Tag: Tax lien sale

Theft By Any Other Name

This story is simply unbelievable. It’s got it all: incompetent city government, crony capitalism and stealing a marine’s home for an overdue $134 tax bill:

On the day Bennie Coleman lost his house, the day armed U.S. marshals came to his door and ordered him off the property, he slumped in a folding chair across the street and watched the vestiges of his 76 years hauled to the curb.

Movers carted out his easy chair, his clothes, his television. Next came the things that were closest to his heart: his Marine Corps medals and photographs of his dead wife, Martha. The duplex in Northeast Washington that Coleman bought with cash two decades earlier was emptied and shuttered. By sundown, he had nowhere to go.

All because he didn’t pay a $134 property tax bill.

The retired Marine sergeant lost his house on that summer day two years ago through a tax lien sale — an obscure program run by D.C. government that enlists private investors to help the city recover unpaid taxes.

For decades, the District placed liens on properties when homeowners failed to pay their bills, then sold those liens at public auctions to mom-and-pop investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid.

But under the watch of local leaders, the program has morphed into a predatory system of debt collection for well-financed, out-of-town companies that turned $500 delinquencies into $5,000 debts — then foreclosed on homes when families couldn’t pay, a Washington Post investigation found.

As the housing market soared, the investors scooped up liens in every corner of the city, then started charging homeowners thousands in legal fees and other costs that far exceeded their original tax bills, with rates for attorneys reaching $450 an hour.

Here’s the short version: Coleman is a 76-year-old retired Marine who owned his $197,000 home free and clear. He also has been showing signs of dementia and, at one point, forgot to pay a $134 tax bill. His son eventually paid the bill — plus $183 in interest in penalties. But it was too late. The lien had been sold to a private company that demanded $5000 in legal fees. The son couldn’t come up with the money and court foreclosed. The Maryland firm that bought the house sold it for $71,000.

This is not an isolated incident. You really must read the whole thing if you have the time. Private companies now hold liens on thousands of properties and have foreclosed on hundreds, frequently over very small amounts of money (after inflating them to unpayable sums with often undocumented legal fees). Poor neighborhoods, already hurt by the recession, are being devastated by these seizures. And these are not people who bought homes to flip them or bought homes they couldn’t afford. These are people trying to be responsible who have, for various reasons, missed a tax payment. Or in many cases, haven’t but had liens put on their homes by mistake.

One 65-year-old flower shop owner lost his Northwest Washington home of 40 years after a company from Florida paid his back taxes — $1,025 — and then took the house through foreclosure while he was in hospice, dying of cancer. A 95-year-old church choir leader lost her family home to a Maryland investor over a tax debt of $44.79 while she was struggling with Alzheimer’s in a nursing home.

Other cities and states took steps to curb abuses, such as capping the fees, safeguarding houses owned by the elderly or scrapping tax sales altogether and instead collecting the money themselves.

Moreover, there is no supervision. Many of these private companies have already been prosecuted in other states for breaking laws and rigging bids. And the DC tax office has sold nearly 2000 liens by mistake.

A 48-year-old math teacher paid his taxes in 2007, but the tax office took his $1,400 payment and applied it to the wrong house, crediting an entirely different taxpayer.

A 58-year-old bank employee almost lost her house in 2010 because the tax office mistakenly sent bills and notices to a wooded lot across from a strip shopping center in Virginia — 12 times.

A 69-year-old hat designer was given the wrong payoff amount and ended up in court to save her property, owned by her family since 1943.

Those homeowners found out about the mistakes in time to fight. Ninety-five-year-old Daisy Dolsey, living in a nursing home and struggling with Alzheimer’s, wasn’t so lucky: She lost her $300,000 house over a $44.79 tax debt even after she paid her taxes.

This is an appalling scandal. This should be national news and the DC Council should be getting pilloried for refusing to address the issue. And it’s only a microcosm of government farming out duties to private companies — which might be defensible enough in a vacuum — but not holding those companies to any standard of behavior or any limitations on their authority. And for the companies it’s a gold mine — the Post reports that $5 million in suspiciously organized and unsupervised bids bought liens on 2/3 of a million in properties. They then charged the owners thousands in administrative and legal fees and foreclosed on the homes if the homeowners couldn’t cough it up

This is theft, plain and simple. This is government, industry and lawyers conspiring to rob people and not giving a fig what it does to the city.

