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City Politics
 

12/07/10   The TRUE story behind raising the CCDC cap.
11/17/10   A "rogue" CCDC CEO, Fred Maas aided by a "rogue" Deputy City Attorney, Kendall Berkey.
10/28/10   CCDC's hidden power renders your vote irrelevant.
06/07/10   Chula Vista's Prop G - an analysis.
05/24/10   Would Lorie Zapf bring "strategic fraud" to City Council?
05/06/10   Strong Mayor = Insider Deals
     
12/07/10   The TRUE story behind raising the CCDC cap.
    by Pat Flannery                                                              top^


The California State Legislature created a process whereby cities can borrow against future property tax revenue for the primary purpose of expanding the supply of low-and-moderate-income housing. The process is called "redevelopment".

"The Legislature finds and declares that a fundamental purpose of redevelopment is to expand the supply of low-and moderate-income housing, to expand employment opportunities for jobless, underemployed, and low-income persons, and to provide an environment for the social, economic, and psychological growth and well-being of all citizens."

This original Redevelopment
Law required each redevelopment agency to set aside 20% of its tax increment revenues and put it into a "low and moderate income housing" fund, commonly known as the "affordable housing" fund. CCDC fulfilled its affordable housing requirement by creating all "moderate" income housing and no “low, very low, or extremely low” income housing. In San Diego "moderate" income housing is very close to "market" price housing.

The original Redevelopment
Law also provided that in the event a redevelopment agency amends its project plan in any way, it triggers the following more stringent affordable housing set aside requirements:

(1) the 20% set aside would increase to 30%;
(2) expenditure on
“moderate” could only happen when at least 49% had already been spent on “low, very low, or extremely low”;
(3) total “moderate” could not exceed the total of “extremely low income” in any 5 year period;
(4) total “moderate” could not exceed 15% of the total set aside fund in any 5 year period;
(5) the number of “moderate” units could not exceed the number of “extremely low income” units at any time.

CCDC wished to remove its revenue cap while continuing to avoid the
“low, very low, or extremely low” income housing requirement. So, its Los Angeles-based outside law firm, Kane, Ballmer & Berkman, found a loophole in the wording of the Redevelopment Law.

Unfortunately Section 33333.10 (f) of the Redevelopment Law refers to
"an agency that has adopted an amendment", rather than an agency that has "amended" its project plan. Kane, Ballmer & Berkman therefore advised CCDC that amending its project plan (e.g. raising its cap) by statute i.e. by State Legislative action, rather than by agency action, would not trigger Section 33333.10(f).

This is the TRUE story behind raising the CCDC cap at Sacramento rather than at City Council. Today, Jerry Sanders, who exploited this loophole in Redevelopment Law in favor of developers at the expense of citizens, is asking City Council to re-appoint him as Chief Executive Officer of the San Diego Redevelopment Agency.
 

11/17/10   A "rogue" CCDC CEO, Fred Maas aided by a "rogue" Deputy City Attorney, Kendall Berkey.
    by Pat Flannery                                                              top^
 

This video clip shows the craziness of City Council delegating management of hundreds of millions of tax dollars to an un-elected body like CCDC, headed by an unelected private developer like Fred Maas. When asked a simple question by Carl DeMaio, Maas arrogantly characterized the questioner's ethics as "Hale-Bopp". That was one of the worst displays of disrespect for an elected body I have ever seen.

The irony is that Maas's rambling exit speech to City Council yesterday was more reminiscent of "Do's Final Exit" than Carl DeMaio's ethics was of Hale-Bopp. Marshall Applewhite was the lunatic leader of the Heaven's Gate cult in Rancho Santa Fe who in March 1997 convinced 38 idiotic followers to kill themselves in order to board his spaceship to the Next Level on the Hale-Bopp Comet. Like Applewhite Maas is gone and good riddance.

So yesterday was a good day for San Diego. It showed the urgency of getting rid of CCDC and the arrogant developers who became bosses of our downtown redevelopment and displayed such utter contempt for our sovereign legislative body, the City Council.

