Timeshare Resale
Scams Involving Fake Appraisals
Resale Reality
One company which offers resale services for timeshare units, campground
sites and deeded vacation holdings says they are agents for English
and Danish companies who successfully market timeshare units and
campgrounds throughout Great Britain and the European Economic Community
("EEC") countries. They tell you the market for resales
is "hot" and that their company has a high success rate
in reselling units. They claim to have extensive lists of sales agents
and potential buyers.
They say that there is a strong demand for timeshares overseas,
and that they can sell your property at a high price. They may even
state that if they do not sell your timeshare within a specified
time, typically nine to twelve months, you are guaranteed to receive,
from another overseas company, 90% of either the appraised value
of the property or the property's list price.
They may charge an advance listing fee from $200 to over $4000 for
this service. To further entice you, they even offer a money-back
guarantee or a $1,000 government bond if they can't sell your timeshare
within a year.
Sadly, it is unlikely that the company can sell the timeshare at
all, let alone at a price equal to or greater than your original
purchase price. Their lists of sales agents and buyers consist of
people who have never heard of the company or have no interest in
buying a timeshare.
In addition, certain consumers whose timeshares don't sell after
a year are presented with a long-term government bond presently worth
only $60 or $70. Or, never intending to provide the promised sales
or service, the agents simply change names then move their operations,
along with your money, to another location.
No Praise for these Appraisals
Four Massachusetts residents and six Florida men have been named
in a fifty-count indictment for running a timeshare appraisal scam
that took in over $15 million from approximately 38,000 victims nationwide
over four years. The ringleader was arrested in St. Maarten, Netherlands
Antilles and detained pending his extradition to the United States.
Purporting to represent a real estate investment company based in
Florida and Texas that wants to market or buy your timeshare property
for a high percentage of its appraised value they would say an appraisal
must be performed first.
He and his co-conspirators, established a complex network of more
than a dozen companies designed to convince owners who were interested
in selling to purchase a $399 "appraisal" of their timeshare
which they would reimburse at the time of closing.
They would call saying they represented a large corporate buyer
called Swiss American Bank and that Swiss American simply needed
an assessment of the property's value. The caller would suggest
owners pick a company accredited by an independent multi-listing
service then refer you to a purportedly independent service, Multi-State
Listing Service ("MLS")-- a second boiler room, which would
provide you with a list of three to four "independent" appraisal
companies supposedly with personnel in the area of your timeshare.
Selecting one from the list you would then be called by a third
boiler room which stated they were actually calling from that appraisal
company. In this call, you were coaxed into providing your credit
card number and then immediately billed for the appraisal.
These purportedly "independent" companies, spread out
across the United States, produced reports which had virtually identical
formats, the same standard language and often contained the same
typos. Every one was opened for the sole purpose of executing this
scheme and was run by friends, family or promoted telemarketers.
They used names such as Resort Condo International Appraisals, Inc.,
Resort Certified Appraisals, Inc., Resort Evaluations, Inc., Interval
International Appraisals. and had locations in Mass., Rhode Island,
Florida, Michigan, Nevada, Georgia, Louisiana, and Windsor, Ontario.
Resort Condo International (RCI) Appraisals was a multimillion-dollar
international time-share-valuation business which shared office space
with a used-car dealership. The owners of RCI Appraisals, a Hyannis
couple who live less than a mile from Carquest, were raking in upwards
of $80,000 a month by providing appraisals of time-share properties
around the world, despite having no experience in real estate.
Roughly eight weeks later, they would mail you out a bogus two-page "appraisal" that
falsely represented that your timeshare had been inspected. Netting
them over $12 million, the reports were simply printed off a database
at a total cost of roughly $25 each.
According to Michael Upton's lawyer, the couple will say Jill's
father convinced them to open RCI Appraisals and they believed it
to be an honest business. A warrant to search the ramshackle
Carquest building yielded 30 boxes of documents, which led to seizures
in Texas and Florida.
Over four years, only eleven of the more than 38,000 people who
purchased appraisals actually closed on the sale of their timeshare.
