HomeMy WebLinkAboutCondo Conversion Restitition Fund - Provide Direction to the i
Council/Agency Meeting Held: J0 1S D
Deferred/Continued to:
ro d ❑ Co itionally Approved ❑ Denied ?OCi frk'§4ignatL&
Council Meeting Date: 10/15/2007 Department ID Number: CA07-36
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Mayor and City Council Members
SUBMITTED BY: Jennifer McGrity Attorney
PREPARED BY: Jennifer McGrZity Attorney.
SUBJECT: Condo Conversion Restitition Fund
Statement of Issue,Funding Source,Recommended Action;Alternative Action(s),Analysis,Environmental Status,Attachments)
Statement of Issue: In October 2006, Justice David Carter ordered restitution to be paid to
the victims of the illegal condominium conversions. The restitution is to be paid to the City for
distribution to the victims.
Funding Source: No funds are required
Recommended Action: Motion to:
1. Provide direction to City Attorney regarding the appropriate methodology for determining
the amount of restitution to be paid to the victims; and
2. Direct City Attorney to notify all current residents of the illegally converted condominiums
of a public meeting on November 19, 2007 to finalize the methodology for distribution of
the restitution.
Alternative Action(s): Provide further direction to City Attorney regarding appropriate
methodology.
Analysis: In 2006 and 2007, seven individuals were convicted or pled guilty of mail fraud in
the United States District Court. Each sentence included a component of fines, restitution,
and in some cases, prison. Both fines and prison are designed to penalize the individual;
however, restitution is intended to return the property or the monetary value of loss to the
victim for the harm caused. The Court ordered restitution in the amount of $679,000.00
which is roughly equivalent to the amount paid by the title companies to the City of
How should the funds be allocated
o Pro Rata distribution
• By unit?
• By complex?
o Claims process
• Staff or hearing officer?
• Process
Who should be notified?
o Original owners?
o Current owners?
o Original and current owners?
L
Y
Recommended Action
o Provide direction to City Attorney
regarding the appropriate methodology
for determining the amount of restitution
to be paid to the victims; and
o Direct City Attorney to notify all
appropriate persons of a public meeting
on November 19, 2007 to finalize the
methodology for distribution of the
restitution.
T�Wll PW
RECEIVED FROM
AS PUBLIC R9FC D FOR CvO JNCIL MEETING
OF—
October October 15, 2007 CITY CLERK
JOAN L.FLYNN,CITY CLERK
In Fall 2006, Federal Judge David O. Carter gave an order stating that he wanted
restitution for the victims of the Huntington Beach condo scam. He ordered a restitution
fund to be administered by the City of Huntington Beach and allocated funds from the
criminals to go into it. He identified recipients of the funds to be"good faith purchasers".
He left, however, general statements requiring much clarification.
I have attached several pages from the federal sentencing that I attended where Judge
Cart discussed the restitution fund with Federal prosecutors and victims. Although his
order may have been general, by reading the dialog that transpired that day, I think you
will be able to see that he did have certain intentions for the victims. After you review
these pages I think you will agree that the judge expressed his intentions to be similar to:
• Each homeowner being notified about the fund,not just the homeowners whose
units were involved in the indictment.
• Homeowners to submit a claim of"out-of-pocket" expenses that would be eligible
for reimbursement.
• Claims to be paid by a proportion of damage suffered (my husband and I have
over 80,000 in construction costs).
He was not specific about any of it,but definitely was trying to help homeowners with
the costs that the insurance companies did not pick up. I feel his order to help the"good
faith purchasers" is specific to those purchasers who did not sign fraudulent documents.
As you may or may not know,there are many individuals still living in these units that
participated in the fraud, but were not prosecuted by the federal government.
As an affected homeowner, I sought legal action against the criminals and the title
company. I recently settled due to the fact that I am nearly bankrupt and now
unemployed. This was not a game for me, but my life. I thought there was no way I could
lose,but I did. An individual alone does not stand a chance against a large entity. It does
not matter what the truth is.
