“Let me guess. Your boss’ wife loves to shop, and the $3,500 per loan comes in handy. I would guess that most appraisals come in okay.”
“Boy, does she like to shop. And instead of ‘most’, try ‘all’. Not a single property hasn’t appraised out. And it gets even better. Guess who keeps half of the twenty points?”
Pierre shrugged his shoulders.
“My boss’ ex-wife, because she’s friendly with the people in Miami and she set the whole deal up. They call it a ‘finder’s fee’ and she puts it into a college fund for their kids—you know, my boss’ and his ex-wife’s.”
“That’s unbelievable. He gets the attorney’s fee and his wife gets the appraisal fee and his ex-wife gets the finder’s fee. Good thing this guy was only married twice. So what made the lender stop making the loans?”
She shrugged. “The borrowers stopped paying. It used to be that maybe ten or fifteen percent of the borrowers would go into default. Now it’s like sixty or seventy percent. And now when the lender tries to foreclose, it turns out that the property isn’t even worth the amount of the first mortgage, never mind the second. Guess those appraisals weren’t so accurate, huh? So the lender is losing tons of money.”
Pierre shook his head. Patti took a sip of wine and continued. “But wait, it gets even better. So now, the lender has no choice but to foreclose. And guess who gets paid for doing the foreclosure work?”
“Did the lender know your boss’ wife was doing the appraisals?”
“I don’t know for sure, but I don’t think so. She used her maiden name on them, even though she usually uses her married name.”
Patti’s boyfriend interrupted them, and Pierre leaned back in his seat and did some arithmetic in his head. At seven or eight closings per week, Patti’s boss was earning over a million dollars per year just from this one lender. Pierre himself had made decent money during the real estate boom, but his $100,000 per year was chump change compared to the small fortunes made by players like Patti’s boss and the Baron of the Brownstones. They may have been operating in that gray area between simple immorality and outright illegality, but they sure got paid well for it.
CHAPTER 18
[December 14, 1989]
Puck’s secretary wheeled a shopping cart full of files into Bruce’s office. “We’re having a special this week on canned corn and paper towels,” she said with a wry, wet smile.
She probably had fifteen years on Bruce, but was still attractive in a leggy, big-haired kind of way. Like Bruce, she was dark-eyed and dark-complexioned, though Bruce could tell her hair had been chemically lightened. When Bruce was younger, he used to fantasize about his birth mother appearing at his doorstep one day to re-claim him. In his fantasy, she looked a lot like the woman standing framed in his office doorway.
Bruce chuckled good-naturedly, resisted the urge to be flirtatious. “Thanks, Jan. Just leave them there in the check-out aisle.”
She wheeled the cart alongside Bruce’s desk, smiled, and spun on one heel to leave. She was carrying Mr. Puck’s mail, and as she turned Bruce could see that the top letter bore the return address “Lloyd’s of London.” Was Lloyd’s a client of the firm? Bruce was sure he had not seen it on the list of firm clients. Was it possible that Puck was one of the shareholders, known as “names,” of the company that was willing to insure almost anything? Rich old bastard.
Bruce turned in his chair and eyed the Nickel Bank foreclosure files. Each of them told a story—of greed, of shattered dreams, of stupidity, of desperation. Collectively they told of fortunes lost and, Bruce hoped, of fortunes to be gained.
There were 40 of them, as Puck had said there would be. Hopefully at least a couple would offer an opportunity for a decent score. Bruce grabbed a handful of files and began skimming through them. Nickel's previous attorney had done some preliminary legal work, but the cases were still two or three months away from the actual foreclosure sales.
All of the borrowers were at least six months in default, some because of job loss and some because they simply had too much debt to cover. Still others, usually the owners of investment properties, seemed to have thrown up their hands and simply walked away from their properties. Whatever the case, the slumping economy and real estate market had shattered these American Dreams.
Bruce was also interested in what the files did not contain. None of them contained a current appraisal, so the bank really had no idea what the properties were worth. Bruce would have to order appraisals for each property before conducting the foreclosure sales. Was there an angle to play here?
