Family in real estate collapse deals with fallout
By: CYNTHIA SEWELL 11/27/10 3:00 AM
Idaho Statesman
Shauntee Ferguson sobbed uncontrollably as she stood before a federal judge this month. The mother of five begged for mercy as the judge set her sentence for mortgage fraud.
Her father, Michael Hymas, sat in the courtroom, head hung low. He listened to the prosecutor and the judge chastise his daughter for letting him, and her husband, talk her into signing falsified loan applications. Just a few hours earlier, the same judge had sentenced Hymas to 21 months in federal prison. Next week, the judge will sentence Ferguson's husband, Stanley.
One by one, over the course of 11 months, almost a dozen people have pleaded guilty or have been charged in federal court for their roles in a web of real estate schemes that made and then lost millions of dollars in the Treasure Valley's housing boom and bust.
It has all the trappings of a Hollywood movie assets hidden in shell companies, abandoned and unfinished homes, a beauty queen, a fatal plane crash and an appearance on a television reality show.
At the center of this complex story is the now defunct Crestwood custom home-building business, its young, ambitious owners and the close-knit group of family and friends around them.
The numbers are staggering: Between April and July 2008, Crestwood owners Aaron Hymas and Justin Walker and their family members and friends filed seven bankruptcies, collectively owing more than $85 million to more than 900 creditors. More than 100 civil cases have been filed in Idaho and Utah against Crestwood, Hymas and Walker.
The subsequent and ongoing federal investigation led to charges last year against eight Hymas family members or associates. All pleaded guilty.
Now, a second wave has begun. Last month, a federal grand jury indicted two more people, and additional indictments are expected in the coming months as the U.S. Attorney's Office, Idaho Attorney General's Office, FBI and federal bankruptcy and IRS investigators unravel a labyrinthine paper trail involving millions of dollars in real estate transactions and dozens of businesses and shell companies.
The two central figures, Aaron Hymas and Justin Walker, have not been charged with any crimes. One never will be: Walker died in a plane crash last year.
And while Aaron Hymas has no criminal charges, he recently was dealt a legal and financial blow. In September, a federal bankruptcy judge refused to discharge any of his debt.
During the real estate boom, many people in the Treasure Valley and across the nation were operating real estate Ponzi-like schemes that worked like this:
— Obtain bank loans to purchase or build homes.
— Quickly sell the homes for a profit.
— Repay the bank and pocket the extra cash.
— Repeat.
The system worked as long as the properties kept selling for more and more money one property sale would pay off the loan coming due on another property.
"The market was out of control," Michael Hymas' attorney, Darren Meacham, told a federal judge at Hymas' Nov. 1 sentencing.
"To call this fraud is misleading," Meacham said. "In fact, this worked in the beginning. Nobody thought they were going to get hurt. Nobody thought it would go down."
But when the housing market cooled and the buyers went away, many were left owning numerous properties, with millions of dollars in bank loans and no financial ability to keep it all afloat.
In October 2007, the tanking economy forced dozens of buyers to walk away from pending Crestwood home sales, leaving Crestwood with more than a hundred unsold lots and homes. Aaron Hymas and Justin Walker consulted a bankruptcy attorney.
The same month, Hymas and Walker attended an "asset protection" seminar by Nick Malis, who presented himself as a Nevada attorney. Malis would tell them how "to own nothing but control everything" by creating holding companies that would own all of a person's assets in effect, making the person penniless and judgment-proof.
Malis' advice so impressed Hymas that he hired him to create nine companies in Nevada on Dec. 4, 2007, to provide the "layers of protection" discussed at the seminar. On the same day, Walker created four similar Nevada companies. A few weeks later, Hymas unsuccessfully tried to contact Malis. "Aaron learned Malis was not an attorney ... and, in fact was in trouble with the law," according to bankruptcy court documents.
The court documents detail what happened next:
Hymas hired another attorney, who determined Hymas' nine Nevada entities were legal. Hymas and his wife, Tiffany, began liquidating investment accounts and transferring assets, their personal home and most of their household goods to the Nevada accounts and elsewhere. Dozens of asset and cash transfers occurred between December 2007 and April 2008, "at a time when Crestwood, Inc. ... was in its financial death spiral," Assistant U.S. Trustee David Newman wrote.
Hymas said he had no intention of filing bankruptcy when he set up the Nevada accounts in December 2007, according to court documents. He said he did not consider filing bankruptcy until Bank of the West filed a $1.3 million lawsuit against him, Walker and Crestwood on Feb. 20, 2008. (On Feb. 21 and 22, the Hymases had transfered $325,000 from a personal account to their Nevada companies.) Hymas and Walker retained bankruptcy attorney Kelly Beeman on Feb. 28, 2008, but they would not file bankruptcy until almost two months later.
The Hymases loaned themselves $60,500 in March 2008 from one of their Nevada companies to pay for a surrogate mother and in vitro fertilization. Twin boys were born in January 2009.
Just days before filing bankruptcy, Hymas partnered with Vince Covino to buy 1,000 shares of stock in a financial planning company. For his shares, Hymas wrote a check for $220,000. About a year before filing bankruptcy, Hymas had loaned Covino $500,000, which was later converted into 49 percent of Covino's company, Equity Benefits, which owned commercial real estate in Eagle and Phoenix.
On April 17, 2008, Bank of the West was awarded the $1.3 million judgment it sought. On the same day, the Hymases sold Tiffany's wedding ring, watches and other jewelry to Aaron's father for $13,000. One week later, on April 25, Aaron, 36, and Tiffany, 35, finally filed personal bankruptcy. The final document comprises several hundred pages, listing assets of just $64,000 and debt of a staggering $68 million.