This restitution fund is my last hope for justice. I know what has gone on better than the
other homeowners. I would like to help facilitate the claims. I know I can help who ever
is appointed to disburse these monies fairly.
Again, for the 4t'time, I offer my services to assist you. Please do not go to Mike Adams
or any one like that. As far as I am concerned,they have a conflict of interest, as they
were city employees in regulating departments during the 1990's when this happened. I
do not find it a coincidence that they were hired by the title company to "resolve and
consult"in this matter. As council members you have the opportunity to restore some
community faith in city officials. Please motion for an oversight committee of
homeowners to determine eligibility of the claims that I know Judge Carter wanted.
Please motion for notice to go to all affected units,not just the ones in the indictment.
The money is available. Over 3 years ago the city sent notice to these homeowners
announcing the problem.Now announce a fund to help solve some of there problems.
SACK 04-309 DOC - 9/25/2006 HB2006-09-25 Items 1316
Page 61
1 THE COURT: Okay. Thank you very much.
2 There anything further from either party?
3 Otherwise, I hope I 've given you all sufficient time .
4 All right. First, in discussing this with the
5 probation department, I don' t understand it and they' re not
6 quite certain why the Court should be awarding a restitution
7 to Stewart Title. And I want to speak to the government
8 about that. Because if these persons would have been
9 identified as victims, then probation would have come back
10 and given a recommendation. And here ' s my concern --
11 Now, Mr. Stolper, you love to talk. I 'm going to
12 give you five hours in a moment. Okay? You talk fast . And
13 now it ' s my turn.
14 Stewart Title may have cut a deal with the City,
15 but that ' s of no concern to the Court . And if people are
16 harmed, Stewart Title is not the victim; either these people
17 or other people like them are the victim. And I don' t know
18 why the Court would be awarding 63, 000, 140--some-thousand,
19 300, 000, et cetera, back to Stewart Title, because,
20 ultimately, they are completely and totally responsible for
21 Mr. DuBose.
22 Oh, they can claim he ' s a contractor, that he ' s
23 independent . Nonsense. Stewart Title employed him, relied
24 upon him. Stewart Title shouldn' t get one red dime of
25 this -- or cents or something like that -- whatever.
Debbie Gale, CSR 9472,federal Offiidal Court Reporter
SACK 04-309 DOC - 9/25/2006 H82006-09-25 Items 13-16
Page 62
1 So how am I going to set this up? This should go
2 into a restitution fund for the benefit of victims, and I 'm
3 not quite certain how that ' s set up and how that ' s going to
4 be administered. There ' s the problem. It' s the mechanics
5 of it .
6 Any ideas? Because Stewart Title is not getting
7 any of this money.
8 MR. STOLPER: A few ideas, Your Honor.
9 First of all, the government in its plea offer --
10 in the plea deals it struck, had actually victim adjustments
11 for the number of victims associated with it . So it ' s not
12 that the government doesn't believe those people are
13 victims . On the contrary, they were count victims in our
14 indictments and were identified, and we requested in our
15 plea agreement victim adjustments for them. Probation
16 office did not give us adjustments on the theory that
17 Stewart Title was the only victim.
18 In terms of the mechanics of restitution, I do
19 think that, with respect to individuals who are paying out
20 money to remedy the conversion process, this Court should
21 absolutely make a restitution order for them. But I also
22 think, to the extent that Stewart Title is paying out money
23 as part of making these conversions right, they were
24 defrauded as well . They were defrauded by Harvey DuBose,
25 who was essentially a rogue title officer issuing title
Debbie Gale, CSR 9472, Federal Official court Reporter
REQUEST FOR CITY COUNCIL ACTION
MEETING DATE: 10/15/2007 DEPARTMENT ID NUMBER: CA07-36
Huntington Beach pursuant to the settlement agreement reached in 2004. A,failure by any of
the defendants to pay restitution can only be pursued by the probation office of the United
States District Court and it is unclear what assets, if any, the individual defendants have to.
satisfy the restitution order. The following chart identifies the status of the restitution.
