AG Zoeller Files Lawsuit Against Out-Of-State Companies Accused Of Tax Sale Scheme

Indiana Attorney General Greg Zoeller filed a lawsuit today against three out-of-state companies and their owners for allegedly working in concert to perpetrate a tax sale scheme in attempt to swindle struggling property owners in Allen, Johnson, Lake and Marion counties out of potentially millions of dollars. 

The defendants in the lawsuit include FLRC, LLC, Coastal Title, Inc. and Oak Tree Title, LLC, as well as Diana Castro, Craig Talkington and David Fuqua. These companies and individuals are based in Florida, Oklahoma and Nevada.

According to the complaint filed in Marion County court, the defendants perpetrated a complicated scheme that took advantage of vulnerable Hoosiers who had fallen behind in their real-estate taxes and who did not understand the tax sale process. It is suspected these defendants conducted the scheme in several other states as well.

The Attorney General’s Office in suing the defendants is seeking more than $9 million in restitution and civil penalties.

Tax sale scheme

When a homeowner falls behind on their property taxes, the county lists the property at tax sale. The minimum bid set for these homes is the amount owed in taxes. If the winning bid exceeds the amount of the unpaid property tax owed, the county claims only the tax amount and the original homeowner is entitled to any surplus amount beyond what may be owed to a mortgage lender. This surplus may be considered a rough equivalent to their home’s equity. 

The original homeowner then has one year to redeem the property if he or she can pay back the taxes originally owed. If the homeowner can’t pay within a year, then the bidder is awarded ownership of the property. It’s during this one-year time window that the defendants allegedly perpetrated their scheme.

Using court and public records, the defendants and their agents allegedly located and contacted the original homeowners whose properties had been sold at tax sales for large surplus amounts. According to the lawsuit, they deceived at least 48 homeowners by making misrepresentations about their legal rights to redemption or surplus in the tax sales. The scam worked best with property owners who did not have an outstanding mortgage that would have to first be paid off with the surplus.

By exploiting the homeowners’ unfamiliarity, the defendants and their agents persuaded the homeowners to sign quitclaim deeds and other legal paperwork turning over their remaining legal interest in the properties to the defendants, in exchange for $450 or less. The companies, in turn, then were able to submit claims for the tax surplus payments the 48 original owners would have been entitled to – in amounts ranging from $2,000 up to $900,000, the lawsuit alleges.  

“Rarely have we seen a scam that so brazenly exploited desperate property owners and took advantage of their lack of understanding of a complicated legal process. Victims not only lost their property but money that was rightfully owed to them,” Zoeller said. “We suspect others were victimized, and my office will use every legal tool available to halt this fraud, hold the defendants accountable and assist the victims.”

The Attorney General’s Office through its Homeowner Protection Unit (HPU) fielded complaints about this alleged tax sale scheme from the affected owners and from county officials, who were able to identify the potential scheme only after the deed exchanges were filed with the county auditor’s office.

“I am thankful the Attorney General is investigating tax sale fraud throughout Indiana,” Allen County Auditor Tera Klutz said. “My staff and I are happy to assist the AG in his investigation because we believe some of these homeowners who have lost their homes in tax sales may have been misled about the surplus funds available to them.”

It is estimated that the defendants paid the 48 original owners a combined total of $13,640 for signing the quitclaim deeds, and after defrauding the owners out of their legal rights to the tax-sale surplus amounts, the defendants were eligible to submit claims for $3,265,204 in tax-sale surplus payments.

Zoeller said that thanks to cooperation from the local auditors, recorders, assessors, and treasurers, the AG’s Office was able to intervene temporarily in many of these 48 cases and obtain court orders to block the defendants from receiving the tax surplus payments, while the AG’s investigation and subsequent legal action is pending.

In the lawsuit, Zoeller’s office alleges the defendants violated the Home Loan Practices Act by making misrepresentations, concealments or false terms in connection with a real estate transaction and by engaging in real estate transactions without proper licensure. The lawsuit also alleges incurable and intentional violations of the Deceptive Consumer Sales Act.

The lawsuit asks the Marion County court to issue an injunction against the defendants that would prohibit them from engaging in any transactions in Indiana or any deceptive acts or omissions. It also seeks more than $9 million in consumer restitution, investigative costs and civil penalties.

Zoeller thanked Deputy Attorney General Derek Peterson for his work on this case.

Tips for consumers

Zoeller added the AG’s Office’s investigation continues due to concerns other homeowners may have fallen victim to this scam or similar scams in Marion County or other counties. Owners who suspect they have been defrauded are asked to file a consumer complaint with the Attorney General’s Office at www.IndianaConsumer.com or by calling 1-800-382-5516.

To avoid fraud, Zoeller urges any distressed homeowner facing a tax sale due to unpaid property taxes or foreclosure due to unpaid mortgage payments to first seek legal advice from a qualified attorney before engaging in any quitclaim deed or other legal transaction. Free legal advice is available from the Indiana Foreclosure Prevention Network at www.877gethope.com or from Indiana Legal Services, which recently received a grant from the AG’s Office to support this type of counseling. 

Todays “Readers Poll” question is “Do You Believe DMD Director Kelley Coures Assertions That The Feds Are Not Doing An Investigation But An Audit of TARP Funds”?

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