But Maas had help. Her name is Kendall Berkey. She joined the San Diego City Attorney’s Office in December 2006. She worked under my good friend Huston Carlyle who is now legal counsel to a Florida county. The Winter 2010 edition of the City Attorney's Newsletter says:

"As a supervisor, she has the primary responsibility of providing legal advice and services to the Redevelopment Agency of the City of San Diego. The work involves many projects including negotiating and preparing a variety of agreements for the development of mixed use, affordable housing and public works projects, and the rehabilitation of housing and commercial projects. The Redevelopment Unit also coordinates and assists the City on various community-wide planning efforts. The unit provides legal advice to the redevelopment Project Area Committees and conducts training sessions on the Ralph M. Brown Act, ethics, conflicts of interest, and the impact of new legislation. "

I pulled her California Bar Association status report and discovered that she is now working for
Kane, Ballmer & Berkman of Los Angeles, the law firm Maas hired to advise CCDC regarding the removal of the CCDC cap. In this November 12, 2010 Memorandum to the City Council, Job Nelson Director of Intergovernmental Relations for Mayor Sanders, confirmed that both the Mayor's office and CCDC took its redevelopment legal advice from Kane, Ballmer & Berkman, not from the elected City Attorney Jan Goldsmith.

Goldsmith has written this letter to Kane, Ballmer & Berkman asking 11 questions. It is clear that Goldsmith was kept in the dark by his own Deputy,
Kendall Berkey and that she did not inform him about the legal advice she was giving CCDC.

Activist Katheryn Rhodes has been trying for months to get City Attorney Jan Goldsmith to look at this Memorandum of Law dated May 21, 2010 that was prepared and signed by Berkey. It directly contradicts Section
33021.1 of California Health & Safety Code which says:

"33021.1. In a city and county, redevelopment includes improving, increasing, or preserving emergency shelters for homeless persons or households. These shelters may be located within or outside of established redevelopment project areas. Notwithstanding any other provision of law, only redevelopment funds other than those available pursuant to Section 33334.3 may be used to finance these activities."

Yet Berkey advised CCDC that "The Agency may not use Agency funds for .... operation of homeless shelters." The law's reference to Section 33334.3 is to the required 20% set-aside for low/mod income housing. The lawmakers were being careful that low/mod housing funds would not be used for homeless shelters but that such shelters would be funded out of regular redevelopment money.

The fact that CCDC could not only pay for a homeless shelter but had an obligation to do so could not be clearer. Yet Berkey and Maas (who is also an attorney) not only misrepresented the redevelopment law but resisted placing the homeless shelter at a CCDC property on Newton Avenue. Maas simply did not want to get into the homeless shelter business.

So Berkey gave CCDC the advice Maas wanted. It got her hired by Kane, Ballmer & Berkman. Strangely, her Memorandum (MS 59) does not appear on either the City Attorney's nor the City Clerk's web site. Did Mr. Goldsmith ever even see it?

Berkey had "gone rogue" long before the "cap" issue. Mr. Goldsmith needs to regain control of his Department. In the meantime neither Kane, Ballmer & Berkman nor
Kendall Berkey should be allowed to give any legal advise to CCDC. We elected a City Attorney to do that. It is a defining moment for Jan Goldsmith.

After the five minute break requested by Councilmember DeMaio, Council President Ben Hueso allowed Fred Maas to stand at the podium for as long as he liked. From there he dominated the discussion until its conclusion. It was decided that CCDC will now hold a series of "outreach" PR meetings around the city to justify its existence.

The developer/union alliance will demonize Carl DeMaio for stirring up the pot and daring to question its long-standing prerogative of secretly deciding how to spend our tax dollars.

Outgoing Council President Ben Hueso has been associated with this powerful developer/union alliance throughout his political career. It has propelled him to the sleazy corridors of the Sacramento Assembly where he will fit right in. The incoming Council President Tony Young is similarly "associated". Therefore San Diego's developer/union alliance will continue to control the purse strings so long as its secretive CCDC powerbase exists.