The vast majority never received an offer or received paltry offers
far below the market value.
When timeshare owners pressed for answers, they were confronted
with unreturned phone calls, answering machines, disconnected numbers
or a litany of excuses for the delay in processing their paperwork.
All of the defendants are charged with multiple counts of mail and
wire fraud, each of which carries a maximum penalty of five years'
imprisonment and a $250,000 fine, as well as restitution.
Money laundering charges, each of which carry a maximum penalty
of twenty years' imprisonment and a $500,000 fine were added because
they wired over $7 million to accounts which used these funds to
further promote the scheme by paying telemarketer commissions and
operating expenses, such as rent, utilities, and the purchase of "lead
lists" of potential sellers.
Case Update 10/22/02 (Boston) - Donald L. Gonczy, age 68,
of Florida, was sentenced to 7 years' imprisonment, to be followed
by 3 years of supervised release, for running a highly sophisticated,
nationwide telemarketing fraud operation that victimized over 38,000
people out of $15.4 million.
The judge also imposed a fine of approximately $142,000, representing
all of his assets held in his Austrian bank account and barred him
from any employment involving sales.
Donald Gonczy, pleaded guilty after the first week of his trial
in June 2002 and has been in federal custody since he was arrested
in St. Maarten in January 2001.
Gonczy's son, Scott was sentenced to 3 years and 10 months' imprisonment,
his daughter, JILL Gonczy Upton, who cooperated with the government,
received a sentence of 3 months' community confinement, to be followed
by 1 year and 3 months of home detention. Her husband, Michael Upton,
was sentenced to 2 years' incarceration. Todd Gonczy, his oldest
son, who pleaded guilty at the outset of this case and assisted in
the prosecution of his father and siblings, received a sentence of
5 years' probation.
They all say they're broke. On his affidavit filed to obtain a court-appointed
lawyer, Donald Gonczy claimed to have just $1,000 cash and no other
holdings or property. He had been living, he said, on Social Security
payments and dividends from an investment in the Bahamas — an
offshore company authorities say he created to hide his money. At
the deposition, the government claimed Gonczy moved $1.1 million
to the Bahamas and at least $200,000 to a bank in Austria.
Peter Train and Buck Shelton, two unrelated participants,
received sentences of 2 years and 3 years and 5 months' imprisonment
respectively. Two other defendants, S. Joel Epstein and John
Handel, were convicted following a four-week trial and will be
sentenced later this fall. Epstein, whose sentencing is scheduled
for October 29, 2002, was convicted of conspiracy, mail fraud, wire
fraud and money laundering. Handel, 51, of Yarmouth, was convicted
on five counts of mail fraud for his role in this scheme and will
be sentenced on December 11, 2002.
In addition to the defendants who have already been convicted, one
other individual, Roger Canzano, an attorney in Michigan,
is facing trial in January 2003 on these charges. Two others who
were indicted, Vincent Corey and Edward Loney, are
fugitives.
According to the evidence presented at trial, Donald Gonczy, Joel
Epstein, and their co-conspirators, established a complex network
of more than a dozen companies designed to persuade timeshare owners
who were interested in selling their timeshares to purchase a $399 "appraisal" of
their timeshare.
The scheme passed timeshare owners through a series of boiler rooms
to complete the fraud. First, the defendants established a number
of purported "buying companies" based in Florida and Texas
which contacted timeshare owners and made a host of misrepresentations,
including that they would buy the person's timeshare if the owner
obtained an appraisal and that they would reimburse the owner for
the appraisal fee at the time of closing.
The buying companies falsely claimed that they received no fees
from the appraisal companies and had no part in the appraisal process.
Once the buying company persuaded the timeshare owner into selling
the timeshare, the buying company referred the timeshare owner to
a purportedly independent service, Multi-State Listing Service ("MLS"),
which in fact was a second boiler room.
