Although the following tale is from
Idaho, it is akin to many seen throughout Michigan, some during my time with the
Wayne County Prosecutor’s Office Deed Fraud and Mortgage Fraud unit. Bank
Fraud, Mortgage Fraud, Deed Fraud, Short Sale Fraud. This story has it all. A
get rich quick scheme that included falsified loan applications to secure
construction loans during the Real Estate Boom time goes bust when the market
collapsed. Most telling is the claim “This is not me”, by the Father that his fraudulent
behavior is his regular character. I beg
to differ. It is easy to be generous, ethical and kind when all is going well.
It is during the tough times that a person’s true character is revealed. Typically,
the involved parties seek to retain what they had gained, protect what they
have, and avoid any consequences. However, some actions, if deemed fraudulent
have Consequences. Even though there is another bad actor in here, Nick Malis,
who falsely claimed to be a Nevada Attorney, the scheme was clear that in the face
of losing everything this family tried to fraudulently transfer its assets to
avoid any collections by creditors. Michigan’s own Judge Hathaway learned the
hard way that this is not the thing to do. Even though the Hymas family blames
the first Bankruptcy attorney for not filing properly, an attorney can only
work with what he is given and told. If that information or documentation is
wrong, then the filing will be as well. I believe the judge was too lenient on
these folks. Hopefully the lenders will file charges for Bank Fraud regarding
the loan applications as well.
Shauntee Ferguson sobbed
uncontrollably as she stood before a federal judge this month. The mother of
five begged for mercy as the judge set her sentence for mortgage fraud.
Her father, Michael Hymas, sat in
the courtroom, head hung low. He listened to the prosecutor and the judge chastise
his daughter for letting him, and her husband, talk her into signing falsified
loan applications. Just a few hours earlier, the same judge had sentenced Hymas
to 21 months in federal prison. Next week, the judge will sentence Ferguson’s
husband, Stanley.
One by one, over the course of 11
months, almost a dozen people have pleaded guilty or have been charged in
federal court for their roles in a web of real estate schemes that made — and
then lost — millions of dollars in the Treasure Valley’s housing boom and bust.
It has all the trappings of a
Hollywood movie — assets hidden in shell companies, abandoned and unfinished
homes, a beauty queen, a fatal plane crash and an appearance on a television
reality show.
At the center of this complex story
is the now defunct Crestwood custom home-building business, its young,
ambitious owners and the close-knit group of family and friends around them.
The numbers are staggering: Between
April and July 2008, Crestwood owners Aaron Hymas and Justin Walker and their
family members and friends filed seven bankruptcies, collectively owing more
than $85 million to more than 900 creditors. More than 100 civil cases have
been filed in Idaho and Utah against Crestwood, Hymas and Walker.
The subsequent — and ongoing —
federal investigation led to charges last year against eight Hymas family
members or associates. All pleaded guilty.
Now, a second wave has begun. Last
month, a federal grand jury indicted two more people, and additional
indictments are expected in the coming months as the U.S. Attorney’s Office,
Idaho Attorney General’s Office, FBI and federal bankruptcy and IRS
investigators unravel a labyrinthine paper trail involving millions of dollars
in real estate transactions and dozens of businesses and shell companies.
The two central figures, Aaron Hymas
and Justin Walker, have not been charged with any crimes. One never will be:
Walker died in a plane crash last year.
And while Aaron Hymas has no
criminal charges, he recently was dealt a legal and financial blow. In
September, a federal bankruptcy judge refused to discharge any of his debt.
PLANS FALL APART
During the real estate boom, many
people in the Treasure Valley and across the nation were operating real estate
Ponzi-like schemes that worked like this:
1) Obtain bank loans to purchase or
build homes.
2) Quickly sell the homes for a
profit.
3) Repay the bank and pocket the
extra cash.
4) Repeat.
The system worked as long as the
properties kept selling for more and more money — one property sale would pay
off the loan coming due on another property.
“The market was out of control,”
Michael Hymas’ attorney, Darren Meacham, told a federal judge at Hymas’ Nov. 1
sentencing.
“To call this fraud is misleading,”
Meacham said. “In fact, this worked in the beginning. … Nobody thought they
were going to get hurt. Nobody thought it would go down.”
But when the housing market cooled
and the buyers went away, many were left owning numerous properties, with
millions of dollars in bank loans and no financial ability to keep it all
afloat.
QUICKLY CRUMBLING
In October 2007, the tanking economy
forced dozens of buyers to walk away from pending Crestwood home sales, leaving
Crestwood with more than a hundred unsold lots and homes. Aaron Hymas and
Justin Walker consulted a bankruptcy attorney.
The same month, Hymas and Walker
attended an “asset protection” seminar by Nick Malis, who presented himself as
a Nevada attorney. Malis would tell them how “to own nothing but control
everything” by creating holding companies that would own all of a person’s
assets — in effect, making the person penniless and judgment-proof.