However, Councilmember DeMaio and City Attorney Jan Goldsmith are genuinely on the side of openness and the taxpayer. For DeMaio it is simply good politics. Councilmember Sherri Lightner is the only truly independent and honest vote on the City Council. Councilmember Faulconer is little better than Fred Maas. Politically ambitious Young and Gloria will remain captives of the developer/union alliance for years to come. Marti Emerald will need all the union support she can get to fend off April Boling in 2012.

So, we must wait and hope that incoming Councilmembers Lori Zapf and David Alvarez will take the moral high road, which in the case of Zapf, considering her real estate shenanigans, might be a little much to hope for. Perhaps the only one who really knows what Alvarez will do at City Hall is his well-hidden handler, Al Ducheny, husband of
Senator Denise Ducheny.

The fact that La Prensa San Diego backed Alvarez carries a lot of weight with me. I have great respect for that publication. However I worry that South San Diego may be neglected for Barrio Logan/Al Ducheny politics. We will just have to wait and see if David Alvarez turns out to be another angel like Sherri Lightner or another depressing Hueso/Inzunza/Vargas style District 8 politician elected on a few thousand votes because of deep voter apathy.
 

10/28/10   CCDC's hidden power renders your vote irrelevant.
    by Pat Flannery                                                              top^

Who is the most powerful person in San Diego today? Fred Maas. Few voters even know his name.
 
Mao Tse-tung (Mao Zedong) once said that "power grows out of the barrel of a gun". In a Marxist-Leninist world, that was probably true. But in the Capitalist world, power grows out of a pot of money. The bigger the pot of money, the greater the power.
 
The biggest pot of money in San Diego today is, without doubt, CCDC's tax increment money. By far the greatest growth in San Diego over the past 30 years has occurred downtown. The shocking truth is that not a dime, not a nickel of the property tax generated by this vast growth has gone to city services. It is called "Tax Increment Diversion" or "redevelopment money".

Who controls this huge pot of money that has accumulated over 30 years outside the General Fund and continues to grow every year? CCDC Chairman and CEO Fred Maas. It has made him the most powerful person in San Diego while his name has never appeared on a ballot paper.
 
Who is this Fred Maas? Where did he come from? What are his politics? Who does he represent? How did he acquire such power? How does he wield it?

Where did he come from? As you can see from his Wikipedia entry, he is originally from upstate New York,
where he graduated from Hobart College in 1979 with a Political Science degree and went on to obtain a law degree from Syracuse University College of Law in 1982.

With a political science degree and a law degree under his belt he moved to Washington DC and was
admitted to the District of Columbia Bar in 1983 at the age of 26. Clearly this ambitious young Jewish boy from upstate New York had plans for himself.

What are his politics? He cut his political teeth with the Washington Legal Foundation, one of a cluster of conservative, right-wing, Washington-based think tanks such as the American Enterprise Institute, the Brookings Institution, the Cato Institute and the Heritage Foundation. While thus building his right-wing credentials, Fred was savvy enough to maintain impeccable liberal Jewish credentials by volunteering on the Board of Advisors of the Center for Public Policy for B’nai B’rith International, a left-leaning, community rights type of organization.

Who does he represent? He got involved in real estate while working for a federal regulatory lobbying firm called National Strategies and Marketing Group, that represented PGA TOUR Inc. on legislative and tax matters. He also joined Potomac Sports Properties Inc., a firm that represented PGA TOUR Inc. in developing golf resort projects. During this time he became heavily involved in national politics as he climbed the Republican ladder. Thus, he came to represent Republican-developer interests, both locally and nationally.

How did he acquire such power? In the late 1980s the PGA TOUR Inc. was threatening to pull its Buick Invitational from San Diego’s Torrey Pines Golf Course and leave town. Maas had become a partner in a subsidiary of Potomac Sports Properties, Potomac Investment Associates, the official property developer for PGA TOUR Inc. Through his negotiations with the City of San Diego on behalf of PGA TOUR Inc and because of his impressive national Republican credentials, he was readily accepted into the inner circles of San Diego power politics and land development.