He took the files and divided them on a geographical basis. Six of the properties were single family homes in upscale suburbs. Eight were condominiums in affluent neighborhoods of Boston—the Back Bay, Beacon Hill, parts of the South End, the Waterfront. The remaining twenty-six were houses and condominiums in neighborhoods or suburbs Bruce characterized as undesirable. He tossed them back into the shopping cart—he would let the paralegal handle these.
He looked at the remaining files. Fourteen pieces of property, each worth at least $100,000, and each under his control. Here was the opportunity, but where was the gain? What was the play?
* * *
Over the weekend, Bruce visited all fourteen properties. Some of the suburban homes were choice pieces of property, but, to Bruce’s disappointment, none of them had “For Sale” signs in front. Apparently the owners realized that they were so far under water with their mortgages that it would be futile to attempt to sell the property. Or they were simply in a state of denial. Either way, Bruce realized that he was not qualified to form an opinion about a property’s physical condition and structural soundness simply by viewing it from the outside. And there was no opportunity to pose as a buyer and get a tour of the homes since they weren’t for sale. Bruce reluctantly concluded that the purchase of any of the suburban homes at a foreclosure auction would be too risky.
The condominiums units, on the other hand, were easier to access. Bruce, dressed in wool slacks and an argyle sweater and struggling under three bags of groceries, went unchallenged as he slipped into the condominium buildings as residents entered and left on their weekend errands. Once inside, Bruce stashed the grocery bags and inspected the heating and electrical systems in the basement. Posing as a potential buyer of a unit in the building, Bruce spoke with other building residents and obtained information regarding the condition of the units and the financial strength of the condominium association. From the mailboxes, he determined whether the unit he was foreclosing on was occupied by the owner or by a tenant. By the end of the weekend, Bruce had a fairly complete profile of each of the condominium properties.
On Sunday night, he called Marci and invited her out for a drink. They had settled into a comfortable routine of dating once or twice a week, but Bruce could tell she was growing impatient at the lack of progress in their relationship. They had been dating for over two months, but Bruce had done nothing more than kiss her goodnight. He had responded to her probing tongue one night by making the false revelation that he recently discovered that an ex-girlfriend had AIDS. He had scheduled an AIDS test, he explained, and did not want to initiate any intimacy until after the results came back. It was an ideal, though temporary, excuse.
“Hi, Mars, how was your weekend?”
“Probably just like yours. I worked both days. The end of December is dead because of the holidays, so this is probably the last chance to make a sale this year. And please don’t call me Mars—I prefer Venus, if anything.” Bruce could see she was tired and a bit depressed, and appreciated her effort at spunkiness. He looked at her closely, surprised that she stirred him sexually. He sighed softly. Another time, another place, maybe they could have worked. But he had lied to her and misled her and manipulated her. It was too late for love.
“Venus it is, then,” he said, knowing that it wasn’t. “Any luck?”
“No. The only things that are selling now are the really nice properties in good location
s—and only if they’re priced right. There are still a few buyers out there, but they’re being really careful. What about you?”
“I worked. I’ve actually got some new foreclosure cases. Some condos in Boston.”
“Oh yeah, where?”
Bruce gave her the addresses. She knew most of the buildings. Bruce teased her. “Tell me what you know, and I might be able to get you the listings to sell the properties after the foreclosure sales.”
By the time they had finished their second drink, Bruce knew that of the eight condo units, six were desirable units in solid buildings. Even in a down market, they could be quickly re-sold if priced correctly.
* * *
First thing Monday morning, Bruce telephoned five different appraisers to discuss the Nickel Bank work. Two he dismissed immediately because they had been in business less than five years—Bruce wanted someone who had seen busts as well as booms, someone who remembered when condos sold for $25,000.