payments by the individual defendants:
Defendant Restitution Status
Order*
Estate of Philip Benson $679,000.00 Deceased - no payments
Harvey Dubose $679,000.00 Incarcerated — no payments
Pamela Houchen $140,000.00 Incarcerated - no payments
Michael McDonnell $361,000.00 Incarcerated - no payments
Thomas Ba shaw $261,000.00 $925.00 paid as of 6/07
Howard Richey $220,000.00 $220,000.00 paid as of 6/07
Jeffrey Crandall $ 63,000.00 Incarcerated - $50.00 paid as of 6/07
*Please note that the restitution orders are not cumulative. Restitution is to be paid by the defendants
collectively with the total restitution collected not exceeding the $679,000 ordered by the Court.
It was anticipated that the restitution would be paid to the various title companies that had
insured the illegally converted units. Instead, Judge Carter ordered that restitution be
delivered to the City of Huntington Beach for the "benefit of good faith purchasers of
fraudulently converted condominium units." However, Judge Carter did not provide further
direction as to how the City should determine whether a,person was a."good faith purchaser"
or how the restitution should be allocated amongst the individual unit owners.
At this time, the probation office is prepared to release $220,975.00.in restitution payments to
the City. Any additional monies received by the probation office in the future,will be similarly
disbursed to the City for distribution to the victims.
To facilitate distribution, the City Council must make two critical decisions. regarding the
appropriate methodology.
1. Who are the persons entitled to restitution?
The City entered into settlement agreements with impacted unit-owners to legalize the
condominium units. The title companies paid $10,000.00 per unit to the City via the same
settlement agreement, except for those units where the individual unit-owner actively
participated in the illegal conversion. Many of the impacted unit-owners have since sold
the units to new buyers. City Council should provide staff direction on the following three
questions:
Should the new unit-owners who purchased with notice of the illegal conversion
be entitled to restitution?
-2- 10/8/2007 3:39 PM
REQUEST FOR CITY COUNCIL ACTION
MEETING DATE: 10/15/2007 DEPARTMENT ID NUMBER: CA07-36
Should the City attempt to locate the original impacted unit-owners?
Should all units be eligible to receive restitution or only those units included in the
criminal cases to which Judge Carter's order applies?
2. How should the restitution be allocated among the unit owners?
Restitution is designed to restore the victim for the harm caused. Since impacted. units
have been legalized, the only components of "harm" remaining for the victims are emotional
distress and any monetary damages not covered in the settlement agreement. The
settlement agreement permitted the impacted unit-owners to separately pursue the title
companies for damages. Staff is aware of only one unit-owner that pursued damages via a
separate civil action filed against the title company and the criminal defendants. Another,
component of loss the. unit-owners suffered that was not remedied via the settlement
agreement was the funding of the homeowners. association for each of the condominium
projects:
City Council should provide staff direction on the alternatives:
Should the restitution be distributed pro rata? If so, should it be distributed by
complex ($220,975.00/26 = approximately $8500.00 per complex)? Or should it
be distributed by unit ($220,975.00/104 = approximately$2125.00 per unit)?
Should the restitution be. distributed via a claims process wherein the individual
unit-owners submit claims to the City and staff makes individual determinations
on the appropriate value of their share of the restitution?
Staff is recommending City Council direct the City Attorney to notify the current unit-owners
of a public meeting on November 19, 2007, to solicit input on the appropriate methodology
for distribution of the restitution.
Strategic Plan Goal: Provide quality public services with the highest professional standards
to meet community expectations and needs, assuring that the city is sufficiently staffed and
equipped overall.
Environmental Status: N/A
Attachment(s):
City Clerk's
Page Number . Description
07RCA/condo restomp)
-3- 10/8/2007 3:39 PM
October 15, 2007 -Council/Agency Agenda - Page 12
F-2. (City Council) Approve the Proposed Concept, Design and Placement of
Playground Equipment
Communication from the Director of Community Services transmitting the following
Statement of Issue: Should the City Council approve the concept of placing play equipment on
the city beach per design and location as recommended by the Community Services Commission.