Malis’ advice so impressed Hymas
that he hired him to create nine companies in Nevada on Dec. 4, 2007, to
provide the “layers of protection” discussed at the seminar. On the same day,
Walker created four similar Nevada companies. A few weeks later, Hymas
unsuccessfully tried to contact Malis. “Aaron learned Malis was not an attorney
... and, in fact was in trouble with the law,” according to bankruptcy court
documents.
The court documents detail what
happened next:
Hymas hired another attorney, who
determined Hymas’ nine Nevada entities were legal. Hymas and his wife, Tiffany,
began liquidating investment accounts and transferring assets, their personal
home and most of their household goods to the Nevada accounts and elsewhere.
Dozens of asset and cash transfers occurred between December 2007 and April
2008, “at a time when Crestwood, Inc. ... was in its financial death spiral,”
Assistant U.S. Trustee David Newman wrote.
Hymas said he had no intention of
filing bankruptcy when he set up the Nevada accounts in December 2007,
according to court documents. He said he did not consider filing bankruptcy
until Bank of the West filed a $1.3 million lawsuit against him, Walker and
Crestwood on Feb. 20, 2008. (On Feb. 21 and 22, the Hymases had transfered
$325,000 from a personal account to their Nevada companies.) Hymas and Walker
retained bankruptcy attorney Kelly Beeman on Feb. 28, 2008, but they would not
file bankruptcy until almost two months later.
The Hymases loaned themselves
$60,500 in March 2008 from one of their Nevada companies to pay for a surrogate
mother and in vitro fertilization. Twin boys were born in January 2009.
Just days before filing bankruptcy,
Hymas partnered with Vince Covino to buy 1,000 shares of stock in a financial
planning company. For his shares, Hymas wrote a check for $220,000. About a
year before filing bankruptcy, Hymas had loaned Covino $500,000, which was
later converted into 49 percent of Covino’s company, Equity Benefits, which
owned commercial real estate in Eagle and Phoenix.
On April 17, 2008, Bank of the West
was awarded the $1.3 million judgment it sought. On the same day, the Hymases
sold Tiffany’s wedding ring, watches and other jewelry to Aaron’s father for
$13,000. One week later, on April 25, Aaron, 36, and Tiffany, 35, finally filed
personal bankruptcy. The final document comprises several hundred pages,
listing assets of just $64,000 and debt of a staggering $68 million.
For more than two years now,
bankruptcy trustees have waded through myriad filings fraught with omissions
and mistakes.
Aaron Hymas told the court their
initial bankruptcy attorney, Kelly Beeman, is to blame for incomplete and
missing information.
Beeman and Hymas refused to be
interviewed by the Idaho Statesman. Other Hymas family members could not be
reached, and Aaron Hymas said they didn’t want to talk.
Hymas brought on a new bankruptcy
attorney, Brent T. Robinson, in October 2008.
Robinson did not return a call from
the Idaho Statesman.
Robinson told the bankruptcy court
this summer that his clients had received bad advice from Beeman.
“Once they realized that they were
receiving bad advice from Mr. Beeman, they attempted to correct any mistakes,
misinformation or omissions that were present,” Robinson wrote.
“Defendants have no defenses,”
Assistant U.S. Trustee David Newman responded. “They cannot claim advice of
counsel as defense or blame their misconduct on attorneys’ sloppy work.”
The judge agreed Beeman’s work may
have been less than stellar.
“Beeman’s advice and conduct was
patently wrong in numerous regards,” wrote Chief U.S. Bankruptcy Judge Terry L.
Myers, noting that Beeman “was in many instances impeached by his own
deposition testimony.”
But ultimately the responsibility
lies with the Hymases, the judge said.
On Sept. 30, Myers denied the
discharge of the Hymases’ $68 million debt because of “their transfer of assets
within a year of filing bankruptcy with the intent to hinder, delay or defraud
their creditors and their knowing and fraudulent false oaths,” Myers wrote.
The Hymases did not appeal the
judge’s decision.
Even though none of their debt will
be discharged, the bankruptcy case moves forward as the trustee attempts to
recover and liquidate the couple’s assets to pay creditors.
On Sept. 17, the bankruptcy trustee
filed a complaint against Covino seeking recovery of the $500,000 Hymas gave
him. Covino is amicably working with the trustee to resolve the matter,
according to his attorney, Brian Boyle.
A TRAGIC TURN
Justin and Jackie Walker filed
bankruptcy the same day as the Hymases — just days after Jackie was crowned
Mrs. Idaho 2008.
It was a busy time for this group.
Within a few weeks, the company of Crestwood filed a $27.2 million bankruptcy
and Hymas’ brother, sister and cousin all filed bankruptcy.
The Walkers’ filing, also lengthy,
lists $168,000 in assets and $69 million in debt — much of the same debt the
Hymases listed. Beeman also was their attorney. Their bankruptcy investigation
also revealed Nevada companies, transferred assets and incomplete or missing
bankruptcy information. As with the Hymases, the U.S. trustee had asked a
bankruptcy judge to deny the discharge of any of the Walkers’ debt.