He set up three appointments for the next day, all in the Stoak, Puck & Beal offices. He reserved the most impressive conference room and sheepishly requested that his secretary refer to him as ‘Mr. Arrujo’ rather than ‘Bruce’ in the presence of the appraisers. These appraisers were attempting to do business with Boston’s oldest and largest law firm, and Bruce wanted them to be appropriately humbled.
His first meeting was with a large, established real estate management company that had been doing business in Boston for decades. The company managed many commercial and residential buildings in the city, and had begun doing appraisals and brokerage for their clients in an effort to offer “one-stop” real estate shopping. They sent the son of the company’s owner, who was respectful of, but by no means cowed by, his potential client. Bruce knew immediately they were the wrong choice. They were simply too intertwined with the health of the Boston real estate market to admit that the market was experiencing anything more than a “minor correction.” They spent most of their time assuring their clients that the market would stabilize and rebound. Their appraisal valuations would inevitably reflect the most optimistic of assumptions.
His second meeting was with Samuel Leumas, principal of Leumas Auctioneers and Appraisals. Samuel was in his late-sixties, and was not the least bit intimidated by the firm or anyone in it. He sat down without invitation, threw his card on the table, and simply began talking. He was a slight man with thick, dirty glasses. He wore a checkered blazer and a blue tie with a thick, uneven knot.
“Name’s Samuel Leumas. Actually, Leumas is the name they gave me at Ellis Island in 1936. It’s Samuel spelled backwards. They asked me my name, I tell them ‘Samuel’. They ask my surname, I shrug. Who asks a fifteen-year-old kid who doesn’t speak any English what’s his surname? Anyway, here I am, kid. Came all the way up to your fancy office. Whad’ya got?”
Bruce laughed to himself. “Before I get into that, Mr. Leumas, please tell me about your business.”
“What’s to tell? When the market is good, I do appraisals for the banks. When the market is bad, I do auctions for the banks. In between, I do both. Thank God for the banks. Just don’t put your money in them.”
Bruce couldn’t resist. “Why not?”
“Have you seen some of the loans these idiots are making? They got their ‘No money down’ loan. They got their ‘No income verification’ loan. They got their ‘No personal recourse’ loan. They got no brains, is what they got. Hey, that’s your money they’re making those loans with.”
Bruce looked down at his notes. He had certain questions he wanted to ask, but Leumas had thrown him totally off balance. He went back to his script. “I see your point, Mr. Leumas. So what do you think is the future for the real estate market?”
“Listen, sonny, here’s the thing. What goes up must come down. It’s the law of nature. These prices are crazy. So if you’re looking for me to give you some happy, cookies-and-ice-cream appraisal so your bank client can fool itself into thinking it’s loans are still good, you got the wrong guy. But if you want my opinion on what your bank can expect to sell these properties for at a foreclosure sale, I’ll give it to you. But your bank isn’t gonna like my numbers.”
Bruce canceled his appointment with the third appraiser.
* * *
Puck had asked for regular updates, and Bruce was diligent about providing them. He summarized his recent work on the cases (leaving out his weekend visit to the properties), informed Puck of the need to get current appraisals, and concluded the memorandum with the following:
I have attached a memo I have drafted which I feel should be forwarded to the client. The memo summarizes the various risks associated with the client taking the properties back at the foreclosure sale, and advises the client to adopt a bidding strategy in which the client bids 70% of the appraised value of the property. The highest bid by a third party above the 70% amount would be the successful bid. As detailed in the memo, the risks associated with the client taking the properties back at foreclosure sale include: 1) environmental contamination of the properties, including lead paint, asbestos and underground fuel oil storage tanks; 2) tenant protection laws which give protections to tenants (including owners who have been foreclosed on), including rent control and eviction bans; 3) market risks if the market continues to slump; and 4) costs of ownership and eventual disposal of the properties, which include property taxes, condominium fees, utility costs and broker fees. These risks can all be transferred to a successful foreclosure sale bidder.
The next day, as Bruce was headed out for a court hearing, Puck’s secretary handed him a copy of a letter Puck had sent to Nickel Bank. The letter included Bruce’s memo, unedited.