Funding Source: No funding source identified at this time. Staff will seek grants and other
methods to fund the project, estimated at $202,000.
Recommended Action: Motion to:
1) Approve conceptual placement of play equipment on City beach with the intent to install
the equipment once funding becomes available;
And
2) Approve proposed design and location of the conceptual playground.
APPROVED AS AMENDED TO CONSIDER LOCATION FOR UNIVERSAL PLAYAREA, 7-0
[F-3. (City Council) Provide Direction to the City Attorney of Appropriate Methodology
etermining Amount of Restitution to be Paid to Victims of Illegal Condominium
versions and Schedule a Public Hearing n November 19 2007 to Finalize
mmended Action
Communication from the City Attorney transmitting the following
Statement of Issue: In October 2006, Justice David Carter ordered restitution to be paid to the
victims of the illegal condominium conversions. The restitution is to be paid to the City of
distribution to the victims.
Funding Source: No funds are required.
Recommended Action: Motion to:
1) Provide direction to City Attorney regarding the appropriate methodology for determining
the amount of restitution to be paid to the victims;
And
2) Direct City Attorney to notify all current residents of the illegally converted condominiums
of a public meeting on November 19, 2007 to finalize the methodology for distribution of
the restitution.
October 15, 2007 - Council/Agency Agenda - Page 13
APPROVED 7-0 AS AMENDED TO AWARD RESTITUTION ON A PER UNIT BASIS
BEFORE A HEARING OFFICER WITH ESTABLISHED PARAMETERS. RETURN TO
COUNCIL ON 1 V19/07.
G. Ordinances
G-1. Ordinance for Adoption
G-1a. (City Council) Adopt Ordinance No. 3785 to Prezone the Brightwater Development
Project Area to the Brightwater Specific Plan with Coastal Zone Overlay and Prezone
0.065 Acres to Residential Low Density with Coastal Zone Overlay and Rezone 0.365
Acres Within the City of Huntington Beach from Residential Low Density With Coastal
Zone Overlay to Brightwater Specific Plan with Coastal Zone Overlay (Zoning Map
Amendment No. 06-01)
Approved for Introduction October 1, 2007
Recommended Action: After the City Clerk reads by title, Adopt Ordinance No.3785, "An
Ordinance of the City of Huntington Beach Zoning and Subdivision Ordinance to Prezone the
Brightwater Development Project Area Located in the County of Orange to the Brightwater
Specific Plan with Coastal Zone Overlay and Prezone 0.065 Acres Located in Orange County to
Residential Low Density with Coastal Zone Overlay and Rezone 0.365 Acres Within the City of
Huntington Beach From Residential Low Density with Coastal Zone Overlay to Brightwater
Specific Plan with Coastal Zone Overlay(Zoning Map Amendment No. 06-01"by roll call vote.
ASSISTANT CITY CLERK ROBIN LUGAR READ INTO THE RECORD THE TITLE OF
ORDINANCE NO. 3785
APPROVED 7-0
G-2. Ordinances for Introduction
G-2a. (City Council) Approve for Introduction Ordinance No. 3786 Amending Huntington
Beach Municipal Code Section 17.66 Adopting the California Fire Code, 2007 Edition and
Schedule a Public Hearing for November 19, 2007
Communication submitted by the Fire Chief transmitting the following
Statement of Issue: Whether to adopt an ordinance amending Municipal Code Section 17.56
adopting the California Fire Code, 2007 edition.
Recommended Action: After City Clerk reads by title, Approve Introduction of Ordinance
No. 3786, "An Ordinance of the City of Huntington Beach Amending Huntington Beach
Municipal Code Chapter 17.56 Adopting the California Fire Code"by roll call vote; Direct the
City Clerk to publish a Notice of a Public Hearing pursuant to Government Code Section 6066,
and Schedule a Public Hearing for November 19, 2007.
