Forrest David Laidley Charged with Allegedly Swindling Investors and Financial Institutions in a Multi-Million Dollar Fraudulent Financing Scheme

 

CHICAGO—A Libertyville, Illinois real estate developer, who offered and sold limited partnership interests and short term, high interest, guaranteed promissory notes to the public, was indicted by a federal grand jury yesterday and charged with mail fraud, wire fraud and bank fraud in connection with a scheme to fraudulently obtain, retain and use more than $10,000,000 from investors and financial institutions.

Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, announced the return of the fourteen-court indictment against Forrest David Laidley today. In doing so, they also thanked Lake County State’s Attorney Michael Waller and his office for their assistance in the investigation.

Laidley, 65, of Libertyville, Illinois owned and operated Forrest Properties Inc., which was engaged in the real estate development business in the northern suburbs.

According to the indictment, Laidley through Forrest Properties fraudulently obtained funds from investors, financial institutions and others by misrepresenting the expected return on investments, the risks associated with investments, his ownership of property, his ownership of loan collateral, his financial condition, the status of investments and the use of proceeds obtained. The indictment further alleges that Laidley commingled the fraudulently obtained funds and at times misappropriated them to make ponzi-type payments to investors, to repay delinquent loans including bank loans, to benefit unrelated real estate development projects and to benefit himself.

According to the indictment, as a result of the defendant’s scheme, limited partnership interest investors and promissory note purchasers lost over $8,000,000.

If convicted, each mail fraud, wire fraud and bank fraud count carries a maximum penalty of 30 years in prison and a $1,000,000 fine, or the Court may impose an alternative maximum fine totaling twice the loss or twice the gain, whichever is greater. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The government is being represented by Assistant United States Attorney Edward G. Kohler.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the
burden of proving guilt beyond a reasonable doubt.

Department of Justice Press Release

July 23, 2009

Are Inspectons Necessary for New Constructions

There are different types of inspections for new constructions:

1) An inspection from start to finish, which can run in the thousands of dollars:

This inspection starts at the very beginning, even prior to breaking ground all the way to completion.

2) Mid-process inspections costing a few hundreds dollars:

This inspection, done at any time during the construction, covers all visible non-cosmetic items and systems, and applicable codes.

3) The final inspection for a few hundreds of dollars, takes place at the end of the construction.  Same as mid-process inspection.

4) One-year warranty inspections which takes place before the builder one year warranty expires. This inspection can help determine who is responsibie for any repairs that may not have been found during the previous inspections. It covers all visible non-cosmetic items and systems, and applicable codes.

HOMEOWNER'S INSURANCE FROM A LAWYER PERSPECTIVE

HOMEOWNER'S INSURANCE? GET A CLUE!

THE PROBLEM:

Your client's closing is scheduled for next week. You've reconfirmed the appointment with her and reminded her to buy homeowner's insurance and to bring the receipt to the closing. Panicked, she calls you back and reports that none of the half dozen agents she spoke with will sell her a policy. Now what?

The need for homeowner's insurance is a "no brainer". Even if your buyer doesn't want it, the mortgage lender is going to insist on it. But what happens if the house under contract is uninsurable? Insurance underwriters across the country are reevaluating the risks they are willing to insure against. As a result, many home buyers are finding that needing insurance isn't the same as actually getting insurance. This problem is very real and is is fast becoming one of the biggest traps for unwary buyers - and hapless sellers.

HOW BAD IS IT?

It's hard to feel sorry for 'em, but insurance companies claim they are in deep trouble: too many natural disasters; too many claims; too much money paid on those claims; poor returns on investments; 9/11.

The insurance industry tells us that it suffered nearly 9 billion dollars on home-related underwriting losses last year and that even premium increases of 40-200% cannot cover those losses. State Farm reported that it paid $95 million last year in Illinois alone for claims relating to ice damage in gutters and roofs. State Farm also claims that it paid $1.55 in claims for every $1.00 of homeowner's premium last year. For a time this year, it stopped writing new homeowners insurance in Illinois altogether (State Farm announced earlier this week that it would begin selling new policies again).

