Scam Affecting Tax Deed Investors PT 1

How has one of the largest real estate schemes in Florida affected you as a tax deed investor?  Though the scheme took place in 2003-2006 its affects are still being felt today through out Florida’s tax deed investment community.  Title insurance underwriters are very reluctant to issue title insurance when a tax deed is found in the chain of title even if a suit to quiet the title has been granted. 

Who can blame the title insurance underwriters? With the typical value of property being less than $15,000 and the underwriters typically receiving $30 per $1000 of insured value it equates to little money for them with an increased risk.  The perceived risk is in large part due to the happenings of 2003. 

In 2003 Sky Development Group LLC turned the real estate world upside down, executing one of the largest Florida real estate scams with diligence and authority. 

The charges brought against them read like a Steven Spielberg movie script born of international fraudsters who ultimately have not been incarcerated for their estimated $200 million dollar scam and who returned to their native country unscathed.  In the wake of their business practices there have been a large number of property owners, commercial lenders, title underwriters and investors holding the remnants of what we believed to be a secure system of checks and balances.

Sky Development Group, LLC began recording fraudulent deeds for vacant subdivision lots in Citrus Springs in or about 2003.  With conveyances of up to 500 lots on a single deed and with some legitimately conveyed to them, it really did not throw up red flags as some of the lots were also scheduled for the auction block at the tax deed sales. 

Once the deeds were recorded the properties were mortgaged.  In fact, Kennedy Funding Group mortgaged hundreds of lots which they began foreclosure proceedings on and ultimately sold their interest in the lots to Citrus Ventures LLC.  Citrus Ventures being owned in part by a Kennedy Funding executive, the interest was conveyed by assignment of bid prior to the foreclosure auction occurring.   These parcels are still listed as being for sale on the Kennedy Funding website, accurate as of January 2010.

Upon Sky Development mortgaging the property, there were very large ad campaigns promoting their homes and preconstruction pricing.   Partnerships were formed with legitimate developers who were equally unsuspicious. 

To further hide the scam an unlicensed title agency was opened by the executors of Sky Development which allowed them to further stretch their ability by issuing unenforceable title insurance and creating less scrutiny over funds held in trust while selling parcels over and over again.   Deposits were taken for pre construction of homes, funds were placed in escrow by buyers of vacant parcels and homes, payments were being received, additional mortgages were obtained against Sky receivables and, of course, these escrowed funds were held by their title agency.  Thus, a funnel was created whereby hundreds of fraudulent deeds were poured in and huge profits were the product created.    

While the Sky Development Managing Member and his wife enjoyed the finer things of  entertaining in their waterfront mansion in West Palm Beach and taking weekend cruises in their yacht, the real estate world of checks and balances became a legal tangle of who owns what.  

Continued in PT 2