ASSISTANT CITY CLERK ROBIN LUGAR READ INTO THE RECORD THE TITLE OF
ORDINANCE NO. 3786
APPROVED 7-0
RCA ROUTING SHEET
INITIATING DEPARTMENT: City Attorney
SUBJECT: Condo Conversion Restitution Fund
COUNCIL MEETING DATE: October 15, 2007
RCA ATTACHMENTS STATUS
Ordinance (w/exhibits& legislative draft if applicable) Attached ❑
Not Applicable.
Resolution (w/exhibits & legislative draft if applicable) Attached ❑
Not Ap licable
Tract Map, Location Map and/or other Exhibits Attached ❑
Not Ap licable
Contract/Agreement (w/exhibits if applicable) Attached ❑
(Signed in full by the City Attorney) Not Applicable
Subleases, Third Party Agreements, etc. Attached ❑
(Approved as to form by City Attorney) Not Applicable
Certificates of Insurance (Approved by the City Attorney) Attached
Not Applicable
Fiscal Impact Statement (Unbudgeted, over$5,000) Attached ❑
Not Applicable
Bonds (If applicable) Attached ❑
Not Applicable E
Staff Report (If applicable) Attach
Not A educable
Commission, Board or Committee Report (If applicable) Attached ❑
Not Applicable
Findings/Conditions for Approval and/or Denial Attached ❑
Not Applicable
EXPLANATION FOR MISSING ATTACHMENTS`
REVIEWED RETURNED FORWARDED
Administrative Staff
Deputy City Administrator (initial)
City Administrator Initial
City Clerk
EXPLANATION FOR RETURN OF ITEM:
Only)(Below Space For City Clerk's Use
RCA Author:
Condo Conversion
RestitutionFund
Jennifer McGrath
City Attorney
October 15, 2007
History
Duly 2004
The City Council adopted an ordinance permitting the
legalization of approximately 122 illegally converted
condominium units
c November 2004
The City approved settle ment.agreements with the title
conmpEmes and property o�hrnersrEnd approved the first
master CUP
I
E
j c i.'C b,e:` 100E
3
f Ever. noivicual defendantS cc—,Mcted in federal court
i
RECEIV'E0 F�"OM�AS PUBLIC REC, NCIL MEETING
OF !
CI TN CLERK FILE
JOAN FLYNN,ciTY CLERK
v -
Criminal Sentence
o Sentences included prison, fines,
and mandatory restitution
o Restitution ordered to be paid to:
"City of Huntington Beach in a
segregated fund for the benefit of
the good faith purchasers of
fraudulently converted
condominiums"
Restitution
o Designed to return the property or
the monetary value of the loss to
the victim
o Two components
. Mandatory court-ordered amount
. Payment option based on ability to pay
G
r
Value of Restitution
o Each defendant separately responsible for a share of
the total restitution of $679,000.00
o All incarcerated defendants and defendants on
supervised release are paying $25 00/quarter based on
probation's analysis of ability to pay
o City cannot separately pursue defendants until after
supervised release concludes
c Only one defendant has paid in full - June 2007
o To date, total restitution available for disbursement is
$220,975 00. Future monies may be separately
received and distributed.
Who are the good faith purchasers .
o Original Owners in 2004
• No one who participated in the illegal conversion
• How were they damaged?
o Current owners
Purchased with notice
Hcv,, were they damaged
c Only owners involved in the federal prosecution?
5
SACK 04-309 DOC 9/25/2006 HB2006-09-25 Items 13-1f
Page 63
1 without authorization.
2 And so I have no disagreement with the Court ' s
3 impulse . I think it ' s a great impulse to expand the
4 restitution order to victims who were actually
5 out-of-pocket .
6 For the those victims who ultimately took the City
7 settlement, the Stewart Title settlement, where Stewart
8 Title wrote a check to the City for $10, 000 to make those
9 conversions happen, those victims didn' t suffer any direct
10 economic harm. So in terms of the mechanics, it may be
11 something as simple as saying restitution is due jointly and
12 severally to Stewart Title and to the victims identified in
13 the counts these defendants were convicted of, to the extent
14 that make -- show the need for restitution to the probation
15 office .
16 THE COURT: No. Stewart Title won' t have any
17 claim on this money.