THE INSURANCE INDUSTRY'S RESPONSE:

Insurers are placing increased reliance on a national database that effectively blacklists homes and homeowners who have the nerve to actually ask them to pay out on a contract they sold! The Comprehensive Loss Underwriting Exchange (C.L.U.E.) run by ChoicePoint, Inc. has been tracking homeowner policy claims for about 10 years now. More than 90% of all insurance companies use it to share information.

Too many claims? Too much risk? Too bad - no more insurance. Homes that have been hit by water damage, storm damage, mold claims or burglaries are particularly vulnerable to rejection.

WHAT THIS MEANS FOR HOMEOWNERS/BUYERS

Homeowners with an unfavorable claims history may find it impossible to renew or replace an insurance policy. If insurance is offered, it will come at a price - steep premium increases.

Buyers who learn of insurance problems too late may wind up committed to a contract they cannot complete (how do you close on that mortgage loan without proof of insurance?).

Sellers whose homes are uninsurable may find that their homes have also become unsalable.

Without advance knowledge AND an insurability contingency, buyers face the risk of being unable to close the deal. Buyers and Buyers agents are urged to investigate this issue early on in the contract process.

FOUR WAYS TO HELP PROTECT YOUR CLIENTS:

• Ask the Seller for a C.L.U.E. report at the outset of the contract. Reports only cost $20 and can be ordered on-line.
  
• Promptly review the C.L.U.E. report with an attorney and insurance agent
  
• Make sure that the contract provides a C.L.U.E. contingency - so that the contract can be cancelled if a problem is discovered.
  
• Urge clients to shop for insurance among several companies to find the best premium and coverage available. (Don't assume all policies afford the same coverage; don't assume all companies charge the same rates)

YOUR NEXT STEP

Call 312-726-1512 or e-mail Mike Wasserman at info@wasserlaw.net if you would like a sample CLUE contingency form, or if you would like contact information to reach ChoicePoint

ABOUT CONCRETE

Concrete is a mixture of cement, sand, gravel, water...

Reinforced concrete includes wired mesh to avoid some cracking.

The concrete quality is relative to workmanship, stable base (consistency of concrete/good gravel material/good bearing soil),  drainage above and under, the final mixture of all the elements.

PRESSURE TREATED LUMBER

For rot to occur in wood, 4 elements must be present: temperature, oxygen, moisture, food source for living organisms. Pressure-treated lumber eliminates rotting and food source. The chemical most commonly used is chromated copper arsenate. For more information go to the American Wood-Preserver's Association.

TYPES OF RESIDENTIAL FOUNDATIONS

~Poured concrete (common);  

 ~Block for basement ;

 ~Pier for unstable soil / concrete with steel beam for soft underground; 

 ~Permanent wood foundation.

 The Primary foundation considerations are structural strength, dryness or water proof, energy efficiency. 

Typical Cost of a New Home

To understand how a new construction is priced, you need to know what are the costs involved. The percentages below are just approximate numbers and may vary over the years.

~ 28% for the materials  

~ 24% for the land  

~ 20% for labor  <li> 9% overhead  

~ 8% profit 

~ 6% Sales & Marketing  

~ 5% Financing

(Excerpt from Certified New Home Specialist training class)

Developer/Builder's Risks

Life is not all rosy for developers/builders. Here are some of the risks they are facing as they try to service their customers, meet their contractual obligations, and earn a reasonable profit.

• Too much overhead


• Availability and cost of the land


• Economic conditions


• Sales/marketing expenses


• Minimum sales volume to break even


• Competition - anyone can call himself/herself a building/developer


• Weather condition


• Unreasonable customers'requests


• Customers'personal problems


• Labor conflict/shortage, unpredictible delays mainly on custom product


• Cashflow problems


• Quality issues


• Vandalism/theft


• Mistakes due to too many people involved
  

(Excerpt from Certified New HOme Specialist training class)

The Reality of Residential Rehabs by Otto Ruebsamen

...Residential rehabs can be residential properties that are bought and renovated to function as a commercial or office space or vice versa. Sometimes, commercial spaces are bought to be renovated into a residential space. The biggest problems in buying spaces and investing in residential rehabs arise with people suffering from poor planning, over confidence and limited knowledge. Rehabbing is a complex, professional project and having some home-improvement experience alone will not help. There are many who consider residential rehabs to be risky simple because they once wanted to invest in real estate and ended up buying property for rehab without knowing what exactly they should do. This results in mismanaged money, loss and waste of time and energy due to deadline lapses. Projects regarding residential rehabs should be given the same importance and professional care that you would give a large scale commercial project.

