2 Builders Plead Guilty

In Rare Criminal Case, Brother, Sister Admit Misusing Clients' Funds, Could Face 15-year Terms

July 02, 2009|By Jamie Smith Hopkins | Jamie Smith Hopkins,jamie.smith.hopkins@baltsun.com

In a rare criminal case against a Maryland homebuilder, a brother and sister who ran a Baltimore County company have pleaded guilty to misusing more than $225,000 in deposits from customers expecting new homes, the state attorney general said Wednesday.

Walter Osborne Ely Jr. and Kimberly Zahrey started JAE Developers in 2002 and collected between $1,000 and $50,000 in upfront payments from prospective home buyers, according to Attorney General Douglas F. Gansler's statement of fact submitted to Baltimore County Circuit Court Judge Vicki Ballou-Watts. Instead of putting the money in escrow accounts as required, the two quickly spent it. Some of the money went to business expenses that had nothing to do with building the customers' homes, the state said. Some of it Ely and Zahrey spent on themselves, the state said.

Of the 22 couples or individuals named as victims, most never got their homes or received their money back, the state said.

Warren A. Brown, a Baltimore attorney named in court records as the siblings' lawyer, did not return calls seeking comment Wednesday.

The six counts of "failure to hold new-home sums in escrow" to which Ely and Zahrey pleaded guilty this week involved deposits collected in 2003 and 2004, when the housing market was hot. They were barred from acting as a home builder in September 2004 by then-Attorney General J. Joseph Curran Jr. But the $226,768 in deposits that are part of the more recent court case represent a fraction of the $1.1 million they were ordered by Curran to repay to consumers in 2006.

Robert and Loretta Lemon, who signed a contract with JAE Developers in 2004 to build them a new split-level home in Catonsville, lost much more than their $3,000 deposit to hold the lot and $25,800 in upfront payment for options. They took out a $190,000 construction loan for the home, and the bank turned all the money over to Ely and Zahrey immediately instead of in stages, Robert Lemon said.

With the borrowed money gone and no house to show for it, the Lemons filed for bankruptcy. The lender foreclosed on the land. The couple has been living in a one-bedroom apartment, their ruined credit preventing them from buying another home and making it hard to find work.

"This thing has been one continuous nightmare for us," said Robert Lemon, 51, who sold his home in Randallstown to buy the upgraded house JAE promised. "I think this was all a scam from the start."

Ely and Zahrey, scheduled to be sentenced Oct. 13, face as much as 15 years in prison and a $10,000 fine. Raquel M. Guillory, a spokeswoman for the attorney general, said cases against homebuilders are usually handled through the consumer protection division and are "very rarely" turned over for criminal prosecution.

"I hope these people sit in jail the entire 15 years so they can never do this to no one else," said Robert Lemon.

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