18 Turn around and talk to probation and work that
19 out quickly. I want a restitution fund. I want that set
20 aside for victims . How that ' s administered, I 'm not certain
21 yet, but I ' ll wait .
22 MR. McCONVILLE: Your Honor, the Stewart Title
23 paid money to certain peoples in the city in order to settle
24 claims under the insurance policies that Stewart Title
25 issued. And that is where the number comes in the PSR for
Debble,Gale,CSR 9472, Federal Offidal Court Reporter
SACK 04-309 DOC 9/25/2006 HB2006-09-25 Items 13-16
Page 64
1 money paid by Stewart Title to victims of the offense.
2 And I know that the restitution guidelines -- or
3 the restitution statute says that if you get insurance
4 proceeds, those proceeds get applied first . And if there
5 are other victims --
6 THE COURT: You' re still arguing a point that I 'm
7 not going to accede to. This Court is not going to be a
8 party to giving money to a defrauding party. And Mr. DuBose
9 was employed by Stewart Title and was high up in the
10 organization. I will not countenance nor be a part of
11 giving any moneys to Stewart Title .
12 Now that we 've resolved that again for a second
13 time, come up with a way that restitution can take place .
14 MR. McCONVILLE: The other alternative,
15 Your Honor, is that the Court can hold off on the
16 restitution order .and we can compile whatever victim
17 information that we can get and provide it to probation.
18 And I believe the Court has -- I think it' s 30 days to issue
19 a restitution order based on information that we can bring
20 to the Court ' s attention.
21 THE COURT: Okay. If I 'm going to hand down
22 restitution today -- speaking to probation -- and apply
23 restitution to, quote/unquote, some type of fund, I don' t
24 know how to label that at the present time . You need to
25 help me with this . And then there has to be notice sent out
Debbie Gale, CSR 9472, Federal Offidal Court Reporter
SACR 04-309 DOC 9/25/2006 H82006-09-25 Items 13-16
Page 65
1 through the City of Huntington Beach, et cetera, so that the
2 Tarnoffs or other people are aware that some moneys exist .
3 Certainly not enough to make you whole, but some moneys
4 exist . Then there has to be some kind of application
5 process through probation, and a rough proportionality for
6 those of you who make claims . Now, it ' s not going to make
7 you whole, but there ' s no reason for the Court to award
8 Stewart Title money in this .
9 So I 'm not sure how to do that . And what, quite
10 frankly, changed my mind was listening to Mrs . Tarnoff,
11 concerning that . Doesn' t make sense to give it to Stewart
12 Title .
13 MR. STOLPER: I think, to effectuate what the
14 Court wants to -- if I understand the Court correctly, the
15 Court wants all the victims to be notified, and then the
16 victims to make application as to what their losses are . I
17 think that rather than establishing, I guess, a fund, what
18 we ought to do is take those 30 days or 60 days that we have
19 to do a restitution order and notify the victims to submit
20 information to us and to probation saying, "I 'm a victim.
21 This is how much money I laid out . Here ' s my receipts . " At
22 which point we can then do a combined restitution order that
23 says, you know, each victim -- the way it work,
24 Your Honor -- each victim by name, how much money they' re
25 due from which defendant.
Debbie Gale, CSR 9472, Federal Offidal Court Reporter
f
SACK 04-309 DOC 9/25/2006 1-1B2006-09-25 Items 13-16
Page 66
1 THE COURT: And let ' s anticipate the worst
2 problem -- or maybe the best problem; and that is, in
3 awarding about a million dollars in restitution, give or
4 take a couple hundred thousand, when you total the four
5 defendants -- what happens if not enough people make claims?
6 This Court ' s not going to be in the position of returning
7 money to Stewart Title.
8 MR. STOLPER: I think that we can -- with the
9 understanding that the Court has deemed Stewart Title not to
10 be a victim within the meaning of the statute --
11 THE COURT: Exactly.
12 MR. STOLPER: I mean, there ' s -- in the event --
13 THE COURT: Any ideas, Mr. Steward?
14 MR. STEWARD: Yes, Your Honor. I was thinking,
15 perhaps the Court ' s order today could simply be ordering
16 restitution, period, to be determined by -- we set a date in
17 the future. Let these claims in. Let everybody take a look
18 at them, and we can finalize that down the road.
