Did Casey Properties rip off investors?

Eyewitness News Exclusive
February 4, 2009 6:13:37 PM PST
An investigation is expanding into home investments that have left many local homeowners broke. More than a dozen of them from New Jersey are now suing a property management company that they say lied to them.

It's quite a mess.

The Investigators' Sarah Wallace has an exclusive report.

The Totawa, New Jersey-based property management firm is still in business, despite a guilty plea by an associate to federal charges of money laundering. Not only is there a criminal investigation, but also now a civil suit alleges a widespread real estate investment scheme.

They are hard-working people who say they once had oustanding credit, before they met disbarred attorney Martin Gendel and his real estate agent son, Seth. Now, it's all changed.

"My credit is just totally shot," investor Barbara Borys said.

"It has just ruined my life," James Reno said. "I can't take out a loan. I can't refinance my house."

The group, consisting of more than a half dozen investors, now claims in a civil lawsuit that they were enticed to invest in homes in several New Jersey neighborhoods, primarily in Paterson. The appeal: No money down and, the biggest selling point, that a property management firm, Casey Properties, would handle all of the details, including collecting money from tenants to make mortgage payments.

"They were supposed to take care of everything," Borys said. "They took care of nothing."

The end result was that the homes ended up in foreclosure, and some of the investors were hit with default judgments.

"Right now, I have a judgment on me for $300,000," Robert Meyer said.

Many in the group bought multiple homes, compounding their credit crisis.

"It's a scam," Reno said. "I bought three houses with them. They were dumps. They need thousands of dollars worth of repairs, and they said they were going to do that, and they never did."

The investors say they often became unwitting slumlords, even though the contract says Casey Properties would maintain the properties. And they say the Gendels continued to collect rents from tenants like Maryann Hughes.

Hughes: "I had door problems, people was breaking in my house. I had a lot of problems."
Sarah: "And they wouldn't fix things?"
Hughes: "No."
Sarah: "But they'd still collect the rent every month?"
Hughes: "Uh huh."

The civil lawsuit was filed on behalf of 14 investors, and it alleges the Gendels and others, including an attorney who is also a retired Garfield municipal judge, conspired to inflate the value of distressed properties, and get buyers to take out new higher mortgages.

"The price for this, that they purchased the house for, was far and above the market value," attorney John Hipp said. "And that difference between real market value and inflated price was pocketed by these people."

For example, one home in Newark sold for $240,000 two months before the Gerhard Henschel bought it for $360,000. And he claims he later learned the Gendels had falsely inflated his income by $50,000 a year so he could get a higher mortgage.

"Now, I find out that it was over $100,000 that they put down," Henschel said.

We tried to talk to Martin Gendel.

Gendel: "I have no idea what this is about."
Sarah: "Well let me explain it to you. Can I explain it to you? You have a lot of people who say that you've ripped them off, who invested in houses, and that you stopped paying the mortgage and now they're in foreclosure and their credit is destroyed."
Gendel: "I have no comment, thank you."
Sarah: "Why don't you have any comment? Sir, do you have anything to say about all these people who've lost all their money?"
Gendel: "Not to you."
Sarah: "Why not? What about to them."
Gendel: "Excuse me."

"There are 14 of us involved in this," Meyer said. "He has ruined 14 people's lives and their families."

"We can't actually do anything to do to look for the future right now," Gregory Borys said. "Because right now, there is no future. We're going to live day to day, week to week. It's just despicable."

This foreclosure business is so insidious that, in this one case, there are 30 to 40 homes now in foreclosure. Most are abandoned. And we know what happens to neighborhoods with abandoned houses, they become even more distressed. And that affects other residents who are hoping to improve the value of their homes.