Estate of Denial™ posted several weeks ago Houston Chronicle reporter Lise Olsen’s latest investigative efforts exposing a property poaching scheme using real estate deeds.
Olsen’s Property deed scams nearly epidemic in Harris County follow-up provides further insight on this hideous activity and her article tag line – “Ordered to repay victims and stop conducting real estate deals, two men did neither” – is reminiscent of the legal system experience befalling many probate abuse targets. Here’s the story:
When a pair of real estate investors pleaded guilty in 2005 to stealing at least 24 area properties, Eloise Smith, a feisty 82-year-old, hoped to see both men go to prison — or at least forced to stop their real estate dealing and fully compensate her and others for damages.
In 2003, Smith was the first to report what later became a barrage of similar “deed scams” uncovered by Harris County officials. The scammers in her case targeted vacant or long-empty homes, fabricated legitimate-seeming documents and deceived buyers into paying cash for properties legally owned by others, court records show.
But instead of going to prison, Richard L. Nugent, a college-educated astronomer and self-styled real estate investor, and his partner, Craig A. Davidson, received 10 years’ probation. Neither man had a felony record.
Harris County District Judge Marc Carter also ordered the men to repay victims $248,521 and to stop dealing real estate.
Ultimately, they did neither.
Meanwhile, the elderly whistleblower who first exposed the scam eight years ago has suffered a series of strokes and is bedridden.
Smith in 2003 reported that someone broke into a rental house she owned on Okinawa Road in Houston, changed the locks and fraudulently sold her house. By the time Smith finally recovered her house, which she’d rented for supplemental retirement income, it had been trashed and she could not afford repairs.
Her daughter, Barbara Thomas, said Smith was not awarded restitution.
“They only gave those men probation. They stole her house and they put phony title on it, and (the authorities) are not doing a thing about this. It’s a horror,” said Thomas, a retired state employee. “The system does not work for honest people – it works for crooks.”
Court records show Carter has repeatedly given Nugent and Davidson breaks. Nugent’s probation conditions have been amended four times to relax restrictions.
In June 2009, prosecutors urged Carter to revoke Nugent’s probation and send him to prison for failing to pay restitution, continuing to deal real estate and violating other terms of his probation. They presented evidence that Nugent had sold or leased at least 10 properties in defiance of court orders. They also argued Nugent had the assets to fully pay all victims immediately.
Instead, Carter allowed Nugent to return to running real estate deals and gave both men more time – until 2016 – to pay victims.
Yet both again have failed to meet monthly payment deadlines, the Chronicle has learned. Carter refused to say how much the pair actually had paid as of May 2011, but a court employee confirmed both have fallen behind again.
Slow and uncertain punishment likely encourages similar scammers blamed for a rash of interrelated deed thefts in Harris and Dallas counties, said James D. Ratley, a former Dallas police officer and fraud expert who serves as president and CEO of the Austin-based Association of Certified Fraud Examiners.
Ratley said various investigators first began to report signs of massive and repeated deed frauds in Texas several years ago.
In Harris County alone, officials have identified three separate major fraud rings that collectively stole and illicitly resold more than 120 properties, court records show. Only one person has been convicted and sent to prison so far.
“If they were to take a guy and go into a 7-Eleven and get $200 or $300, they’d get 10 or 20 years in prison,” Ratley said. “Here it is they can take a pen and steal hundreds of thousands, and they get probation.”
Capt. T.S. Berry, a Harris County Constable Precinct 6 official and fraud investigator who has investigated similar scams, said the problem has reached near epidemic proportions and harmed some of the county’s poorest residents – depriving many owners of “heirloom” homesteads and robbing would-be buyers of hard-earned savings.
Both Ratley and Berry argue state and county officials should band together to coordinate a strong response.
After being sentenced, Nugent fought paying restitution by filing an appeal, records show. He lost at the Texas 1st District Court of Appeals in October 2006. His attorney, Dee McWilliams, did not reply to Chronicle requests for additional information.
Davidson’s attorney also did not respond.
Nugent holds master’s and bachelor’s degrees in astronomy from the University of South Florida, according to Lara Wade, a university spokeswoman. He has won recognition and published articles on his findings about space.
But for years he has worked as a self-taught real estate investor and at one time claimed membership in a local club that calls itself RICH – Realty Investment Club of Houston. Davidson often was his partner.
Instead of using his own name, Nugent’s deals typically are conducted through various trusts, including one dubbed “PBJ.”
In court, attorneys for Nugent and Davidson initially argued their practice of breaking into vacant homes owned by elderly or absentee landlords, filing so-called “wild deeds” and then quickly reselling properties to others without valid title was simply a savvy investment strategy known as “adverse possession.”
However, Harris County prosecutors and experts argued that Nugent’s methods fell far short of legal adverse possession – a controversial technique akin to what used to be called “squatters’ rights.” It requires would-be owners to visibly claim possession of abandoned property, pay taxes on it for several years, meet other legal requirements and finally pursue a formal civil action before being able to claim legitimate ownership.
Civil court records show Nugent continued to use “adverse possession” to acquire property – even after Harris County prosecutors filed the motion to revoke his probation in 2009. He finalized one deal in June 2009, days before Carter lifted the ban and formally allowed him to return to the real estate business.
• 2003: Eloise Smith reports that someone broke into her Houston rental house.
• 2005: Real estate investors Richard L. Nugent and Craig A. Davidson plead guilty to theft for stealing 24 properties, including Smith’s, and for taking money from duped buyers. Both get sentenced to 10 years’ probation, banned from real estate deals and ordered to pay $248,521 in restitution by Harris County District Judge Marc Carter.
• 2009: Carter is urged to revoke probation; prosecutors argue Nugent has continued to buy and sell property, failed to pay restitution and violated other terms of probation. Instead, Carter lifts the ban on real estate deals and gives the convicted thieves more time to pay victims.
• 2011: Both men are still failing to pay restitution as ordered, court confirms. Carter refuses to say how much remains unpaid.