19 THE COURT: But later on, I don' t want to be
20 accused of the following; and, that is, any excess moneys
21 going to some pet charity, any of that kind of nonsense . I
22 don't want to be involved in where the money goes nor
23 delineate who eventually receives it . I know -- I 'm
24 absolutely adamant, though, that those people who are
25 committing fraud aren't going to be getting money returned.
Debbie Gale, CSR 9472,Federal Offidal Court Reporter
SACK�309 ppC 9/25/2006 HB2006-09-2 ms 5 ite 13-16
Page 67
1 And I 'm not saying Stewart Title itself did that, but
2 certainly, a high officer in the company did. It makes
3 absolutely no sense to return money to Stewart Title . I 'm
4 not going to lighten the restitution amount concerning your
5 clients .
6 So what I 'm anticipating is if there aren' t enough
7 claims . Now, if there are enough claims -- I 'm already
8 hearing $80, 000 from one of the victims, potentially. I
9 don' t know who else is out there. And of course, when
10 notoriety gets around about this restitution fund, a lot of
11 people are going to apply who probably didn' t have their
12 needs met through the City. And even though they've got
13 increased valuation on the property, or maybe they've got
14 increased valuation, there ' s still going to be out-of-pocket
15 expenses that they've gone through -- 5, 000 here, 10, 000
16 here -- that they never recouped.
17 And how to administer that is usually left to
18 attorneys in a class action settlement of some type .
19 MR. STOLPER: The problem I 'm struggling with,
20 Your Honor, is if we have claims that are less than the
21 total amount of restitution, then it seems that -- whatever
22 the balance is, is no longer restitution. Restitution is
23 meant to pay off the victims . If we have successfully paid
24 for all the victims, then I think that whatever money is
25 left can no longer fairly be called "restitution. "
Debbie Gale,CSR 9472, Federal Offidal Court Reporter
SACK 0¢309 DOC 9/25/2006 HB2006-09-25 Items 13-16
Page 68
1 THE COURT: Well, is the City of Huntington
2 Beach -- I know Stewart Title isn' t . Is the City generally
3 a victim because of the decreased housing? You know, the
4 cost to the City involved in this?
5 MR. STOLPER: I think the City is a victim in the
6 following ways, Your Honor --
7 THE COURT: Let' s do this . I think your
8 suggestion is wise. Let ' s employ restitution today. You
9 know that my intent is that these go back to individuals .
10 I 'm going to order the U. S . Attorney' s Office to work on
11 some type of mechanism with the probation office to come up
12 with notification. And after that notification -- is
13 anybody here from the City of Huntington Beach? I keep
14 asking that, but . . . what a shame .
15 Maybe some type of notification. Some of the
16 press is here today. I recognize some of you. So maybe I
17 can manipulate you a little bit to get word out, ' cause it
18 would, after all, be for a good cause. It would be for the
19 victims .
20 And then the excess maybe going back to the City,
21 because they've certainly suffered harm, reputation.
22 They've suffered harm in terms of their -- they don' t have
23 any low-cost housing from this point forward. I think that
24 would be a more appropriate victim. And that way, the
25 general population in Huntington Beach, at least the City
Debbie Gale, CSR 9472, Federal Ofiidal Court Reporter
SApt 04_309 DOC 0/25/2006 HB2006-09-25 Items 13 16
Page 69
1 would have that for disbursal . And how they chose to spend
2 any excess, I think, would be more appropriate than Stewart
3 Title .
4 Mr. Bruinsma.
5 MR. BRUINSMA: Your Honor, with respect to the
6 people making claims to the restitution fund, would they be
7 current owners of those properties?
8 THE COURT : I don' t know. I haven' t gotten that
9 far, Mr . Bruinsma. I just know I 'm not going to employ the
10 recommendation to Stewart Title at the present time . That ' s
11 as far at I 've gotten.
