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Realtor Don Johnson being sued by Attorney General

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Local real estate agent Don Johnson is the subject of a civil suit—alleging a variety of deceptive, unprofessional, negligent, or fraudulent foreclosure consulting activities—filed last month by the Indiana Attorney General’s Office.

The 33-count suit, filed before the Indiana Real Estate Commission (IREC) on Nov. 19, is the second such suit to name Johnson in seven months, the first one alleging on his part—and on the part of 21st Century Legal Services Inc., a firm with which he was associated—violations of the Credit Services Organization Act and the Mortgage Rescue Protection Fraud Act.

Johnson was previously disciplined in July 2009 by the IREC “for engaging in material deception in the course of professional services by utilizing false and misleading advertisements regarding mortgage debt forgiveness,” the most recent suit notes. Johnson’s real estate principal broker’s license was placed on indefinite probation at the time and a hearing is scheduled for Dec. 15 to hear his petition for withdrawal of his license’s probationary status.

The Nov. 19 suit makes the following general allegations:

•Johnson had been acting as a foreclosure consultant for 21st Century Legal Services Inc., prior to 21st Century’s “being raided and subsequently dissolved by the FBI.”

•In his role as consultant, Johnson met with consumers in his office, prepared loan modification documents, and forwarded those documents to 21st Century.

•Johnson took up-front money from those consumers and forwarded those moneys to 21st Century. He “claimed to make no income off these transactions,” telling consumers “that he only hoped in return for his services, good referrals, or the opportunity to work with the consumers in the future,” but from April through July 2009 Johnson received “six wire transfers from 21st Century for approximately $60,000.”

•In addition, Johnson “prepared bankruptcies on some of these consumers’ behalf, without a license to practice law.”

The Nov. 19 suit cites several cases in detail.

Brown Street

One case involves a woman “laid off from her job” who wanted to list her house on Brown Street in Chesterton for sale. Johnson advised her to work on a loan modification with 21st Century instead of selling and “assured (her) that he could lower her monthly payments,” the suit alleges. Johnson then told her to cease her mortgage payments and instead to pay him the equivalent of four mortgage payments, totaling $2,694, which she did, sending Johnson three checks and one credit card payment “processed through (Johnson’s) kickboxing business,” the suit alleges.

The woman did cease her mortgage payments, then two months later began receiving foreclosure notices” and in February 2010 was notified that her house was scheduled for a sheriff’s sale, the suit alleges. At this point the woman requested a refund but was told “that a refund could not be issued because of a class-action suit against 21st Century,” the suit alleges. In February 2010 the woman filed for bankruptcy to avoid foreclosure and to keep her home.

Annabelle Court

In March 2009 a man—“due to loss of employment”—asked Johnson to assist with a loan modification on his property on Annabelle Court in Chesterton. Johnson told the man that he could reduce his interest rate from 7.25 percent to 4.2 percent, the man signed a contract for loan modification services, and he remitted to Johnson $4,500, the suit alleges. Johnson “assured (the man) that he would refund any moneys if the loan modification was unsuccessful.”

In July 2009, however, the man was notified that his property was scheduled for sheriff’s sale. Johnson then prepared Chapter 13 bankruptcy documents on the man’s behalf, telling him “that the bankruptcy filing was just a tactic to stall the sheriff’s sale but that no actual plan would be filed in the bankruptcy court,” the suit alleges. When the man filed the paperwork in the U.S. Bankruptcy Court, Northern District of Indiana, “an employee of the court commented that the paperwork was incomplete and she recognized the paperwork as another faulty filing prepared by (Johnson),” the suit alleges.

In September 2009, the man signed a letter of release provided by Johnson, “believing it was a release to get a refund of the moneys promised by (Johnson).” But the man “has never received a refund,” the suit alleges.

In January 2010 the man again filed for bankruptcy and shortly thereafter received notice from his mortgage servicer that it had never received any funds either from Johnson or 21st Century, the suit alleges. The man “negotiated independently with his servicer” but “now owes approximately $30,000 more on his mortgage.”

Bank Letter

The suit alleges as well that Johnson, in the course of making short-sale offers on properties, would include with those offers “an availability of funds letter issued on Fifth Third Bank letterhead” indicating that Johnson had in excess of $150,000 available to him to make such offers.

That letter was dated Nov. 6, 2009 but on April 5, 2010, Johnson “altered” the date of the letter, “creating the fraudulent letter that was circulated to agents in the region, in order to portray (Johnson) had sufficient funds for the short-sale offers,” the suit alleges.

Contractor Clean-outs

In addition, the suit alleges that Johnson “conducts clean-outs and re-modeling projects on properties that (he) does not own.”

Johnson does so by employing contractors “to either re-model a property so (Johnson) can start marketing the property prior to ownership or strip the property in order to reduce the appraised value for (Johnson’s) initial purchase,” the suit alleges.

Johnson “then has these contractors replace all of the items so the new appraisal will make it appear (Johnson) has made extensive improvements to the property for added value,” the suit alleges. “This allows (Johnson) to re-sell the property at a much greater value than what he purchased it for.”

Specific Counts

The Nov. 19 suit specifically accuses Johnson of the following, among other things:

•Of engaging in material deception in the course of professional activities, in violation of Indiana Code, by preparing a false bankruptcy petition without a license to practice law.

•Of violating both the Mortgage Rescue Protection Act and the Credit Services Organization Act by failing to obtain a surety bond and file it with the Attorney General’s Office; by failing to provide a written statement prior to contracting services; and by failing to provide homeowners written notice of their rights.

•Of continuing to practice although “unfit to practice due to professional incompetence,” by failing “to account for and remit funds belonging to (a client) once the loan modification process was unsuccessful.”

•Of engaging in material deception, by failing to notify a client—this one the owner of a property on Commodore Lane in Porter—that the property had been sold at a sheriff’s sale and continuing to collect rental payments from the tenants of the property.

•Of engaging in material deception, by “forging a Fifth Third Bank letter.”

•Of engaging in material deception, by haring “contractors to clean-out properties to reduce their value, only to have the same contractors re-install the items to make it appear that (Johnson) has made extensive improvements to the property to raise the selling price.”

Molly Butters, spokesperson for the Attorney General’s Office, told the Chesterton Tribune that, if the charges against Johnson are sustained, the administrative law court which has jurisdiction in the matter could order Johnson to pay restitution, penalties, and fines, and could also impose discipline ranging from a letter of reprimand to the revocation of his license.

Johnson did not return a call today from the Tribune.



Posted 12/8/2010






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