Shawn Vestal: Jeffreys fraud case spreads plenty of blame
There is a strange bit of parallel blaming in recent court filings surrounding Spokane fraud king Greg Jeffreys.
In attempting to get a judge to lower the millions in restitution he owes his victims, Jeffreys has been arguing that many of his victims weren’t, in fact, victims at all, but people who simply made bad deals. He notes that the deals were blessed by banks, attorneys, real estate agents and others. A judge didn’t buy it, ordering Jeffreys to pay $9.3 million to a host of victims, in addition to serving eight years in prison. Ironically, though, one of Jeffreys’ victims is making a very similar argument in a new lawsuit, which names an attorney, an appraiser, Realtors and others in its allegations.
Both are spreading the blame a little further than it’s been spread before, at least in official court proceedings. Jeffreys has pleaded guilty to four counts of fraud and contempt of court involving a mountain of scammery alleged by prosecutors, ranging from fraudulent deals involving actual properties to fraudulent deals involving entirely invented properties.
In court filings arguing for a lower restitution, Jeffreys focused a lot of effort on the fact that his deals – the ones that involved actual properties, at least – were vetted by all the licensed and responsible parties that are intended to referee the system.
“Generally,” Jeffreys argues in court filings, “the facts and circumstances in this case involve real estate transactions, banking transactions, investors, real estate agents, attorneys, individual investors and Mr. Jeffreys. As to Counts 1 and 2, all transactions were prepared by and signed by either a licensed real estate agent in Spokane, an attorney who specialized in real estate or both. All transactions were subject to the purchase and sale agreements prior to them being signed; and HUD statements prior to them being signed were reviewed by everyone prior to signing, and all closings went through a registered title company. There were Realtors on each end, there were attorneys on each end, and a title company in the middle of every transaction.”
Jeffreys doesn’t mention appraisers, but investigators do. According to an affidavit filed by FBI Special Agent Lisa Jangaard, Jeffreys lied to the appraiser about his purchase price and comparable sales for 90 acres split into two parcels along U.S. Highway 2 between Spokane and Airway Heights; the appraiser pegged the value of the property at more than 10 times what Jeffreys had paid for it. The appraiser in those transactions was Jenny Benson of Value Logic, and Riverbank loaned investors money to buy interest in the properties in 2006.
Jangaard’s affidavit also asserts that appraisals performed on several Ridpath Hotel transactions in 2008 were “materially inflated” to meet Jeffreys’ preferred prices. The appraiser in those cases was Scot Auble. Jangaard writes that Jeffreys, “during the scheme, regularly had discussions with this appraiser to ensure appraisals valued these properties” at the inflated prices Jeffreys had put on them.
The appraisals became the basis for investors to get on board, and for banks to lend to the investors, and for, eventually, everyone to lose their shirts.
On Tuesday, Auble said that he did not work with Jeffreys in order to elevate the values in his appraisals and that he could not speak to Jeffreys’ motivations or actions. He defended his work, noting that he has a 25-year career in Spokane and has worked with a wide range of clients, and said that his appraisals were “fine.”
Jeffreys’ blame-shifting must certainly be taken with an Everest of salt. And yet he raised one of the most perplexing questions surrounding the astonishing number of scams he pulled: How did the folks whose job it is to referee such transactions get them so consistently, dramatically wrong?
Jeffreys’ criminal case is grinding to a close. Lawsuits surrounding his Ridpath transactions grind on, however, including the newest one. That suit, filed by former NFL linebacker James Darling and others, names Auble, real estate agent Grant Person, attorney Eric Satchjen and others as defendants, and is centered on the purchase of two Ridpath units in 2008. Darling played for Washington State University before an 11-year career in the NFL that ended with the Arizona Cardinals.
The suit was filed recently but has not been answered by the roster of defendants. Attempts to reach Person and Satchjen for comment were unsuccessful. Auble said the lawsuit made factually incorrect claims about his role.
“People can say whatever they want,” he said. “That doesn’t make it true.”
Jangaard also detailed that case in her affidavit: Her summary and that of Darling’s suit are very similar. Jeffreys executed a contract to purchase two Ridpath units in November 2007 for $50,000. They then assigned their right to purchase to another party with a new purchase price of $910,000. In February 2008, Jeffreys “solicited a materially inflated appraisal,” which set the property value at $890,000.
Darling and his partners then bought the units at the low, low price of about a half-million dollars with a loan from the Bank of Whitman.
Jeffreys describes the transaction thus: “The property was subject to an independent appraisal by a bank for investors who were knowledgeable in the real estate business world.” Referring to another transaction, Jeffreys says: “Mr. Jeffreys should not have to pay restitution to individuals who made poor decisions.”
The judge saw it differently, awarding Darling and his partners restitution on two Ridpath purchases. But it is doubtless that Jeffreys’ victims made one very poor decision: to ever go into business with the guy to begin with.
Shawn Vestal can be reached at (509) 459-5431 or firstname.lastname@example.org. Follow him on Twitter at @vestal13.