4 accused of flipping must pay purchasers

Men ordered to cover cost of probe, prosecution

October 26, 2002|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Four men accused of illegally flipping houses in Baltimore were ordered this week to pay more than $2.2 million in restitution to homebuyers they allegedly misled and to stop violating Maryland consumer protection laws in the sale of homes.

The order by William Leibovici, chief of the attorney general's Consumer Protection Division, also requires the four men and their companies to pay civil penalties totaling $264,000 and to foot the costs of the three-year investigation and prosecution. The decision was dated Tuesday and released yesterday.

Named in the broad order were Lee M. Shpritz, a real estate speculator, and three companies he operated; Lee P. Woody III and American Skycorp Inc., a defunct mortgage firm that Woody headed; and two real estate appraisers, John M. Morgan Jr. and Michael Almony and his firm.

Leibovici found that Shpritz sold homes at inflated prices, using falsified appraisals. He said American Skycorp used falsified documents to provide first-time homebuyers mortgages they could not afford and then sold the mortgages. Many buyers later defaulted.

The accused "exploited a vulnerable group: first-time homebuyers with low incomes and questionable credit histories," Leibovici wrote in a 167-page opinion. "Not only have these practices adversely affected individual consumers, they have created significant problems for the neighborhoods in which these consumers live. ... When consumers default and the property is foreclosed upon, the practice hurts the neighborhood in which the consumer lives."

Records show that Shpritz bought and quickly resold dozens of houses in the Baltimore area in recent years, selling them for much higher prices than he paid.

Property flipping itself is not illegal. It crosses the line if documents are falsified to obtain mortgages for buyers who would not otherwise qualify and if the house is resold for more than it is worth.

Leibovici's decision was welcomed by Larry Chriscoe, who got a government-insured loan from American Skycorp in 1999 to pay $115,000 for a Northeast Baltimore house. Shpritz had bought the property from a bank six months earlier for $38,000.

"It's about time we got some repayment for what happened to us," said Chriscoe.

Shpritz's lawyer, John Bourgeois, said there is a good chance that he will appeal Leibovici's decision to the Circuit Court.

"There are some fascinating legal issues in this case including among others whether purchasers who actively engage in fraud themselves are entitled to be awarded restitution," he said yesterday."

Leibovici overturned a key part of a recommended decision by an administrative law judge who held hearings last year.

Judge Sondra L. Spencer had said division lawyers failed to prove that appraisals were inflated and she had "no objective standard" to determine whether those by Morgan and Almony were accurate.

In rejecting that part of Spencer's decision, Leibovici accepted the contentions of lawyers in the division he heads.

Michael Conroy, Morgan's lawyer, was outraged that the head of the division, acting as a judge, would "rubber-stamp" the work of subordinates who prosecuted the case.

"It's not helpful to the judicial system," he said. "I think it's just going to emphasize how important the constitutional right to a jury trial for all our citizens is."

Morgan is no longer licensed in Maryland and has left the state, Conroy said.

Almony's attorney and Woody could not be reached. Woody left Maryland after American Skycorp was barred from issuing loans backed by the Federal Housing Administration and the state revoked its operating licenses in 2000.

A federal criminal investigation involving Woody and Shpritz began more than two years ago.

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