12 MR. BRUINSMA: Okay.
13 THE COURT: All right. Let me start with general
14 comments about all four of you .
15 I 've brought you together for one reason; and that
16 is, oftentimes, cases come to the Court in somewhat of a
17 helter-skelter basis with different defendants being
18 sentenced at different times . I 'm going through that right
19 now with a 28-defendant Mexican Mafia case and another
20 19-defendant case . Therefore, the sentencing tends to be
21 literally all over the place. And it points out, quite
22 frankly, the difficulty with the guidelines .
23 First, in varying degrees, Mr. McDonnell, you' re
24 first and foremost in my comments . And Mr. Crandall and
25 Ms . Houchen, you' re also egregious -- and Mr. DuBose, to a
Debbie Gale, CSR 9472, Federal Ofl'idal Court Reporter
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Condo restituion fund
From, Renee Tarnow (rtarnow22@hotmail.com)
Sent: Thu 10/11/07 9.28 AM
To: dcook@surfcity-hb org; kbohr@surfaty-hb.org, lcarchio@surfaty-hb.org, cgreen@surfaty-hb.org;
dhansen@surfaty-hb org; jhardy@surfcity-hb.org; gcoerper@surfcity-hb.org
Cc. jmcgrath@surfaty-hb.org
Dear Mayor Coerper and City Council members,
In September I sent the following letter to the Mayor and copied all the council members. I
recieved back an email and then a phone call telling me of the events surrounding this issue.
Today the City Attorneys report regarding the restitution fund should be available and my letter
should make more sense. I have the transcripts of the federal sentencing where Judge Carter
changes the federal prosecutors recommendation about the money going to Stewart Title and
wants it to go to the victims. I know that created a dispersment issue, but the Judges orders were
extremely fair in the "spirit" of things.
I am resending this letter now as a refresher. As you can tell by my writing, I am a very direct,
honest person. If you would like to speak with me to get further detail, please call me. I will make
myself available.
Thank you,
Renee Tarnow
2505 Delaware Street #4
Huntington Beach, CA 92648
714-374-0311 home
714-609-9240 cell
Dear Mayor Coerper,
On July 17th my husband and I ran into you in the conference room by the city
attorneys office. We spoke briefly about the restitution fund as ordered by Federal
Judge David Carter in September of 2006 for the homeowners/victims in the condo
conversion scam. Prior to July 2007, my husband ran into Jennifer McGrath and spoke
briefly about the fund, which she said had approximately $220,000 in it. When I saw
you in July, you stated you were unaware that there was any money in the fund and
were going to talk to the city attorney. My husband and I have also inquired about the
restitution fund to the city attorneys office directly. Their response was that we would
be notified when council would discuss it (late August or early September). I even left
my information with the secretary to insure I was contacted when the discussion came
up. I have yet to hear from anyone.
I offered my services to Former Mayor Dave Sullivan last September when Judge Carter
made his order to the federal prosecutor, but I was told my assistance was not
needed. I disagree and feel my assistance is extremely needed. It is vital that victims
sit on some sort of an over-site committee to set the requirements for reimbursement
of costs regarding the fraud committed. Since I am by far the most damaged victim, as
well as, by his own statement, the victim who convinced Judge Carter to
order restitution to the homeowners instead of Stewart Title, I want to be directly
involved. I know that any funding left over is to go to the city and feel this is fair as long
as the victims are reimbursed first. What makes this tricky is that some of the "victims"
actually committed fraud themselves, but were not prosecuted. This entire scam was
very well orchestrated and extremely difficult to unravel. I am confident I know it better
than any city employee or official.
In short, when will it be discussed and how will it be decided what the requirements are
for reimbursement? I am very concerned and do not want the unjust acts to continue.
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Without someone involved who understands the fraud, it will be virtually impossible to
decided if a receipt is a legitimate expense or not.
Please let me know when this will be discussed and if I can be involved.
Thank you- Renee Tarnow
Peek-a-boo FREE Tricks &Treats for You! Get 'em!
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