Loading...
HomeMy WebLinkAboutCity Council - 2008-51 RESOLUTION NO. 2008-51 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH ESTABLISHING A PROCEDURE FOR PROCESSING CLAIMS AND DISTRIBUTION OF THE CONDOMINIUM CONVERSION RESTITUTION FUND WHEREAS, in 2004 the City became aware of a scheme being perpetrated whereby existing apartment units in the City had been and were being illegally sold to purchasers as if they were legally created condominium units; and The City commenced an investigation into this scheme and found that approximately 122 of these apartment units had been sold and that a substantial percentage of the purchasers were unaware of the illegality involved while others were aware of, or participants in the scheme and had purchased them for investment purposes; and In 2004 the United States Attorney's Office commenced criminal actions against the perpetrators of the scheme and in 2006/2007, seven individuals involved in this scheme were convicted of felonies involving Mail Fraud, Honest Services Fraud and Aiding and Abetting; and As a part of the sentencing Federal District Judge David Carter in the United States District Court for the Central District of California ordered each of the seven defendants to pay restitution to the City of Huntington Beach as follows: Name of Defendant Amount to be Paid Paid to Date Howard Richey $220,000 $220,000 Philip Benson (deceased) $679,000 0 Thomas Bagshaw, Jr. $261,000 $925 Jeffrey Crandall $ 63,000 $50 Harvey DuBose $679,000 0 Pamela Houchen $140,000 0 Michael McDonnell $361,000 0 (Although the amounts Judge Carter required each defendant to pay vary, the total amount of the entire Fund will not exceed $679,000) Judge Carter stated in each Defendant's Judgment and Probation/Commitment Order that the "Victim" for purposes of payment of restitution is the "City of Huntington Beach in a segregated fund for the benefit of good faith purchasers of fraudulently converted condominiums;" and As of August 4 2008 the Condominium Conversion Restitution Fund balance is $220,975; and Resolution No. 2008-51 On April 21, 2008 the City Council approved the appointment of Thomas W. Allen, Attorney at Law, as the Hearing Officer to review, consider and rule on claims submitted; and The City Council's objective in these proceedings is to achieve a fair and equitable distribution of the restitution funds available in accordance with Judge Carter's pronouncement; and Pursuant to City Council direction given on October 15, 2007, the City Attorney's Office mailed over 400 claim forms to individuals whose names were obtained by a title search performed on each unit identified as having been fraudulently converted; and The mailed claim forms describe the process for claim evaluation and invite the addressees to file if they feel they qualify for reimbursement from the Fund. NOW THEREFORE, the City Council of the City of Huntington Beach does hereby resolve as follows: SECTION 1. PURPOSE The purpose of this Resolution is to establish the criteria by which the appointed Hearing Officer shall consider and approve or deny Out-of-Pocket Expense claims made against the Condominium Conversion Restitution Fund by Bona Fide (Good Faith) Purchasers of Fraudulently Converted Units. SECTION 2. DEFINITIONS For purposes of this process,the following terms shall have the following meanings A. Condominium Conversion Restitution Fund means the sum of money collected by the Federal Court Probation Office from the individual named defendants and transmitted to the City of Huntington Beach. B. Fraudulently Converted Unit means a dwelling unit originally constructed as an apartment in the City of Huntington Beach for which no condominium map or approval had been granted by the City of Huntington Beach but which through a scheme developed individually or collectively by the defendants in the Federal District Court case had been sold as an individual condominium unit. C. Good Faith (Bona Fide) Purchaser means a person or entity who purchased a fraudulently converted condominium unit in good faith for valuable consideration and without notice (actual or constructive) of any irregularity or impropriety in the creation (documentation/title) of the condominium purchased. As used herein, "good faith" and "bona fide" are synonymous. Resolution No. 2008-51 D. Out of Pocket Expense means an expenditure of money actually made by a Claimant as a cash disbursement for an item or service which would not have been required but for the fact the Claimant was the victim of the condominium conversion scheme. The test will include: i. Whether the expense was incurred as a direct result of the fraud; ii. Whether the expense would not have been incurred but for the fraud; and iii. Whether the expenditure was appropriate and reasonable under the circumstances at the time incurred. SECTION 3. PROCESS FOR REVIEW OF CLAIMS A. Initial Review: The City Clerk provided all claims received to the Hearing