There are a few things to pay attention to when you plan to invest in residential rehabs.

1. Personal vs. professional - Residential rehabs, unlike commercial projects offer you a choice. They can either be done by you or you can hire a professional to do it for you. By doing it yourself you can save on money. Whereas, if you hire someone to do it for you they will take much less time, but you will have to pay them and constantly supervise them. Weigh the pros and cons of both along with your professional experience in the area before you make the call; as residential rehabbing demands professional expertise.

2. Estimating costs - First, before making any form of investment, it is absolutely vital to research and find out exactly how much it would cost you. Unless you are sure about this, whether your rehab project will be profitable to you or not cannot be estimated. The biggest expenses to be considered are roofing, plumbing, structure and electrical repairs. Also, evaluate the location of the property, neighborhood and the facilities available. This will allow you to understand whether investing in that property is advisable or not.

3. Legal issues - All the four important areas that when it comes to residential rehabs, which need primary attention, also require a legal permit. Windows also need permission, but since the important areas are most expensive, the law is much stricter about permits for them. You can do some of the rehabbing on your own on the weekends to avoid obtaining permits, but it is at high risk. If city officials spot you rehabbing without permits, they will cite you for an offense. I strictly recommend sticking by the law.

New construction contract do not have your best interest in mind

New construction contracts are written for developers/builders, not you.  That's why you need a lawyer who specializes in this type of contract to review the document. Before signing anything, or giving any money down, ask for a copy of the contract. Read it thoroughly and have all your questions answered by your condominium lawyer regarding deposits, occupancy conditions, developer/builder's construction schedule, extras not covered by the purchase price, material changes, declaration, and right of recscission.   Make sure to review the disclosure statement carefully and warranty program available. Upon signing the purchase contract, don't be a stranger. You must stay in contact with the builder/developer to assess progress. Keep track of all communications in case of future litigation.

Tell Your Story

Any view or opinion represented in the blog comments are personal and is accredited to the respective commentor / visitor to this blog. This blogger reserves the right to moderate comment suitability in support of respecting racial, religious and political sensitivities, and in order to protect the rights of each commentor where available. Everything the commentor says in explicity or expressed in defamatory statements is bound to sedition laws from the commentor’s country of origin, and may be used against the said commentor  Regarding the posts, any views or opinion represented in this blog are personal and belong solely to the blogger minishorts and do not represent those of [company name]. Everything you repeat and say that has been previously said in this blog may be an infringement of copyright law, and may be used against you.

Be Prepared

You are going to face many pitfalls when buying a new home, whether it's a single family home or a condo.  In both cases, we can never emphasize enough that you have to research not only the builder/developer but also the market and the location.  

If you build a $5,000,000 house in an area surrounded by $500,000 houses, you will have a hard time to resell it.  If you buy a condo (new or resale) near the express way or if the 'L' runs in your backyard, good luck to find a buyer. Most real estate agents never think resale when selling a property to a client.  I do.

I had a client at 3950 N. Lakeshore Drive. His unit was on the second floor and his living room was facing the compressors of the building.  I could not sell it although I had many showings in 6 months and people were impressed with the unit.  But it's a "buyer's market" where you'll find 200 more one bedroom for sale and many with greater views. We had no chance unless we gave the unit away. I asked my client why he bought the unit.  "It sounded like a good investment at the time", he said. 

When I bought my condo in 1999, I did not know much and relied on my agent to guide me. I thought he did, until I and 11 other condo owners got sucked into a lawsuit for 9+ years.  You probably wonder what's taking so long.  A bad lawyer and slow judicial system. The complaints against the developer were plenty: a covered parking that was paid for but never delivered, falling chimney, leaks in units, a non-conforming deck...  We asked a structural engineer to make an inspection and the needed repairs were approximately $300,000.  That's when the association decided to sue. The cost: $30,000 per unit. Don't rely on anyone but yourself to research all you can before writing the down payment check.