And while I’m on my horse about property rights and corrupt government, the problem of asset forfeiture is only getting worse:

Leino is one of thousands of Philadelphia residents who each year find themselves facing the seizure of their possessions — cars, cash and real estate — via “civil asset forfeiture,” a legal construct that lets law-enforcement agencies seize property linked to crime and keep the proceeds. In Pennsylvania, civil forfeiture is carried out primarily under state drug laws. The Philadelphia DA brings 300 to 600 real-estate forfeiture cases per year, and thousands of cases against small amounts of cash seized in police stops that sometimes, but not always, result in arrests — together bringing nearly $6 million into its coffers annually.

In a series of reports for City Paper [“The Cash Machine,” Nov. 29, 2012] and ProPublica, this reporter has documented how the Philadelphia DA has made civil forfeiture into a vast, unaudited revenue stream, profiting from an upside-down legal process through which the DA has the power to bleed property owners dry of financial resources and imperil homeowners with minimal or no evidence of criminal wrongdoing.

Long before the forfeiture action against her house would be completed, and without a judge or jury ever seeing her face, Leino would be forced from her house and made homeless along with her three children. She would lose her most precious possessions, and ultimately be deprived of her family’s most valuable asset — all without Leino ever being accused of any crime.

Her husband, Sam, was accused. On Feb. 22, 2010, police officers arrived at the family’s house, at 2729 Orthodox St. in Bridesburg, to arrest Sam on charges of selling prescription pills. The officers would later testify that they observed Sam handing over small objects in exchange for money outside the house. After executing a search warrant, police recovered various painkillers. (Sandra Leino says her husband was partially disabled from a truck accident and took the painkillers himself, legally, for his pain.)

Sandra Leino and her three children were not accused of any crime; nowhere in police reports is there even a hint that any of them had done anything wrong.

That didn’t stop the DA from filing a motion to seize the Leino’s house that May — and then, for reasons that remain unclear, kicking them out of it the same month. (The DA’s Office responded to inquiries with a short statement describing the forfeiture action, but would not explain why Leino and her family were made to leave). Leino, her husband (out on bail awaiting his trial), and their children were forced from their home with nowhere to go. They stayed in a motel for one week.

While the family navigated a homelessness imposed on them by the District Attorney’s Office, the DA asked the city’s Department of Licenses & Inspections to conduct a “clean and seal” operation on the Leinos’ house. City officials arrived at the house shortly after the forfeiture motion had been filed (not granted) and began throwing out the Leinos’ possessions — among them pictures of the Leinos’ children growing up, antiques they had collected together as a hobby and a 5-gallon jar of pennies the family had filled as a way to save money.

The house was foreclosed on by the bank. Leino was convicted of a single felony charge. Oh, and the officers who brought the charges against Mr. Leino? Four of them were found to be part of drug-dealing ring within the Philadelphia police. Nearly 300 of the cases they brought have been dropped.

I highlight these two stories specifically because they involve people who are working class, not the rich folks that defenders of asset forfeiture and foreclosure corruption always insist are the real targets of the laws. Whenever you give government this kind of gangster power, it will be turned on everyone, but especially on those who do not have the resources for lawyers and publicity. These are poor and working class people, mostly minorities. The only crimes they have committed are missing a tax bill or low-level drug dealing (or living with someone who has done those things). And they are being robbed blind to stuff the coffers of police departments in one case and rich speculators in the other.

This is what happens when you don’t respect property rights and when you give the government authority to just take people’s possessions. You won’t see Donald Trump having his home sold to speculators. You won’t see a rich politician kicked out onto the street if her husband is dealing pain pills (according to four corrupt cops). Michael Bloomberg’s stop-and-frisk wasn’t used on Wall Street execs. Our War on Drugs imprisons lots of poor people but sees rich drug users as “having a problem”. Our War on Prostitution thinks Eliot Spitzer should run for comptroller while survival-level sex workers should be imprisoned and raped.

Arbitrary government power is always turned against the powerless. There are some things we need government to do, but that power should always be supervised, constrained, reviewed and never allowed to play to the personal benefit of the rich and powerful. The nation has forgotten this lesson. But thank God for the Wapo, for the IJ and for independent journalists who are determined to make sure that this abuse and criminality does not go unnoticed.