The Teamsters Union had sold an undeveloped 4,660-acre tract of land northwest of Black Mountain to a Christian group that planned to build a Christian University involving millions of square feet of campus buildings and thousands of student housing units. The group hoped to finance it all through the sale of thousands of private homes.

The project drove the environmentalists crazy. I remember it as the hottest “growth” issue in San Diego during the '80s.
It was known as “La Jolla Valley”.

Predictably, the Christian University project went bankrupt. It was far too ambitious and naïve for San Diego at that time. Fred Maas saw the chance of a lifetime. He easily persuaded his firm, Potomac Investment Associates to purchase these prime 4,660 development acres out of bankruptcy for the paltry sum of $53 million or $11,373 per acre. Not bad for a Syracuse home boy. Fred had found his new home, San Diego politics.

How does he wield his unelected power? His negotiations with the City of San Diego on behalf of his client PGA TOUR Inc. were inextricably bound up with his own negotiations on behalf of those 4,660 acres that had now transferred to an entity called Black Mountain Ranch LLC, of which he was the managing partner.

The City was vulnerable in that it did not want to lose the
PGA TOUR Inc. By constantly threatening to pull the "Buick Invitational" out of San Diego, Maas succeeded in getting the City to spend heavily on its Torrey Pines Golf Course to keep his client the PGA TOUR Inc. in town. He will tell you now that it was a great service to this area. Perhaps. What he will not tell you is how those negotiations enabled him to coincidentally secure the density entitlements for his Black Mountain Ranch project that made him millions of dollars. Density is the secret to creating value in any development project and is usually achieved through bare-knuckle politics.

Not only is Maas a master of the subtle art of the “threat”, he is also a master of the even more subtle art of “persuasion”. He reached an "agreement” with the Sierra Club by which that venerable environmental organization amazingly supported his increased housing density measure, Proposition K, on the November 1998 ballot. That political feat alone should be sufficient to enroll him in the political-developer Hall of Fame.

What can we expect from this unelected power-broker in the future?

In making his millions on those 4,660 acres, we know that he could have afforded
to serve as consultant for the PGA TOUR Inc. for free. The ominous thing is that he now works as Chairman and CEO of CCDC for free.

Does that powerful position give him the kind of insider knowledge and leverage he used so effectively against the City on behalf of PGA TOUR Inc. and coincidentally on behalf of his Black Mountain Ranch project? He has admitted to recently orchestrating the midnight elimination of the CCDC cap so that it can finance a Chargers Stadium. What is that worth to the Spanos family? Will there be a "Black Mountain Ranch" side to a Chargers Stadium deal? Are there other sweetheart projects? Is he picking the politicians of the future, like Nathan Fletcher?

We only know that his “free” service to San Diego City has made him a very powerful man without the need to run for elected office. The unions know
the power of this pot of public money. They know that it has the power to create union jobs and union dues (unions are businesses just like any other). They have learned that they in turn can control which developer gets financing for its project and which does not by first making "enabling" union deals with CCDC. The banks have learned that without such a CCDC-union-developer deal there is no project - the unions get their project labor agreements, the developers get financing for their projects and Maas gets to broker the deal. That's real power.

Recently we got a glimpse of the sometimes petty side of that CCDC power. The Mayor and City Council wanted to use the officially vacant former Housing Commission building on Newton Ave as a temporary homeless shelter. It emerged that CCDC is letting its contractors use some of it as storage space. Maas would not budge. In desperation the City resorted to turning Golden Hall in the City Plaza into a homeless shelter. That will be interesting. It was a spectacular display of Maas's raw political power and of his single-mindedness in using it on behalf of his developer friends. His B’nai B’rith days are long forgotten in his new-found wealth and power.

Prop D
is another reminder of CCDC's power. Sanders knew it would be useless to try to tap into the hundreds of millions of dollars CCDC holds in reserve for developers. Donna Frye didn't even bring it up. They both know that CCDC's redevelopment money lies safely outside the dwindling "General Fund" from which the Mayor and City Council must provide city services. CCDC is thus beyond the power of the Mayor and City Council. That was Pete Wilson's plan in creating it. It works perfectly. Unfortunately our city services are the poorer for it.