Illinois First Time Home Buyer Grants at
http://www.downpaymentsolutions.com/type2.shtml

Voice your opinion or learn form other consumer experiences at
http://www.my3cents.com

More consumer reviews and list of high quality service providers at
http://www.angieslist.com/Angieslist/

The Homebuyer's Booklet, including answers to often-asked questions
http://www.ihda.org/admin/Upload/Files/pdf/homebuyer.PDF

State’s homeownership program that provides below-market interest rates for qualified first-time homebuyers.
;http://www.ihda.org/ViewPage.aspx?PageID=7

Better Business Bureau at <
http://www.bbb.org/

Who Are The Bad Boys

By bad boys,I mean all the real estate developers or builders whose irresponsible actions and incompetence, have resulted in financial losses to YOU the new homeowner. If you have been the victim of fraudulent behavior and have a story to tell, make sure to know your facts. The ChicagoHomeBuyerCoalition.org and its board of directors are not responsible forthe opinions expressed in this section.

Please reserve the title section to identify the name of the company/developer/builder involved.

Illinois Construction Law

Hiring a Contractor

Awarding a construction contract to a single contractor is the archetypal construction project situation. Here, the owner contracts with the general contractor for the completion of the entire project and the general contractor, in turn, contracts with various subcontractors for the completion of various aspects of the project (e.g. electrical, mechanical and plumbing work). It is the responsibility of the general contractor to coordinate the activities of the various subcontractors, and the project is built in accordance with the plans and specifications provided by the owner.

Contracting construction work typically involves either the direct hiring of a contractor or competitive bidding among different contractors. Government contracts differ from nongovernment contracts in that private sector contracts have few constraints, while public sector contracts involve extensive regulations imposed by the government.

Private sector construction contracts may either be directly hired or bid upon. The direct hiring of a contractor is the hiring of a contractor at the individual's own discretion. Competitive bidding gives all contractors a chance to bid on the construction contract and allows the individual to hire the lowest bidder.

Public sector contracts involve competitive bidding. Since the government is a major employer and is political in nature, there is an assumption that there may be impropriety and that the government cannot be trusted to meet and negotiate suitable terms without at least the appearance of impropriety or special favor. Thus, competitive bidding serves the dual purpose of safeguarding against favoritism toward a particular contractor and giving all a fair opportunity to participate.

Bidding Procedure

In most bidding procedures, there will be a "request for bids," which is an invitation to construction companies to make bids on a construction project. (Private owners and governments typically reserve the right to reject all bidders, usually for skill or reputation in trade.) After the request for bids, the bidders typically will obtain "bidding information," which includes the drawings or plans for the project, job specifications, the parties involved, and the proposed contract. Upon receiving the bid documents, the bidder will submit a "bid proposal"; i.e. the offer (usually irrevocable for a certain stipulated period of time). Factors considered in accepting a contractor's bid include: financial ability, reputation, equipment availability, and skill and expertise. After the lowest bidder's offer is accepted, the hirer (the owner or public body) makes a formal award of the contract, typically through written formal notification. If the bidder signs the contract, a binding agreement is created.

Bidding Issues

The Illinois Purchasing Act requires competitive bidding in all public contracts, and all prospective contractors be "qualified bidders" (using considerations such as quality and serviceability, terms of delivery, and site specifications).The Act also requires that "economical procurement practices" shall apply to all purchases and contracts by or for any State Agency. In other words, the state agency may in good faith determine that it is more economical to perform the work with its own employees than to let the contract by competitive bidding. (See Illinois Section 505/2 et. seq.) Further, Illinois courts have held that a public body may not draw specifications in its bid request that would permit only one bidder to qualify for the project, and that all bidders be "resident contractors" (i.e. licensed to transact business in the State of Illinois).

Cases that involve fraud or ill repute in contract bidding usually nullify the contract. For example, if a city or county lacks the statutory authority to enter into a particular contract, the contract is void and the contractor may not recover for work performed. Cases that involve bad faith or bribery are also nullified, with the contractor receiving nothing.

