Earley hatched a fraudulent short sale flipping scheme. He put in an offer for Vicki Kahia, a straw buyer, of $890,000, which was accepted on December 7, 2012. Still no counter was made to the Kramer trust broker. No one informed the claimants about the accepted offer.

In fact, the purchase agreement was a short sale, and the lender on the first trust deed, Comerica Bank, was adamant that the deal close by December 31, 2012, or they would revoke short sale approval. The ROFR clause required a 30 day written notice, so there is no way proper notice could be given and still close by the end of the tax year. (Had claimants been notified, they were ready, willing and able to buy the property, and would have closed by the 31st also, in order to take advantage of the short sale approval and their own tax benefits.)

Because of the lack of notice, Kramer bought a different property, which recorded on December 28, 2012. Sandi Kramer, as trustee of the Norman and Sandra Kramer Family Trust gifted Laura Lynn a 1/10th undivided interest in each of two commercial properties in Los Angeles that recorded on January 3, 2013. A similar gift was made to each of Lynn’s four sisters.

Because Lynn’s father and her spiritual beliefs caused Lynn to be humble and not spend money on outward signs of wealth, like expensive cars, she did not flaunt that she was a “trust fund baby”. Earley, Kahia and Jordan assumed the claimants could not afford to protect their right to buy the property through litigation. Ironically, Earley filed bankruptcy in 2010 and Jordan claimed to be facing bankruptcy.

In fact, though Kahia was well aware of the conspiracy plan and was a willing participant, Earley told several people he was a “partner” or “owner” of the property after Kahia took title. His own bankruptcy might have been a sham, or else he took an undisclosed profit on top of commission, which should have been disclosed to the FDIC insured bank in a short sale.

Bral was mentioned by name as an assignee on the purchase agreement, and then his name was stricken out. If Jordan received part of the $300,000 profit as a kick-back and also had his debt to Comerica forgiven, this would give him motive to breach the contract with the claimants.

Had claimants been given the ROFR, they could have obtained financing from the Kramer Trust, from one of Laura Lynn’s other investors, or even assumed the Comerica loan. The Bral contract had assumption of the loan as a contingency. Pietrczak had nearly perfect credit and the bank would have done better with an assumption of the loan than with the short sale. (Pietrczak’s credit was almost non-existent, with only one line ever opened. He paid cash all his life. He has a debt of about $400 showing to a broadcast company, but that needs to be removed, as he doesn’t even watch t.v. and never signed any contract. He also had a medical bill from an emergency room, but that is about to fall off the credit report and is only a few thousand dollars anyhow, so claimants could have paid it off, if necessary to qualify.)

The claimants’ $6,000 security deposit was not transferred in escrow and Jordan did not notify claimants of a transfer of the deposit to Kahia.

After the defendants found that claimants would pursue their rights, Earley wrote an email where he asked Jordan for the family name of Lynn. He wrote “I’m going to hunt down the mom and sister and mess up Laura’s little world.” To which Jordan replied that he did not know the name, but he should try Lynn.

Earley did call Lynn’s mother and a sister, but not Linda Kramer. The sister Earley called is the oldest in the family, has a huge amount of money and, frankly, Lynn finds that sister to be greedy, conniving and allegedly embezzling from a mutual investment. Claimants do not know what Earley told the sister, or what spin she put on it, but soon thereafter, Lynn’s mother became distant. We are not claiming that defendants were wholly responsible for the breakdown of familial relations, but they contributed, and they had the intent to “mess up Laura’s little world”.

Regardless of why there was a breakdown in the familial relationship between Lynn and her mother, or if it was just too soon after buying the other property for Linda, or that the tax breaks for transferring $5,000,000 from the trust to the children was used up, Lynn could no longer get the easy, one phone call cash to purchase the property from her family trust.

Lynn has other potential investors, but decided to ask for a constructive trust on the property or at least get a decent price concession when she was forced to litigate. And Pietrczak could probably have qualified to assume the loan from Jordan, but that option was no longer available after Jordan passed title to Kahia.