The timeshare owner would be told that the MLS would put the timeshare
owner in touch with "independent and internationally recognized" appraisal
companies. MLS then provided the timeshare owner with three "independent" appraisal
companies supposedly with personnel in the area of that person's
timeshare. Every one of these appraisal companies was phoney and
established solely to execute this fraud scheme. The "appraisal" companies
were run by Donald Gonczy's children, close friends, or former telemarketers
from the boiler rooms.
Jill Gonczy Upton and her husband, Michael Upton,
ran one of the appraisal companies, known as RCI Appraisals, located
in Hyannis, Massachusetts. Scott Gonczy, another son, operated
Interval International Appraisals ("IIA") in Providence,
Rhode Island. Other "appraisal" companies were opened in
Florida, Michigan, Nevada, Georgia, Louisiana, and Windsor, Ontario.
At trial, the government proved that after speaking with an MLS representative,
and selecting an appraisal company, the timeshare owner was next
contacted by a third boiler room operation called the Appraisal Referral
Center ("ARC").
The ARC telemarketers falsely represented that they were actually
calling from the appraisal company the timeshare owner had selected.
In this call, the timeshare owner was coaxed, through more misrepresentations,
into providing his or her credit card number. At this point, the
timeshare owner was then billed approximately $399 for the appraisal.
Eight weeks later, the appraisal companies mailed the timeshare
owner a bogus two-page "appraisal" that falsely represented
that the timeshare had been inspected as part of the appraisal process.
The government proved at trial that these reports were simply printed
off a database at a cost of just $7.50 to the appraisal company.
The established time-share-exchange company RCI (Resort Condominiums
International) took issue with the name RCI Appraisals and sued to
make the Uptons drop it. Then Interval International, another property-exchange
business, challenged Scott Gonczy for naming his Providence company
Interval International Appraisals. (The Providence business took
another jolt when Scott was nabbed for soliciting minors over the
Internet and jailed for two years.) As all this was happening, Michael
and Jill Upton faced complaints from their credit card processing
companies, which revoked their merchant accounts.
They weren't very good at eluding authorities though. When Donald
traded in his Bentley for a BMW, he asked the dealer to deliver it
to the Caribbean island of St. Maarten. Pam, meantime, leased a post
office box in Pompano Beach and had their mail forwarded to High
View, 54 Guana Bay Road, St. Maarten, Netherlands Antilles.
Experienced fugitives would have settled on the French side, St.
Martin, since the French are more hesitant than the Dutch to extradite
people to the United States. But Donald and Pam were right there
on Guana Bay Road on January 30, 2001, when authorities arrived.
Jill and Michael were also there, and after learning they, too, were
facing indictments, they returned home to surrender.
John Handel signed roughly 10,000 fraudulent appraisals for RCI
and IIA, and was paid $5 for each report he signed. He also signed
several thousand reports using a fictitious name he created, James
Rose.
The appraisal reports issued by these purportedly "independent" companies
had virtually identical formats and standard language, and often
contained the same typographical errors. The bank records at trial
proved that the defendants sold $15,409,000 in fraudulent appraisals
to approximately 38,000 timeshare owners located throughout the country.
The evidence at trial also established that Epstein and Vincent
Corey, ran the financial operations of these enterprises, resulting
in Epstein's money laundering convictions for using the proceeds
of illegal activity to further a mail fraud and wire fraud scheme.
The vast majority of the more than 38,000 timeshare owners who purchased
appraisals as part of this scheme either never received a purchase
offer from the buying company or received "low-ball" offers
that were 15% of the "appraised" value. When timeshare
owners pressed the buying companies for answers, they were confronted
with unreturned phone calls, answering machines, disconnected numbers
or a litany of excuses for the delay in processing their paperwork.
Only 11 out of the 38,000 people over the course of the five years
the scheme operated were able to sell their timeshares to the buying
companies.
At their upcoming sentencings, Epstein and Handel each face maximum
penalties of 5 years' imprisonment and a $250,000 fine on each mail
fraud and wire fraud conviction, as well as Epstein's conspiracy
conviction. In addition, Epstein faces maximum penalties of 20 years'
imprisonment and a $500,000 fine on each of the 5 money laundering
counts.
