Tuesday, November 22, 2011

Phoenix home-fraud lawsuit leads to indictment

A case that likely would have died in civil courts came back to life with a multicount indictment unsealed in federal court last month that accuses a Valley man of fraud and money laundering for his work with historic homes near downtown Phoenix.

The allegations against Jere Parkhurst will be familiar to anyone who lived in the Valley during and after the housing boom: Parkhurst, a Litchfield Park resident, is accused of taking money from investors, promising a 20 percent return within six months as he bought, renovated and sold historic homes for a profit.

The investors included a schoolteacher, engineer and other middle-class residents looking to pad their retirement accounts with proceeds from the booming Valley housing market. Investors allege in civil lawsuits that as the bottom began to fall out of the market, Parkhurst saw what was coming and funneled the money earmarked for renovations into his own accounts.

Parkhurst's activities resulted in a series of suits being filed against him in civil court from 2007 through 2009, all of which were either settled or dismissed with victims claiming they never received any of the court-ordered payments.

That's where it could have ended - until investor Katie Muha got angry.

Frustrated that an attorney said it would cost $75,000 in legal fees to try to recoup $46,000 from Parkhurst, Muha hired a private investigator who dug into Parkhurst's past and presented the information first to the Arizona Attorney General's Office, which passed on the case, and then to federal officials.

Those efforts paid off last month when a 27-count indictment against Parkhurst was unsealed in federal court.

Parkhurst's attorney said his client intends to fight the allegations.

The U.S. Attorney's Office declined comment.

But for investors like Muha, a Gilbert teacher, and her husband, the indictment was vindication after years of trying to hold Parkhurst accountable for his actions.

Muha and her husband were drawn to the investment opportunity in early 2007 by friends who were "making money left and right" renovating and flipping historic homes near downtown Phoenix. They worked with Parkhurst to buy a home on Lewis Street, which was renovated and sold months later for a profit, Muha said. Another opportunity arose in the spring and they invested again, but by then the market started to turn and Muha said they decided to sell the house at the first opportunity. But Parkhurst could not repay the $100,000 they invested, she said.

"What Jere had been doing was using money for the first deal for the second deal," Muha said. "When the wheels came off the bus he couldn't pay for it. I really think that he knew that things were going south and he grabbed as much money as he could grab before it went down."

The Muhas' claim mirrors many of the other civil lawsuits filed against Parkhurst, with investors alleging losses estimated to range from several thousand dollars to more than $1 million.

Many of the investors who filed claims against Parkhurst and scored rulings and settlements in their favor say they have never been paid, much like Muha, who holds out some hope that the federal court case will succeed where the civil actions fell short.

"I hope he goes to jail," she said. "I know I'm never going to get my money back. That was a tough lesson to learn. I should have made sure that money never went directly to him, but to an escrow officer."

A lot of green investors learned similar lessons when the bottom fell out of the Valley's housing market, but experts say that guidance still holds true, particularly with the abundance of short-sale and foreclosed properties on the market that continue to lure investors.

"Even though you think that it's a relic of what happened four or five years ago, it's still going on," said Eric Forster, a mortgage-fraud expert from Los Angeles. "The best thing to do, which no one does, is use a real-estate attorney before they give the money to anyone. Most people just don't have a sense of what they're getting into."

by JJ Hensley The Arizona Republic Nov. 13, 2011 08:47 PM

Phoenix home-fraud lawsuit leads to indictment

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