Claimants did offer to pay $860,000 to Kahia, if Kahia would carry the loan at 6% until other financing could be arranged or Lynn could sell her other property to her sisters to get the cash. Earley informed Jordan and other defendants of this offer by email. Kahia refused. As Earley wrote, he “literally threw” Lynn out of his office.

Earley has embarked on a campaign to defame the claimants, both slander and libel, calling them “con artists” several times. He wrote in an email that Lynn “laid in wait during the sale transaction just so she could claim to be wronged by everyone, including all of us”. Since he knows that claimants were ready, willing and able to buy the property if only they were notified of the accepted offer, and willing to purchase the property from Kahia after the transaction closed, if she would give them bridge financing until other arrangements could be made, this is patently false.

In fact, Earley, Kahia and Jordan, et al, knew of the claimants right of first refusal, but claimants knew only that Earley and Kahia were one of a score of prospective buyers on the property. One reason ROFR clauses are unpopular with landlords is that prospective purchasers might not make an offer because they don’t want to waste time and effort negotiating a deal, just to have the mandatory, equitable assignee exercise their rights. For this reason, the claimants did not discuss their ROFR with prospective buyers, because the claimants wanted a written offer to be made. Holding their cards close to their chest is not the same as laying in wait.

So, what are the damages?

The arbitrator has broad discretion to determine this, but the amount is of little consequence in that several people aligned with Jordan have mentioned that Jordan will be difficult to collect from. Included in the damages are the costs to litigate and collect any verdict. This can easily reach into the hundreds of thousands of dollars. So far, Pietrczak and Lynn have spent countless hours working on the litigation instead of working on their start-up business. Copies of documents alone run in the thousands of dollars. Scores of subpoenas and pleadings have been served at $20 or $30 per each. Court reporters were paid a few thousand dollars. The arbitrator was paid $2,000. Lynn has driven downtown and paid for parking to do research at the law library countless times. Pietrczak paid an attorney $10,000 to protect him against the unlawful detainer filed by Kahia. The 3-day notice to quit or pay rent filed on January 9, 2013, before anyone discussed the breach of contract with the claimants.

Because Kahia has a history of buying existing businesses, claimants think she wanted the claimants to be driven from the property so she could take over their business. Jordan and the other defendants started driving the claimants out well before the breach of contract. First Jordan reneged on his verbal agreement to forego rent increases. He started charging the increases months after the written contract ordered them, after the Bral transaction stalled.

Other strange occurrences happened, that make sense now in the context that a group of conspirators were plotting to take over the property rights that belonged to the claimants. For example, Jordan’s neighbor befriended Lynn. She worked for an attorney. She offered to help the claimants recover a few thousand dollars from a credit card processor who was wrongfully charging the claimants. Claimants paid her $500 and the work was never done. After the sale to Kahia, the neighbor set up an appointment with the attorney she worked for to see if he could defend the claimants in the unlawful detainer case filed by Kahia. Claimants had what they thought would be a confidential meeting with the attorney, and the neighbor never disclosed that she knew Jordan. Claimants only discovered it when they went to serve Jordan with this lawsuit and found he lived in the house next door to hers.

Jordan and the tenant on 2950 tapped into the claimants’ electrical service, causing outrageous bills.

Even before finding out about the breach of contract, Pietrczak was falling back into depression. He had built his life up from homelessness and psychosis to owning his own business and serving the community. But no matter how hard he worked, he felt oppressed. Perhaps because Pietrczak is more sensitive than average, he probably sensed the evil going on. (Pietrczak was always suspicious of Jordan’s neighbor, but Lynn did not heed his wise counsel to reject her offer of friendship.)

On or about December 27, 2012, Pietrczak, a dry alcoholic had his first drink in five years. He was suicidal, bashing his head on the street and, although he does not remember this, he apparently broke a glass door at a bar. He was brought to emergency services at Scripps, but the police did “not want to wait around” to take him to County, so he was released.

Claimants took their first time away from the store since they opened. They went to Sedona, and decided to work less hours when they returned. The business was moving into the black.

When they returned, there was the letter from Earley saying the property was sold. Jordan might as well have swung a sledge hammer into Pietrczak’s gut then put the knife in his back and charged him for it.