The case was investigated by the U.S. Postal Inspection Service
and the Florida Department of Law Enforcement.
So, if you own a vacation timeshare, go for a company that offers
to sell for a fee only after the timeshare is sold.
Timeshare Terrorism Tax
As far as getting out of contracts - that's a tough one. You
probably already know there is little resale value on a timeshare
so that usually isn't an option. A lot of the people I've talked
to have been willing to lose their original investment if they could
just stop paying the annual fees and walk away but the company won't
let them.
Our friends at RHC just sent out a letter to their members - this
year everyone is getting a "special assessment" in addition
to their annual fees due to 9/11.
PT 10/26/02
Real Estate Liquidation Firms
Tens of thousands of frustrated property owners across the United
States and Canada are getting sucked into an explosion of real estate “liquidation” firms.
The liquidation firms, in exchange for an advance fee in the area
of $250 to $1,000, promise to find buyers for un-salable property.
With a barrage of sophisticated direct mail and telemarketing solicitations,
these firms are telling weary property owners that the up-front charge
is a marketing fee needed to cover the cost of promoting the properties
on television, radio, a nationwide computer database, mass mailings,
ad nauseum. Property owners are assured that their property will
be marketed until sold!
The fact is, that in most cases, once the fee is collected, the
firm is never heard from again. That is called the “No-Pester” guarantee.
Once you send them your money, we’ll guarantee they won’t
pester you. It leaves the person still holding the property and the
loss of hundreds of dollars. These land liquidation promotions have
generated complaints in almost all US states and Canadian provinces.
Further, a lot of these land liquidation schemes use assurances such
as stating they are registered and bonded by state agencies, giving
the false impression that they can also provide real estate brokerage
services, even though they are not licensed to do so.
These liquidation scams are cruel because they exploit the desperation
of property owners who want to sell a piece of land or a property,
but have not been able to do so. The land liquidation firms use familiar
abuse tactics to get the people to part with their money. Owners
of raw land, timeshares, and trailer park lots are particularly susceptible.
These firms are under investigation all across the United States.
In Texas, where a woman sent in a $388 check to a liquidation firm,
she was told she would momentarily be receiving a contract in the
mail. Of course the contract never arrived.
In Oregon, a man sent $495 via Federal Express to the liquidation
firm so he could sell his timeshare. When a contract was sent to
this man, he refused to sign it because the terms differed substantially
from what was discussed on the phone solicitation. But the company
refused to refund the sales fee. A recorded conversation between
real estate liquidation sales persons in Idaho got one couple on
the hook for a fee of $695 by stating: “At a price of $16,000,
I am showing that if you keep it at that, I have got between 18 and
20 buyers registered in the computer that we can show it to today.”
In Arizona, Cease and Desist orders have been issued against seven
out-of-state and six in-state real estate liquidation firms. In Alabama, one
man sent in $250 in response to someone offering to sell his property
for seven times its actual market value.
Let’s face it, this is a typical scheme: Empty promises, sophisticated
outreach to potential victims, and demand for advance fee, followed
by unresponsiveness. But in these particular cases, the author does
not feel particularly charitable toward most of the victims. As in
any fraud, you need a perpetrator and a victim. Both of them must
be willing participants. In this, as in almost every other case,
the perpetrator has hit the greed (and admittedly in some cases the
desperation, for which we do feel sympathy) factor on the victim.
The victims think they are going to put something over on someone
else and unload a worthless piece of real estate.
Some of the companies involved that have received cease and desist
orders are:
ADNET Inc., DBA the Advertising Network (Texas);
American Land Liquidators, Inc. (Texas);
Resort Properties Marketing, AKA Resort Nationwide Land Liquidators,
AKA Nationwide Liquidation Services Inc., (Texas);
Prime Property Locators, Inc.(Missouri);
Properties Marketing (Texas);
TRY-VIEW Inc.(Texas);
Universal Land Liquidators Inc., AKA Universal Liquidators, Inc., (Texas).
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