Attorney General's Office alleges Davis and Frank committed consumer fraud and ongoing criminal conduct in the sale of homes.
DES MOINES. Attorney General Tom Miller filed a lawsuit Thursday alleging that John J. Davis and Christine Frank committed consumer fraud and ongoing criminal conduct in the sale of homes in the Des Moines area.
"We allege the defendants repeatedly sold homes at highly-inflated prices to first-time buyers with average or below-average credit scores, and that they engaged in fraud to induce the mortgage company to make the loans," Miller said.
Both home buyers and the mortgage company were harmed by the practices, he said. The suit spells out nine cases of fraud victims who bought homes from Davis and Frank. All the loans cited ended in foreclosure, harming the buyers and their credit histories, and harming the mortgage companies because the value of the properties is substantially less than the respective loans.
"Davis and Frank and their various business entities invested in properties in Polk County, and then they took steps to arrange loans for buyers," Miller said. "The first problem we allege is that the properties were sold to buyers at highly-inflated prices. Second, the defendants deceived and defrauded the mortgage company into making the mortgage loans."
In particular, the lawsuit alleged, the defendants "repeatedly created documents to make it appear that the purchasers made sizeable down-payments, when in fact the purchasers had not done so." The suit alleged that Davis and Frank wired and transferred their own funds to the real estate closing agent, falsely representing that the funds were down-payments from purchasers.
The suit also spells out how appraisals of properties were significantly overstated. Eight of nine appraisals in the examples cited in the lawsuit were performed by Linda Hintz, who now has surrendered her State of Iowa appraisal license. The other was completed by Mark Wallace, who has been convicted of Theft in the First Degree and Forgery for activities related to other appraisals.
The lawsuit alleged that the deception induced the mortgage company to make loans to buyers -- and allowed the buyers to pay the defendants highly-inflated prices for the properties.
Examples cited in the Lawsuit:
In one case, for example, the property at 1180-13th St. in Des Moines was appraised at $85,000 for a sale on March 30, 2003 - even though the Polk County Assessor had placed a value of only $33,290 on the property just four months earlier, on January 1, 2003.
Davis and Frank sold the property at 1180-13th Street for $85,000. Davis and Frank falsely represented that a down-payment of $13,000 had been paid by the buyers. The mortgage company made a loan of $72,250 to the buyers - and proceeds of $64,870.07 were wired to a Davis and Frank account at the Earlham Savings Bank.
Mortgage foreclosure proceedings have been initiated against the buyers.
In another example, Davis and Frank sold a property at 4115 S.E. 8th Street for $115,000 on March 31, 2003. It had been appraised at $115,000 by Linda Hintz, even though the Polk County Assessor had placed a fair market value of only $55,580 on the property on Jan. 1, 2003. The down-payment of $7,000 was purportedly paid by the buyers, but it actually was paid by Davis and Frank, the suit says. Proceeds of $69,893.89 were wired to a Davis and Frank account at the Earlham Savings Bank. The buyers lost the property by foreclosure in 2006.
In the nine examples cited, the suit alleges, misrepresentations by Davis and Frank induced the mortgage company to make loans totaling nearly $700,000, and all of the loans ended up in foreclosure.
Other details of the suit:
The lawsuit was filed Thursday in Polk County District Court. Defendants named are John J. Davis; Christine Frank; Primo Acquisitions I, LLC; Data International, Inc.; Tax 216; Tax Acquisitions Xtrordinaire, LC; and 3624 South Union, LLC (all companies and partnerships of Davis and Frank.)
The lawsuit alleges consumer fraud and ongoing criminal conduct. It asks the Court to permanently prohibit the defendants from further violations, order the defendants to make restitution to consumers, and assess a civil penalty up to $40,000 per violation of the Consumer Fraud Act. The ongoing criminal conduct allegations allow the State to seek treble damages and other relief.
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