But it would never get that far.
On the morning of Aug. 1, 2009,
Walker attended a bankruptcy auction of his personal items and unsuccessfully
bid on his children’s snowmobile. After the auction, he went to the Caldwell
airport, where he kept a tan-and-blue single-engine Gray RV-6. Except for a
quick flight a week earlier, the plane had sat idle on the tarmac for almost a
year.
Walker removed and sandblasted the
spark plugs and cleaned the air filter. He then got in the cockpit and took
off. He had gained just a couple of hundred feet in altitude when the engine
began making a popping noise.
Walker attempted to turn around and
land, but as the plane nosedived, it collided with power lines and burst into
flames as it hit the ground near the runway. Walker, 35, was killed. He was the
father of five children.
The FAA determined that pilot error
caused the crash: Walker failed to maintain adequate air speed, causing the
plane to stall.
ALL IN THE FAMILY
Between 2004 and 2006, Michael Hymas
(Aaron’s father), his daughter, Shauntee, and his son-in-law, Stanley, pleaded
guilty to falsifying $8 million in loan applications to purchase and flip 21
properties in Idaho and Utah.
“Ultimately, the scheme collapsed,”
Assistant U.S. Attorney George Breitsameter told Judge Edward J. Lodge at
Michael Hymas’ sentencing.
Hymas, 59, a longtime Meridian
insurance agent, asked the judge for leniency.
“This is not me,” he told the judge.
“My entire life I’ve taught my family about integrity. I put myself in a
position where I … jeopardized my integrity. I didn’t mean to.”
Hymas wants to return to Utah and
start making money so he can pay his restitution. He and his son, Aaron, have
just started a new business venture called eNutriTec, a health food products
company.
The elder Hymas’ attorney asked the
judge to let his client go with probation or house arrest and restitution.
Lodge scoffed at the idea.
“Restitution is not a punishment …
the money was never yours to begin with,” Lodge said.
This wasn’t just one mistake in need
of restitution, Lodge said. Because Michael Hymas had filed bankruptcy a few
years ago, he had to use his daughter and son-in-law’s names and credit ratings
to get bank loans. Twenty-one of the 28 loan applications filed by the trio
contained false information.
The “train wreck” was inevitable,
Lodge said.
Lodge sentenced Michael Hymas to 21
months in federal prison, three years supervised release and 80 hours community
service. He ordered him to pay restitution of $544,647.
Lodge was especially critical of how
Hymas and his son-in-law used his daughter.
“Your daughter pretty much did what
she was told,” Lodge said.
Shauntee Ferguson, 33, a
stay-at-home mom, signed her name to loan applications and other documents
prepared by her father or husband. Some documents indicated she made $10,000 a
month as a marketing director at her father’s insurance agency, when in fact
she was not employed and had no income.
“You cannot put your head in the
sand and say you didn’t know what was going on here,” Lodge told her. “You just
don’t sign documents unless you read them.”
Lodge sentenced Ferguson to one day
in prison, five years of supervised release and restitution of $365,829.69.
“It is probably unfair to the
victims, but it is the only sentence the court feels is realistic,” Lodge said.
Her husband, Stanley, will be
sentenced on Nov. 29.
THE NEXT ROUND
Melody Covino Redondo, Vince
Covino’s sister, slouched in her chair next to her husband, Paul, at the
defendants’ table during their arraignment before a federal judge on Nov. 1 —
coincidentally the same day as Michael and Shauntee Hymas’ sentencing.
Their indictment on multiple counts
of bank fraud, wire fraud and making false statements to a financial
institution marked another wave of charges brought by federal investigators and
prosecutors.
The Redondos may be familiar faces
to fans of “Fear Factor.” The couple appeared on a honeymoon episode of the
television show in 2005.
In an alleged real estate scheme,
Melody Redondo, a real estate agent, attempted to sell Crestwood subcontractor
Christopher Georgeson’s $1.4 million Eagle home in a short-sale without
notifying the bank of higher offers.
Under the scheme, the house would be
simultaneously sold to another buyer and Redondo would get a share of the
proceeds. When Redondo couldn’t get someone to notarize a quitclaim deed on
which she had allegedly forged Georgeson’s name, Redondo became a notary and
signed the deed herself, according to the indictment.
The simultaneous sale never took
place.
Both Paul, 33, and Melody, 32, also
are accused of falsifying income and other information on loan documents.
The Redondos pleaded not guilty at
their Nov. 1 arraignment. A trial is set for Jan. 11.
Breitsameter said the FBI
investigation continues and he expects to bring more cases to the grand jury in
the coming months.
Original story By CYNTHIA SEWELL —
cmsewell@idahostatesman.com
This story originally appeared on
Nov. 21, 2010
