October 22, 2009 in Washington Voices

Grafos’ business fined in 1983

Coach-Lite convicted of four HUD-related felonies
By The Spokesman-Review
 

Court records show Spokane Valley City Council candidate Dean Grafos admitted in 1983 that his mobile home business “knowingly and willfully” committed four federal felonies.

Newspaper clippings about the court case, in which Grafos wasn’t personally charged with any wrongdoing, were delivered to The Spokesman-Review by a supporter of incumbent Councilman Ian Robertson.

Grafos and two others are running against Robertson, a retired minister who was appointed to a council vacancy in August. Robertson purchased the clippings from The Spokesman-Review’s reference library hours before copies were given to a reporter.

The 26-year-old news accounts of the federal action against Grafos’ mobile home company, Coach-Lite Inc., don’t mention him by name. But court documents show he signed a plea agreement for the corporation.

As a result, Coach-Lite was convicted of four counts of providing false information to obtain U.S. Housing and Urban Development loan guarantees for customers.

The corporation was fined a maximum $20,000.

Jack A. Sherman, a vice president and finance manager for Coach-Lite, pleaded guilty to one count of making false statements to HUD. He was fined $500 and given a year of probation on a one-year suspended prison term.

“We prosecuted the people against whom we had evidence, and he (Grafos) wasn’t one of them,” said Bruce Carter, the retired assistant U.S. Attorney who handled the case.

Carter said Coach-Lite was one of a number of companies in the Northwest that were caught in an investigation of the lending practices of the Sherwood & Roberts banking firm. Sherwood & Roberts pleaded guilty to 20 counts of criminal fraud and agreed to a multimillion-dollar settlement of a federal lawsuit.

Robertson said he checked on all three of his challengers, but neither he nor his campaign manager, Steve Wilson, is publicly disseminating information on Grafos. However, tips about Grafos were passed to two members of The Spokesman-Review news staff.

“I just found that (Grafos’ history) out and want to leave it at that,” Robertson said. “I don’t want to bring anybody’s name down at all. That was not my intention at all. I just wanted to know who’s doing what.”

Grafos said this week that he had no knowledge of his corporation’s crimes until federal officials brought them to his attention. Still, he acknowledged, he and his wife, Elizabeth Grafos, were responsible as owners and officers of the closely held corporation.

Grafos blames the violations on Sherman. He said he had 40 to 45 employees, and “you rely on other people to do things right for you.”

Coach-Lite had a separate recreational vehicle site, and Grafos said he didn’t personally run the mobile home lot.

Court documents say Coach-Lite gave HUD false information about whether customers used their own money for down payments.

The documents say the company improperly lent money to customers for down payments in several cases and falsely reported that customers didn’t receive rebates to help cover down payments.

HUD rules require borrowers to use their own money for down payments so they will have equity at stake. The idea is that borrowers are less likely to walk away from loans if they would lose a substantial amount of money.

The rule was intended to prevent debacles like the current housing-market meltdown, triggered by “subprime” loans to unqualified buyers.

In one case, according to court documents, Coach-Lite also falsely certified that it set up a mobile home in a Federal Housing Administration-approved mobile home park.

A five-count indictment handed up by a grand jury on March 2, 1983, in U.S. District Court in Seattle charged Coach-Lite with four counts of making fraudulent statements to HUD and Sherman with one count.

Court documents indicate Sherman was cooperating with authorities when Grafos signed the plea agreement on March 25, 1983.

Sherman pleaded on May 6, 1983, in Spokane.

Court records contain minutes of a March 24, 1983, meeting in which Coach-Lite’s directors – Dean and Elizabeth Grafos – voted to accept the plea bargain. He acted as president and chairman of the board; she, as secretary.

Although Sherman and a few other employees were called vice presidents, those were “essentially honorary titles,” Elizabeth Grafos said.

Newspaper archives indicate Dean Grafos hired Sherman as finance and insurance manager in November 1978 and promoted him to vice president in August 1979.

Grafos, who had just turned 40 at the time of the plea, said he relied on Sherman, who was 56 and experienced in mortgage finance.

“He came to us with great credentials,” Elizabeth Grafos said.

The family got out of the mobile home business after the federal prosecution, but wasn’t forced to do so. Dean Grafos said he was already involved in real estate and switched his focus to that.

He said he renamed Coach-Lite to Grafos Investment, and the corporation is still active.

The Grafoses have retained attorney J. Steve Jolley, who emphasized that they weren’t charged personally, weren’t forced out of business, didn’t lose any license and remain in business at the same site, offering self-storage units instead of mobile homes.


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