Officer. On or before September 8, 2008 the Hearing Officer shall have completed an initial review of the claims submitted. Between September 22, 2008 and September 28, 2008, the Hearing Officer may hold an open meeting to which all claimants will be invited at which time the Hearing Officer can explain the hearing process and receive input from the persons present. Each claim presented shall initially be evaluated by the Hearing Officer to preliminarily determine whether the Claimant was a Good Faith (Bona Fide) Purchaser of a Fraudulently Converted Unit and whether each amount claimed appears to qualify as an Out-of- Pocket expense. B. Hearing Process: i. Commencing September 29, 2008,the Hearing Officer shall set and notice hearing times and dates for all claimants. ii. Each Claimant shall be notified as herein provided of the date, time and place for the hearing. Each Claimant shall be entitled to only one change of hearing date; any additional changes are subject to documentation based upon emergency or illness. iii. The hearings shall be conducted on an informal basis. After being sworn as a witness, the Claimant will be asked to briefly explain the nature and amount of the expenditures described in the filed claim form. The Hearing Officer may ask questions of the Claimant for purposes of evaluation and clarification. In the event contentions are made by any other person that a Claimant is not a good faith purchaser or that the expense claimed does not qualify as an out-of-pocket expense, the Hearing Officer shall inquire of the person making the accusation to state the basis for the contention and then shall allow the Claimant to.respond. The Hearing Officer shall have the right to continue the hearing to a date certain for the purpose of evaluating any such contentions. The Hearing Officer may require any person making contentions in the hearings to reduce their Resolution No. 2008-51 contentions to writing and submit them to the Hearing Officer by a date certain. The Hearing Officer may also require the Claimant or any other participant to provide additional documentation or other information. If the Hearing Officer determines that significant contentions have been made which cannot be resolved in the informal setting then the matter may be continued by the Hearing Officer to a date certain at which time the matter shall be heard in accordance with the Rules for Formal Hearings set forth in Section C.. C. Rules For Formal Hearings. i. The hearing shall be conducted in accordance with the following procedures and any additional procedures as announced and provided to the participants in writing by the Hearing Officer. ii. Oral evidence shall be taken only on oath or affirmation, administered by the reporter, if present, or by the Hearing Officer. iii. The Parties shall have the following rights: a. The right to call and examine witnesses (no subpoena power is available), the number of which may be limited by the Hearing Officer; b. The right to introduce exhibits relevant to the issues of the case; C. The right to cross-examination is not afforded; however, persons present may request the Hearing Officer to make inquiry of witnesses on specific, relevant questions. iv. The Hearing Officer shall rule on all evidentiary issues and the following shall apply: a. The hearing need not be conducted according to technical rules relating to evidence and witnesses, except as hereinafter provided. Any relevant evidence shall be admitted if it is the sort of evidence on which responsible persons are accustomed to rely in the conduct of serious affairs, regardless of the existence of any common law or statutory rule which might make improper the admission of the evidence over objection in civil actions. b. Hearsay evidence may be used for the purpose of supplementing or explaining other evidence but over timely objection shall not be sufficient in itself to support a finding unless it would be admissible over objection in civil actions. C. Judicial notice may be taken of any generally accepted information or technical or scientific matter or fact that may be judicially noticed by the courts of the state of California. Resolution No. 2008-51 V. The Hearing Officer is authorized to establish rules and time frames for any of the following: a. Production of all documents, reports, videotapes, witness lists, and any other evidence that will be relied upon in the hearing; b. Any briefs on the issues or motions with respect to the admissibility of any evidence; C. Any documents that were not previously exchanged and provided to the Hearing Officer, or witnesses and experts that were not previously identified, may not be considered by the Hearing Officer at the hearing, unless agreed otherwise by the Parties (term defined ?) or upon a showing of good cause. vi. Before the hearing, the Parties should pre-mark exhibits and should attempt to resolve any disputes regarding the admissibility of exhibits. vii. The