Far from this hidden power diminishing, it appears to be growing. Current events at SEDC suggest that Maas is planning the annexation of SEDC to CCDC and Councilmember Young seems to be a part of it. He has become the darling of the developer class. He even received Lincoln Club support in his recent reelection campaign. He is being groomed as the next Council President. He will be a powerful (and obedient) friend of Fred Maas.

Young, who was undoubtedly in on the Fletcher/Maas midnight elimination of the CCDC cap, tellingly did not seek to eliminate the SEDC cap. A CCDC-SEDC merger would automatically eliminate it. Earlier this year he quietly acquiesced in the laying off of 40% of SEDC's staff and moving its HQ from 4393 Imperial Avenue into the non-profit Jacobs Center building at 404 Euclid Avenue. That raised some eyebrows at the time, including mine.

Jerry Groomes, the current City Manager of Carson in Los Angeles County, is reported to have accepted the permanent position of President and CEO of SEDC, replacing Brian Trotier who held that position on an interim basis since October 2008 and had himself applied for the job.

We are now expected to believe that Groomes, who preceded
Carolyn Smith as CEO of SEDC until 1992, will leave a prestigious City Manager's job at $225,000 for a much-diminished administrative job in the Jacob Center at $150,000, in order to "spend more time with his family"?

Anybody who follows San Diego politics knows there is more to this than they are telling us. My guess is that Groomes has been promised the CCDC CEO job after it has absorbed SEDC. Groomes is a developer-friendly guy and would fit right in with Maas and his developer pals. Fred probably personally hand-picked him for the CCDC job.

And so it goes on. Redevelopment is the powerful unelected government within a government. It does not have to provide a single policeman or a single firefighter. Like the pension system it takes a bigger and bigger share of our tax revenues every year. It is run by shadowy unelected figures like Fred Maas. It siphons off huge amounts of public money for private developers while asking us to backfill the hole with new taxes like Prop D.

Consider this as you enter the polling booth on Tuesday: all the property tax from all the growth in downtown San Diego over the last 30 years will continue to be diverted away from our city schools and city services to private developers no matter how you vote. Contrary to the oft-repeated lie, not a penny of property taxes ever "goes to Sacramento". Only in the sense that the State is obligated by law to "backfill" local school deficits due to redevelopment tax diversion, do any property taxes "go to Sacramento". And more and more the State is baulking at that backfill.

State law has always intended that local property taxes be the primary funding for K-12 schools, city and county services. The problem is that out-of-control growth of redevelopment is diverting vast amounts of those property taxes to private developers. That is unsustainable both at local and state levels.

Until it is fixed, your vote on Tuesday is irrelevant. Fred Maas and a few self-appointed developer-serving insiders will continue to govern through the Redevelopment Agency. Even if passed, Prop D will not "solve the structural problem once and for all" as Sanders is falsely promising. The structural problem is much, much deeper than that. Redevelopment has to be restrained. The present system of local government funding allows us to be governed by shadowy unelected people like Fred Maas.
 

06/07/10   Chula Vista's Prop G - an analysis.
    by Pat Flannery                                                              top^


The heated arguments over Chula Vista's Prop G have centered around whether Project Labor Agreements (PLAs) increase or decrease the cost of public works projects. Both labor and developers accuse each other of increasing costs through exclusionary labor practices. But I think there is more to it than that. I think the truth is much deeper. This is not about cost.

Read this letter? It is the best window into the developer/union mind we've got. Does it sound like Gaylord and the unions were at war with each other? It sounds more like they reached agreement on how to divide up the profits of the Chula Vista waterfront project but they failed to find "a mutually beneficial way to fund the infrastructure".

So what is the truth behind the Prop G campaign rhetoric? Is it a union-busting ploy?  Would a ban on PLAs cause Chula Vista to lose jobs? Are the unions defending working families against developer attempts to import cheap labor, as the unions claim? They say: "Proposition G will ban us from working on construction projects in Chula Vista because we are in a union."