“Looks like Mr. Puck likes your work.” Jan, like all firm employees, spoke in a funereal whisper when in the common areas of the firm—the business of the firm’s clients was a serious and somber one. Still, she offered Bruce a quick smile. “He never sends memos out without re-writing them.”
“Great. And thanks.” Bruce reminded himself to pick up a Christmas card for her, then continued on his way to court.
He arrived, checked the list tacked to the bulletin board in the hallway outside the courtroom. His case was number 17 on the list, and the judge was not even seated yet. He took a seat on a hard wooden bench near the back of the old courtroom. His matter was a routine one, but he would likely have to wait an hour or more to present it to the judge. It was an archaic practice—there was no reason he had to personally appear in front of the judge, since the papers he submitted were self-explanatory. But the courtroom was filled with earnest young attorneys, many of whom had wide-eyed clients in tow. The clients were thankful to be shepherded through the antiquated procedures, and the law firms were cheerful to accommodate them at a cost of $150 per hour.
Bruce, thankfully, was not saddled with the burden of making small-talk with a client today. He sat back and focused on his plan. The news that Puck had sent his memo out unedited to the bank was welcome—it meant that Nickel would likely agree to dump its properties at the foreclosure auction ….
Bruce’s scheming was interrupted by a tap on the shoulder. “That’s the second time you let me sneak up on you. You’re losing your edge.” He heard Gus’ voice even before he turned his head around and saw the dark suit on his orange-haired friend.
Bruce closed his eyes for a minute, fighting to keep his anger in check. “Gus, damn it, this is a courthouse. It’s crawling with cops!”
“That’s why I’m not wearing a hat, to show the proper respect.” He smiled, then scowled when Bruce did not respond in kind. “Come on Brucie, give me some credit. The criminal cases are way over on the other side of the building. There are no cops over here. And besides, I wore this stupid monkey suit just to fit in.” Gus straightened his tie and pursed his lips in a smug smile. “Don’t I look nice?”
Bruce sighed. Gus was probably right, it was a pretty safe place to meet. Not that Bruce was at all happy to see him. “What do you want? And keep your v
oice down.”
“I need some help planning this Gardner Museum thing.”
“I told you, Gus, I’m not interested. You’re on your own.”
“I just want to run a few things by you to see what you think. See if you can poke any holes in the plan.”
“You’re wasting your time. I’m not getting involved. Bye, Gus.” Bruce turned back around.
Gus leaned closer and spoke into the back of Bruce’s neck. Bruce smelled wintergreen; Gus was a career criminal, but God forbid he should offend anyone with stale breath. “Look, Bruce, I’m doing this, with or without your help. And we both know you’re the expert on putting these plans together. I’m a lot more likely to get caught if you don’t help out….”
So there it was again. The implicit threat to rat on Bruce. But this time Bruce couldn’t match the threat. This had gone far enough. “All right. Meet me tonight on the footpath under the Mass. Avenue bridge, on the Boston side. Make sure nobody follows you. Nine o’clock. Now get out of here.”
* * *
Bruce left the office early that night, ate a large dinner, and layered himself in a stack of warm clothes and heavy boots. Boston was in the midst of a bitter cold spell, and Bruce figured he would be out in it for at least a couple of hours.
He also slipped a pair of brass knuckles and a sheathed hunting knife in his jacket pocket. Things might get ugly tonight with Gus, and he wanted to be prepared—his friend was wispy and slight, but Bruce had seen him scratch and claw like a bobcat when forced to fight.
At seven o’clock he boarded an outbound green line train. The train emerged above-ground just outside Kenmore Square, then proceeded west through Brookline and into Newton. Bruce sat quietly through almost a dozen stops, studying the other passengers and memorizing their faces. As the doors were closing for the train to pull out of Newton Center, Bruce leaped from his seat and squeezed out of the train. Nobody followed.
[Boston Law 01.0] Unlawful Deeds Page 11