Hearing Officer shall render a written ruling with respect to the subject matter of the case, based upon a preponderance of the evidence as the basis for the decision(s). The Claimant will proceed with presentation of its case first and the order of the hearing shall then follow in an orderly manner as determined by the Hearing Officer. viii. Witnesses may be excluded upon the request of either party at the commencement of the hearing and with the consent of the Hearing Officer. ix. The record of the hearing shall be maintained by the Hearing Officer or the City and shall consist of a reporter's transcript or tape recording of all oral evidence, arguments and rulings; copies of all exhibits offered and/or admitted into evidence; copies of any written comments, arguments, reports, documents, or other written materials presented to or relied upon by the Hearing Officer; and the written decision of the Hearing Officer. The record of the hearing shall be maintained by the Hearing Officer or City until all appeals and court hearings have been concluded. SECTION 4 PLAN FOR DISTRIBUTION A. At the conclusion of the Process for Review of Claims, the Hearing Officer shall determine the amount to which each Claimant is entitled and shall render a decision in writing. If the Fund amount is sufficient to pay all approved claims in full then they shall be paid. If the Fund amount is insufficient to pay all approved claims in full then all approved claims will be paid on a pro-rata basis. The ratio for payment shall be determined by dividing the total approved claims into the amount of the restitution fund and arriving at a percentage which shall then be used to calculate each Claimant's share. Resolution No. 2008-51 B. If an unexpended amount remains in the Fund after payment of all approved claims, the City Council shall determine the distribution. C. At a City Council meeting at least one year after the initial distribution of the Fund pursuant to this Resolution, and annually thereafter for a period of xx years, the City's Director of Finance shall report the current balance of the Fund and the City Attorney's Office shall make a recommendation to the City Council for distribution of the balance. SECTION 5. MISCELLANEOUS A. There will be no priority or preferential categories established based on the nature of claims, the type of expense incurred by the Claimant or the individual needs or circumstances of the Claimant. B. There will be no individualized preferential treatment for any individual, class or group. C. The Hearing Officer will not engage in evaluation of proposed future projects or consider approval of future projects on Fraudulently Converted Condominiums; provided however if a Claimant is contractually obligated to a future expenditure, and the expenditure otherwise qualifies, it may be approved. D. The notices of initial hearing dates, meeting times, rulings and acceptance or rejection of claims shall all be done in writing, using the U.S. Postal Service. All notices shall be mailed at least 5 days before the event is to occur. Continuance dates and times will either be announced in a hearing or noticed in writing. E. The Hearing Officer shall discourage telephone or email exchanges with Claimants or other participants. F. The hearings shall be open to the public; provided, however, the hearings are for the purpose of considering each individual's claim and not as a forum for discussion of public policy or political discourse. The Hearing Officer may limit or prohibit discussion and testimony by and between attendees. G. The decisions of the Hearing Officer are the final and conclusive administrative decisions and are binding on all parties, including the City. There are no appeal rights to any administrative agency or appointed/elected body. All written decisions of the Hearing Officer shall include an advisement pursuant to California Code of Civil Procedure Section 1094.6, that any court action to review a decision shall be commenced not later than the ninetieth day after the date the decision is mailed. BE IT FURTHER RESOLVED, that the Hearing Officer is authorized to interpret or supplement the provisions of this Resolution with procedures and determinations not inconsistent herewith in order to achieve the stated objective of a fair and equitable distribution of the Condominium Conversion Restitution Fund. Resolution No. 2008-51 PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 18 t h day of August 2008. Q Mayor REVIEWED A,b AP ROVED: / INITIATED AND APPROVED AS TO FORM: City,7Administrat V// ( (L City Attorney Res. No. 2008-51 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, JOAN L. FLYNN the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on August 18, 2008 by the following vote: AYES: Hansen, Hardy, Bohr, Cook, Coerper, Green, Carchio NOES: None ABSENT: None ABSTAIN: None Clerk and ex-offici Clerk of the City Council of the City of Huntington Beach, California