The developers on the other hand say: "The purpose of this measure is to ensure fair and open competition for public works projects funded in whole or in part with public funds; to aid in lowering the cost of public works projects; and to ensure that all workers, both union and non-union, have a fair and equal opportunity to work on public works projects."

If the measure passes it will be enacted as the "Fair and Open Competition Ordinance" in the Chula Vista municipal code. Which is it? A fair and open competition ordinance or a clever union-busting move by the developers?

The answer of course is: neither. This battle is over the legitimacy of PLAs, pure and simple. The question voters have to answer is: "do PLAs serve the public interest, or the reverse?" It is clear that PLAs serve union interests. But what's in it for developers? The letter shows that Gaylord would have had no problem signing a PLA in 2008. It also shows that the Chula Vista waterfront project failed because of infrastructure (public) funding problems, not labor problems.

So why Prop G? What has changed? Nothing. This initiative is not coming from Gaylord. It is coming from medium to small building firms who feel threatened by big deals between big developers and big labor. Only big labor and big business benefit from PLAs, the little guy on both sides of the labor issue are defeated.

The Internet has many studies and discussions on PLAs. Both unions and developers always claim that their interests coincide with the public interest. We must therefore separate the public interest from that of both unions and developers. The truth is that a PLA is an enabling deal between a big developer and a big union to craft "a mutually beneficial way to fund the infrastructure" i.e. it enables them to cooperate in raiding the public purse.

When developers and unions combine their lobbying power it is all but impossible for elected officials to resist them. Their combined political power succeeds in brushing aside environmental and public lands issues. For developers the extra labor cost is outweighed by union help in getting their project approved. The public interest takes third place behind that of unions and developers.

The City of Chula Vista has become the testing ground for putting the public interest ahead of  union/developer special interests. It is ironic that a mistaken belief, that union demands for a PLA was the cause of Gaylord's departure in 2008, became its driving force. As I see it, Prop G is more a struggle between big developers and small developers, big labor and ordinary (union or non-union) working families.
 

05/24/10   Would Lorie Zapf bring "strategic fraud" to City Council?
    by Pat Flannery                                                              top^


Lorie Zapf, a candidate for City Council District 6, is attempting to turn a bust into a boon. Last week Dave Maass of CityBeat broke a story busting her for being in default on her family home in Clairemont. Responding to CityBeat Ms. Zapf tried to paint herself as the champion of all families who are attempting to negotiate a modification of their mortgage with their lender.

Maass asked me for my (real estate) opinion on the veracity of Zapf's claim, that "strategic defaults" are now commonplace. I told him it was "B.S." Lenders do not modify loans for borrowers who have the means to make their payments. Modification is for families who have genuine hardship, not slick real estate professionals like Zapf's husband.

Before responding to CityBeat I pulled the relevant Deed of Trust and the Notice of Default from the County Recorder. The loan on which the Zapfs are in default is an interest-only Home Equity Line of Credit (HELOC). A quick look confirmed that Zapf's "explanation" to CityBeat was indeed B.S. HELOC rates are already the lowest rates available.

Reporter Maass was now caught between two opinions on "strategic defaults". Mark Goldman, a real estate lecturer at SDSU, was telling him "In order to just have the bank consider your request, they pretty much force you into going into default. There’s a lot of people in that situation.” A classic example of "Those who know, do. Those who profess to know, teach". But the journo handbook requires that reporters call know-all professors.

Then CityBeat asked me to research another Zapf Notice of Default, this time in Las Vegas. They wondered if this too was a "strategic default". Obviously somebody was feeding them information. So I dug out all the Zapf documents on their property at 2446 Craigie Castle St., Henderson, NV. It turned out to be much more than a "strategic default". It had all the trappings of "loan fraud" and "rent skimming". But CityBeat would not touch it. Perhaps they were afraid of getting sued.

2446 Craigie Castle St. is a 4 bedroom, 2 bathroom single-family house built in 2004. The Zapfs bought it from the builder, Dell Web of Arizona, on September 10, 2004 for $511,875 as a second home. It was a second home because they used "second home" financing. They got a $417,950 first loan and a $52,277 second, both from Countrywide. Wife Lorie would have to be intimately involved. A husband can't get "second home" financing without a wife's full cooperation.

