In light of the commission class action lawsuits, tell us your thoughts on the U.S. real estate market?
I am pleased with the feedback since our last conversations, or at least with my predictions for 2024. Which, by the way, are quite accurate for both the commercial and private sectors for the first half of 2024.
How do you think it will end or resolve?
In short, the whole residential commission thing is a real shit show. I’m sure these big national companies like REMAX, Keller Williams and Realty One Group will regret the tens of millions of dollars they agreed to pay out. The same argument used as to why real estate agents should pay consumers back when they agreed up front to pay a 3-6% commission on the sale of their home is the same argument plaintiffs in personal injury cases can use against their attorneys, which is usually a 30-33% contingency fee, and that they should also void their signed attorney fees and be compensated. That is a ridiculous legal theory. Both industry professionals, real estate agents and attorneys, are two of the most prolific discovery companies out there today, and that’s to prevent what is happening now. Sorry to be so negative.
How about The informantYour fourth book is coming out soon. That’s at least a positive thing, isn’t it?
Of course it is. It’s always good to write. Now, let me think, this was more of a statute of limitations situation than anything else. Not in terms of compensation, because the details of this situation would not have entitled me to compensation, but rather because it was ideal or even legally permissible to write about my role as a whistleblower because there were two different states with jurisdiction, namely Florida and California.
What do you mean by two different areas of government jurisdiction?
The applicable laws are controlled by one of those two states, since the fraudulent activity originated in California, where a mortgage fraud ring purchased two of my condos in Burbank, California without my knowledge. Florida could be a problem because at the time the FBI contacted me in 2010, I was – ironically – working on a mortgage fraud project in Jacksonville. I can’t make this stuff up. But more generally, since it was the FBI that “handled” my cooperation, there were potential violations of federal law.
Why were you not charged?
I don’t know. Maybe because they liked me. I assumed they had obtained a search warrant for my emails and other electronic communications. Maybe to see if I called the people I sold my two properties to for over a million dollars. Maybe just to see if I warned them. That might have been why they didn’t charge me. To make sure I was a “de facto” cooperating witness. Every condo now legally and easily costs over a million dollars.
Coming back to the issue of compensating a whistleblower, why were you not compensated?
Well, technically because my properties were not sold at a loss. I was able to sell both properties well above list price. Since I’m licensed in California, I was the broker and the official agent. Which I realize is suspect since pretty much everything was sold at a loss in 2007. But this mortgage fraud ring wanted to pay significantly more than list price, so I agreed. Morally and legally, I was unaware of what they were doing. Some people do actually buy above list price. As a former commercial real estate agent, this has happened to me several times. No big deal. Nothing unusual. They got me out of a deep jam. What was the other question?
About compensation?
Well, not these two condominiums, but in The informant I remember the time I was a potential witness against Wells Fargo in what’s called a relator case. That’s a legal term. In a “qui tam action,” a relator files suit against a person or corporation on behalf of the government. Or a relator is someone who files a qui tam action against another person under the False Claims Act. I believe the key witness is entitled to up to 25% or the gross civil judgment against a corporation. Essentially, I would have been a federally protected witness in a whistleblower case.
Did you help in this case?
I didn’t because I was never officially a witness. In about 2016, around the time I was no longer an active informant with the FBI, so from 2010 to 2012, I was approached. I can talk about this because Wells Fargo settled that case for tens of millions of dollars, so the statute of limitations…or rather, breach of confidentiality doesn’t affect me because the documents I had as a whistleblower were related to systematic and company-wide criminal and civil violations by Wells Fargo. In this case, the whistleblower cannot be prosecuted because their going underground – or basically taking company documents – is a protected activity because it’s a criminal or civil offense. In this case, it’s Wells Fargo.
Who was the real estate agent? I mean real estate agent.
It was a real estate agent from Pasadena, California. But he had sold houses and I had sold commercial real estate. I thought I would get along with him because that’s where I’m from. He came across my background when I answered a blind ad looking for mortgage portfolio subject matter experts.
And what are you looking for?
For mortgage and real estate professionals who had worked or were working on loan modification projects. What they actually did was take out an ad to recruit unsuspecting witnesses against major banks and also to obtain internal documents that proved their decision criteria – all with the goal of finding out whether these major banks were complying with federal law regarding the Dodd-Frank Act, which requires that federally insured banks properly offer loan modifications to their customers. These guys were really savvy. Sophisticated profiteers who would sell their mother’s grave if you paid them enough. I was impressed by their audacity.
Have you met this person from Pasadena?
No, I didn’t. All communication was by phone and email. But this punk was sleazy. Wanted to fly me to Dallas to look at the documents since I was still working in Minneapolis. At the time, the documents were in storage in Southern California since I had them FedExed there overnight. About two bank boxes full of files showing that underwriters, analysts, and managers had systematically denied homeowners loan modifications they were legally entitled to. Just a crappy situation. I felt bad. Eventually, I was able to abandon that project for another project without them knowing. There have been at least a half dozen class action lawsuits over loan modifications involving Wells over the last decade. It’s the gift that just keeps on giving. It all comes from one of the government programs, I think it was called… uh… the Home, the Home or something.
You mean the Home Affordable Housing Program.
Yes, that’s it. Thanks for helping me with that. The acronym for that is HAMP.
What ultimately came of your collaboration?
I couldn’t get this person out of Pasadena to formalize a relator agreement and put my share in writing. Rule #1 in the real estate business. Get it in writing. There were conference calls with his attorneys discussing case strategy and my background as an asset. I reciprocated in good faith and provided a small sample of the documents, about 15-20 pages. I even provided a photo of the two bank boxes with the lid removed and slid over the side just to show the real documents inside. Bottom line, he didn’t agree to a relator agreement. So basically I was giving him two boxes of important documents supporting his case with no guarantee I would get paid.
Seriously?
I know you just have to believe it. At least in cases like this, he was credible. In Westlaw-Lexis, I was able to confirm that he had won a $30 million qui tam whistleblower case against Ocwen Financial Corp. But there was something unholy about him. Any time a grown man brags to another man that he has a new $150,000 Maserati in his second home in Dallas, you know there are developmental issues. I call it the “little boy syndrome.” And I would never have forgiven myself if I had sent those two packages and not been paid as one of the relators. I just couldn’t take the risk. So I left.
Any regrets?
Not at all. And that’s even more true because at one point he basically said he and the lawyers might not even use the documents I provided. That’s just haunting. He’s basically saying, “I might end up screwing you over and there’s absolutely nothing you can do about it!” The way I would react if that actually happened would probably be detrimental to my liberty and my individual freedoms.
Now I understand.
Thanks. It just wasn’t worth it.
Good. Then we look forward to highlighting The informant when it lets go.
Okay. Probably early 2025. It’s 90% done. Shouldn’t take too long.
About the author:
Mr. Potter writes about commercial and residential real estate and is based in Southern California.