If Lynn was not an investigative journalist with legal training and real estate experience, and if they did not have income from Lynn’s properties, and if Pietrczak was not the most amazing business man, kind, wise, and hardworking, Kahia would get to keep the property and the claimants would have lost their entire investment of blood, sweat, tears and money. Jordan didn’t just sell a commodity; he sold Pietrczak’s dreams for a successful, productive future.

Pietrczak had a second suicidal and alcohol drinking experience on May 27, 2013. This time the police brought him to County Mental Health for a WIC 5157 hold (often referred to as a 5150). Upon release, Pietrczak met with his psychiatrist who had diagnosed him in 2009. Finding the psychiatrist took both claimants an entire day, but we won’t go into detail. Pietrczak went on 200mg of Trazadone nightly to sleep and an anti-depressant. He also uses cannabis under the recommendation of a physician, but still has trouble sleeping or accepting the evil he cannot change.

Lynn had to go back to her psychiatrist, after a year of living without anti-anxiety medication. She now takes Xanax, and needs sleeping pills, but the pharmaceuticals gave her severe constipation, so she is trying cannabis for the first time in her 51 years. It works, but leaves Lynn groggy when she wakes up. Lynn gave birth without pain killers, has rarely taken prescription or any drugs, uses no caffeine and doesn’t drink more than a couple glasses of wine per year, so medicating is an extreme measure for her.

Had Jordan gave the claimants notice and their right to buy the property, all this litigation would not happen. Also, Lynn would be able to concentrate on wrapping up the divorce case. The court in Los Angeles admitted to “losing” the entire 12 volume file, so Lynn is supposed to recreate the file by March 20, 2014. She proved the orders charging her $200,000 in child support arrears is void and needs to file a motion to vacate void orders. It is extremely difficult for Lynn to accomplish everything at once.

But that was not enough. The other tenant on the property has tormented the claimants since early December 2013, causing them to close down their business for the weeks leading up to Christmas. He has parked his van and BMW in the space Jordan had designated in writing belonged to the claimants for their display to attract customers. Earley and Kahia encourage the other tenant. They have enlisted building inspectors to “help in the process” of evicting them, since a judicial eviction failed. If the claimants had purchased the property, the other tenant would get a 30 day notice. He was on month to month when the property was sold.

If claimants were given their ROFR, they would pay about $5,000 in mortgage, if the family trust made them pay anything at all. (The deed to the property bought by the joint trust funds on December 28, 2013 was gifted to Linda Kramer’s personal trust.) The Comerica loan was costing Jordan about $6,000 per month. The other two tenants on the property pay about $4,000 per month in rent. So if that money was going to the claimants, they would only pay $1,000 to $2,000 per month to own, instead of $6,360 rent flushed. Over the eight remaining years of the lease, that would be about $610,000, $470,000 more to rent with no future value, instead of $144,000 to own with a future value of who knows how many million dollars minus the $860,000 investment.

Even though the claimants had no intention of leaving the property if they bought it, they could have just resold for $1,200,000 to someone like Bral. Earley relisted the property immediately for $1,695,000 with a 7.9% CAP rate. The value of the property and the existing business of The Estate Sale is speculative. But there is a funded project to build a trolley station and infrastructure for the new blue line kitty-corner to the property. That is a $1.2 Billion dollar infusion of cash for redevelopment and improvement of the surrounding area.

If we could have Jordan pay our medical bills and legal bills for the past year and give us specific performance to purchase the property, and if we could still get funding, we would do that. But Jordan has no control over the property now, so we are forced to continue litigating with Kahia, Earley, the other defendants and their teams of lawyers. If we are not given a constructive trust or an offset in the purchase price for actual and punitive damages, we will have the burden of collecting on any judgment.

Claimants wish Jordan had performed his end of the contract. All the money in the world cannot compensate them for the emotional distress and disruption of their long sought after peace. But, the arbitrator is required here to only decide on a reasoned monetary award for the breach of contract and conversion of $6,000 deposit. We submit to his judgment.

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