Their combined 1st and 2nd loans, $470,277, was 92% of the purchase price. That kind of loan-to-value ratio is not available for investment properties. If Eric rented out this property as an "investment", he defrauded his lender and Lorie was equally responsible. Yet that is exactly what Lorie told Channel 10 they did. She said it was an investment property, owned by her husband.

A Notice of Trustee Sale was filed by Countrywide on September 14, 2008. The Zapfs had not made a mortgage payment since January 1, 2008. By then the amount owing on the first loan of $417,950 was $443,153.12. The Zapfs had "strategically" not paid $25,203.12 on the 1st, there is no information on the 2nd. If the Zapfs were collecting rent from their tenants from January to September 2008 while their loans were in default, they are guilty of "rent skimming".

The foreclosure sale did not go forward. Instead the Zapfs sold the property in a "short-sale" on March 27, 2009 to Robert and Ann Canavan for $250,000. Countrywide, now Bank of America, took a loss of $470,277 - $250,000 = $220,277 plus delinquent payments on both the 1st and 2nd together with foreclosure costs.

Obtaining 92% "second home" financing, renting the property, not making mortgage payments and then selling it in a short-sale has all the appearances of "loan fraud" and "rent skimming".

Scenting serious fraud, not just "strategic default", I went back and dug deeper into the financing of Zapf's Clairemont home. They had bought it in 1997 for $215,000. They pulled $180,000 "cash out" in a refinance with Wells Fargo for $330,000 on March 23, 2004. This was about the time they started "investing" in Las Vegas.

They took out a further home equity line of credit or HELOC for $230,000 on October 30, 2005. Their Clairemont home is now encumbered with $560,000. Altogether they have pulled $560,000 - $215,000 = $345,000 cash out of it since 1997.

A further search in Nevada's Clarke County public records revealed that the Zapfs "second home" loan on 2446 Craigie Castle St., Henderson, was not their first "second home" loan in Las Vegas. At the time they obtained their second "second home" loan on 2446 Craigie Castle St, they already had an outstanding "second home" loan on another house at 20 Weston Hills Rd, in the same Henderson project! How did they qualify for all three home loans? Lenders may not count projected rental income in a "second home" loan. Did they falsify their income?

They had purchased the 20 Weston Hills Rd. property 5 months earlier on April 7, 2004, only days after pulling that $180,000 "cash out" of their Clairemont home on March 23, 2004. To purchase 20 Weston Hills Rd., they had obtained their first "second home" loan from the same lender that had refinanced their Clairemont home, Wells Fargo. How did Wells Fargo  verify the required income to support these two home loans? There are no "stated income" products for low-down, owner-occupied "conforming" first and second home loans. Verification of income is required.

This Zapf/Wells Fargo deal has echoes of Jim McConville's "straw-buyer" scam. A person named James K. Crosby, from Hayward, CA, supposedly bought the house from the builder, Dell Web Communities Inc, an Arizona Corporation, for $314,416 and sold it to the Zapfs on the same day for $425,000, a one-day profit of $110,584. This is the classic "straw buyer" scenario.

Upon close examination I noticed that Crosby's signature on his grant deed to the Zapfs was notarized in Santa Clara County, CA on March 26, 2004, the same day the builder's grant deed to Crosby was notarized in Nevada.

This is called a "double escrow" transaction. If the Zapfs knew of, but failed to disclose the existence of, a second escrow, they defrauded Wells Fargo. If Wells Fargo personnel knew about it, they defrauded Wells Fargo's investors.

The Zapf loan was a standard Freddie/Fannie "conforming" loan. No Freddie/Fannie-approved lender could knowingly fund a "conforming" loan in such circumstances. The Zapfs' loan was the only loan recorded against that property on April 7, 2004, the closing date of this "double escrow" transaction, or at any time close to that date. In other words there is no record of a Crosby loan. Did he pay cash to the builder?