However, accidental bidding discrepancies sometimes occur. The nature of the bidding process means that bidders sometimes miscalculate their bids. Relief is typically granted when the mistake was an honest error in mathematics or a clerical error but the courts have refused to grant relief for errors of judgment. The Illinois courts also have allowed rescission of contracts when enforcement of the contract would be unconscionable or when unforeseen circumstances render the contract unenforceable. In cases of unconscionability, courts either will grant relief to the bidder, a refund of the bid deposit, or an action for rescission of the contract.

When the bidding contract involves a prime contractor and a subcontractor, a subcontractor generally may not hold the prime contractor liable for the prime contractor's use of the subcontractor's bid unless there was an agreement stating otherwise. Thus, if a prime contractor uses a subcontractor's bid, the prime is not compelled to use the subcontractor if the prime is awarded the project; similarly, a prime contractor may not hold a subcontractor liable for the subcontractor's bid unless there was substantial reliance on this bid by the prime contractor in making his or her bid, in which case the court may impose the doctrine of promissory estoppel and hold the subcontractor liable for its bid. Further, Illinois law requires that any person or business entity who enters into a contract for consultant swerves with a State agency shall state in the contract whether the services of a subcontractor will be utilized, along with the subcontractors' names, addresses, and fees charged thereby.

Construction Contract Provisions

http://www.weblocator.com/attorney/il/law/constructlaw.html

Before Buying, Check The Developer/Builder

 When the father of one of my clients came from France a few years ago to spend a month with his son, he was shocked to see how poor most of the new constructions were in Chicago.  As a contractor himself he was pointing out the lack of attention to details, and was amazed to see that people were willing to pay so much money for such mediocre quality homes.  Since then I decided to become a certified new home specialist to understand better new constructions.

First thing to look for when buying a new home is making sure that the developer/builder has the proper license and permit.  Pemits should be displayed on the site. If no,  you can always contact the Building Department at the City of Chicago to verify that the builder/developer is in good standing meaning that all inspections are being done.   

But whether the developer/builder is licensed or not, you must check his/her credentials: years of experience, training and affiliations with trade associations, certifications.  Find out if the builder/developer has an after-sale service program and get it in writing. Find out what other projects he/she has done in the past and go talk to the owners to assess quality and service. Quality and service do come at a cost.  Never buy a home based solely on its price and features.

You can get more information on the developer/builder through American Homeowners Foundation  ( http://www.americanhomeowners.org/AHF/links%20pages/consumerprotectionoffices.htm ) or Better Business Bureau.

Do a court search, to ensure that there is no lawsuit pending again him/her. 

Don't rely on your lawyer to do the work for you. Take the time to read the contract, bylaws, rules and regulations and don't be afraid to ask questions. Pay special attention to the disclosure statement regarding the description of the site and buildings, landscaping, common facilities and the proposed budget of expenses for the first nine month of operation.  If the development is partly sold, request a proof that monthly assessment have been paid by current owners, and request copy of the minutes of all the meetings that took place if any.  The developer/ builder IS the condo association until the last unit is sold. He MUST then turn the association over to the new owners.

There is no "lemon law" to protect buyers of defective homes

According to Robert Irwin, in his book  "Tips and Traps When Buying a Home", there is no national clearinghouse to protect a consumer from residential construction disaster.  The reality is that unless the builder is willing to fix the problem, the homebuyer is on his/her own and his/her only recourse is to go to court, resulting in aggravation and financial hardship. In fact, as a consumer you get better protection if you buy a TV or a dishwasher then a new house.

And why is that? Most states are regulating buildings but not contractors who most of the time practice without being licensed.  It is shocking that home inspectors now need to be trained to be licensed to practice but not contractors.

Another reason is profit.  A small builder who hire a local contractor with untrained workers for his project faces the risks of expensive mistakes such as structural or design flaw. In general consumer's complaintes are totally ignored by the builder and if sued, the builder will most likely declare bankruptcy. The homeowner has almost no chance to collect. 

Anyone can become a victim of defective construction.