For more than two years now, bankruptcy trustees have waded through myriad filings fraught with omissions and mistakes.
Aaron Hymas told the court their initial bankruptcy attorney, Kelly Beeman, is to blame for incomplete and missing information.
Beeman and Hymas refused to be interviewed by the Idaho Statesman. Other Hymas family members could not be reached, and Aaron Hymas said they didn't want to talk.
Hymas brought on a new bankruptcy attorney, Brent T. Robinson, in October 2008.
Robinson did not return a call from the Idaho Statesman.
Robinson told the bankruptcy court this summer that his clients had received bad advice from Beeman.
"Once they realized that they were receiving bad advice from Mr. Beeman, they attempted to correct any mistakes, misinformation or omissions that were present," Robinson wrote.
"Defendants have no defenses," Assistant U.S. Trustee David Newman responded. "They cannot claim advice of counsel as defense or blame their misconduct on attorneys' sloppy work."
The judge agreed Beeman's work may have been less than stellar.
"Beeman's advice and conduct was patently wrong in numerous regards," wrote Chief U.S. Bankruptcy Judge Terry L. Myers, noting that Beeman "was in many instances impeached by his own deposition testimony."
But ultimately the responsibility lies with the Hymases, the judge said.
On Sept. 30, Myers denied the discharge of the Hymases' $68 million debt because of "their transfer of assets within a year of filing bankruptcy with the intent to hinder, delay or defraud their creditors and their knowing and fraudulent false oaths," Myers wrote.
The Hymases did not appeal the judge's decision.
Even though none of their debt will be discharged, the bankruptcy case moves forward as the trustee attempts to recover and liquidate the couple's assets to pay creditors.
On Sept. 17, the bankruptcy trustee filed a complaint against Covino seeking recovery of the $500,000 Hymas gave him. Covino is amicably working with the trustee to resolve the matter, according to his attorney, Brian Boyle.
Between 2004 and 2006, Michael Hymas (Aaron's father), his daughter, Shauntee, and his son-in-law, Stanley, pleaded guilty to falsifying $8 million in loan applications to purchase and flip 21 properties in Idaho and Utah.
"Ultimately, the scheme collapsed," Assistant U.S. Attorney George Breitsameter told Judge Edward J. Lodge at Michael Hymas' sentencing.
Hymas, 59, a longtime Meridian insurance agent, asked the judge for leniency.
"This is not me," he told the judge. "My entire life I've taught my family about integrity. I put myself in a position where I jeopardized my integrity. I didn't mean to."
Hymas wants to return to Utah and start making money so he can pay his restitution. He and his son, Aaron, have just started a new business venture called eNutriTec, a health food products company.
The elder Hymas' attorney asked the judge to let his client go with probation or house arrest and restitution.
Lodge scoffed at the idea.
"Restitution is not a punishment the money was never yours to begin with," Lodge said.
This wasn't just one mistake in need of restitution, Lodge said. Because Michael Hymas had filed bankruptcy a few years ago, he had to use his daughter and son-in-law's names and credit ratings to get bank loans. Twenty-one of the 28 loan applications filed by the trio contained false information.
The "train wreck" was inevitable, Lodge said.
Lodge sentenced Michael Hymas to 21 months in federal prison, three years supervised release and 80 hours community service. He ordered him to pay restitution of $544,647.
Lodge was especially critical of how Hymas and his son-in-law used his daughter.
"Your daughter pretty much did what she was told," Lodge said.
Shauntee Ferguson, 33, a stay-at-home mom, signed her name to loan applications and other documents prepared by her father or husband. Some documents indicated she made $10,000 a month as a marketing director at her father's insurance agency, when in fact she was not employed and had no income.
"You cannot put your head in the sand and say you didn't know what was going on here," Lodge told her. "You just don't sign documents unless you read them."
Lodge sentenced Ferguson to one day in prison, five years of supervised release and restitution of $365,829.69.
"It is probably unfair to the victims, but it is the only sentence the court feels is realistic," Lodge said.
Her husband, Stanley, will be sentenced on Nov. 29.
Melody Covino Redondo, Vince Covino's sister, slouched in her chair next to her husband, Paul, at the defendants' table during their arraignment before a federal judge on Nov. 1 coincidentally the same day as Michael and Shauntee Hymas' sentencing.
Their indictment on multiple counts of bank fraud, wire fraud and making false statements to a financial institution marked another wave of charges brought by federal investigators and prosecutors.
The Redondos may be familiar faces to fans of "Fear Factor." The couple appeared on a honeymoon episode of the television show in 2005.
In an alleged real estate scheme, Melody Redondo, a real estate agent, attempted to sell Crestwood subcontractor Christopher Georgeson's $1.4 million Eagle home in a short-sale without notifying the bank of higher offers.
Under the scheme, the house would be simultaneously sold to another buyer and Redondo would get a share of the proceeds. When Redondo couldn't get someone to notarize a quitclaim deed on which she had allegedly forged Georgeson's name, Redondo became a notary and signed the deed herself, according to the indictment.
The simultaneous sale never took place.
Both Paul, 33, and Melody, 32, also are accused of falsifying income and other information on loan documents.
The Redondos pleaded not guilty at their Nov. 1 arraignment. A trial is set for Jan. 11.
Breitsameter said the FBI investigation continues and he expects to bring more cases to the grand jury in the coming months.
Regards,
Michael Hon
CEO, The Iron Eagle Realty Team
Associate Broker, Market Pro
Certified Short Sale Specialist®
Investment Property Consultant
Direct: 208.919.0458 Office: 208.939.9033 Fax 208.514.1422
www.IronEagleRE.com Michael.Hon@IronEagleRE.com