Unless Crosby (if he even exists) put $314,416 cash into escrow and received $425,000 back, for an instant profit of $110,584, the Zapfs, the builder, Wells Fargo and Crosby, split the proceeds of the inflated fraudulent loan between them. It is a well known scenario.

Those who perpetrate this classic fraud, move the inflated proceeds of a fraudulent loan between two escrows and record all the deeds on the same day. That is what appears to have happened on the Zapfs' purchase of 20 Weston Hills Rd., Henderson, NV.

The Zapfs went on to pull another $65,060 out of the property in a 2nd mortgage with Wells Fargo on December 13, 2005. On August 2, 2007 the Zapfs sold the house to Michael Rankin and Faith Matteson for $459,000.

This is the person the Republican Party wants to succeed Donna Frye in District 6. Do they condone this type of personal ethics so that they can use it at City Hall? It would appear so because they have donated $20,000 to her election campaign.
 

05/06/10   Strong Mayor = Insider Deals
    by Pat Flannery                                                              top^
 
I went to a strong-mayor forum (Prop D) last night at the San Diego County Health Complex sponsored by Common Cause and Empower San Diego, with guest speakers Donna Frye and Carl DeMaio. It was well attended, informal, with lots of great comments and questions. Carl and Donna are a great double act and the crowd loved it.

For me, what emerged was a pointed reminder of the continuous struggle between a secretive privileged elite and the rest of us. Carl DeMaio, who by temperament should identify with the forgotten masses, seems to yearn for acceptance by San Diego's ruling elite. It will never happen. Those of us who have lived here long enough know that San Diego is an elitist closed shop.

Carl doesn't seem to realize that Strong Mayor = Insider Deals. Unwittingly he is supporting a Prop D that will condemn him to permanent outsider status just like the rest of us. No matter how faithful a servant he may become, he will never be the choice of San Diego's ruling elite. They already have their yes-man - Kevin Faulconer. Ironically, DeMaio could actually be a popular mayor under the old system. His instincts are for open government, not Sanders-style insider dealing.

Frye argued passionately against the insiderism of a strong-mayor system. She contrasted the ready responsiveness of the old city-manager-style staff with the present bunker mentality of the strong-mayor system. She told how previously cooperative staff are now terrified to talk to Councilmembers for fear of being fired. Everything is routed through the Mayor's office. Every staff member remembers how Jim Waring, an arch-insider and favorite land use attorney, was fired for talking to Donna Frye about Sunroad without permission. Jay Goldstone told Lance Wade he was fired because he was "not political enough".

The fact is that powerful business interests already control City Hall. Prop D would just make it permanent and cheaper for them. Look at its financial supporters. It reads like a "Who's Who" of San Diego's insiders with McMillan and Sudbury topping the list. Under Prop D business interests would only need to own the Mayor and four Council Members to run the city. Control of local government is a business gravy train. It issues their permits and funds their projects.

A key part of Prop D power is the mayoral veto. It would expand City Council from 8 to 9 members which in turn would require 6 votes (not 5 as at present) to override a mayoral veto. Four compliant Councilmembers is all business would need to achieve a headlock on all city legislation.

Here's how a strong-mayor would work. He/she would veto an item passed by the Council 5 to 4. A super-majority of 6 to 3 would be required to override that powerful veto. Insider money would easily own 4 of the 9 votes. They already do: Faulconer, DeMaio, Young and Gloria (the Lincoln Club just bought Young's vote). The City Council would be effectively emasculated. That's what a strong-mayor would mean. That is the plan.

Thus a bought and paid for Mayor and four bought and paid for City Councilmembers could deliver billions of our tax dollars to special business interests such as the Chargers, while we the citizenry go begging for city services. But first they must get Prop D passed!

Will an insider elite succeed in persuading enough ordinary San Diegans to vote for an insider regime that is the very antithesis of citizen services? It would be like turkeys voting for Christmas. I sincerely hope the citizens recognize Prop D as the developer Santa Clause that it is and reflect on the stuffed socks of those four bought and paid for City Councilmembers.
 

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