Ponzi Scheme Unearthed by Anti-Flipping Task Force

Attorney General Andrew Cuomo has filed suit against an investment company whose illegal practices have caused blight in the Buffalo community. East Coast Capital (ECC), LLC and others have been named in a suit that accuses them of promoting a Ponzi scheme that grossly overrates the market value of distressed, often uninhabitable houses.
A Ponzi scheme is a fraudulent investment that offers big payoffs to a high number of investors, only to collapse, leaving the initial investors rich, while the subsequent investors who provide the cash flow are left empty-handed.
Cuomo gave kudos to Mayor Byron Brown, his Anti-Flipping Task Force (AFTF) and various community activists who were instrumental in interrupting the fraudulent practice. Cuomo said, “In Western New York, we are setting an example that house flipping cannot and will not take place at the expense of our neighborhoods and communities.”
ECC, who bought 53 properties, is operated by Norman Dansker, who duped investors into thinking that they were investing in houses that would be rehabbed and sold for a high profit. ECC provided short-term bridge loans to contractors using the investors’ money, and investors accepted interest only repayments from the contractors, though some did recoup their investment in full through other investors’ money.
Along with ECC, the lawsuit names JD Realty and Management Inc., run by siblings Joshua and Jessica Doucette and IMA Equities. ECC transferred title of the properties to Jessica Doucette, a 20-year-old college student with no experience as a contractor. Though she earned $500,000 from ECC, she was forced to default on the properties. 40 of the properties have been cited for code violations, and Doucette was briefly imprisoned for failure to appear in court. ECC, with an initial output of $961,300, received private investor mortgages totaling $2,753,500.
Senator Bill Stachowski, co-chairman of AFTF has vowed to prosecute flippers, and Assemblyman Sam Hoyt feels that the unveiling of this scheme and the subsequent persecution of the involved parties, “…will send a message to the rest of the country that we will not tolerate this type of illegal activity in Buffalo.” Housing court liaison and co-founder of AFTF, Michele Johnson says the fight will continue against the destructive practice of flipping.
Assistant Attorney General James Morrissey of the Buffalo Regional Office, under the supervision of Assistant Attorney General In-Charge Russell Ippolito, will bring the lawsuit before New York State Supreme Court Justice John M. Curran. Investigators Harold Frank and Paul Scherf will assist in the case.
All sales and transfers of the properties have been suspended by Curran.

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Kernwatch
Note: Here are the Doucette properties, and the neighborhoods facing more troubles about what to do about all these distressed houses:
http://www.ci.buffalo.ny.us/applications/propertyinformation/propsearch.aspx
SBL House Number Street Primary Owner 1332400008035000 350 ABBOTT DOUCETTE JESSICA View Information 0902400007001000 467 AMHERST EAST DOUCETTE JESSICA View Information 0994200003002000 43 ARKANSAS DOUCETTE JESSICA View Information 1017300001011000 42 BRINKMAN DOUCETTE JESSICA View Information 0906300005024000 415 CAMBRIDGE DOUCETTE JESSICA View Information 0904600012026000 41 CASTLE (sold $$32K, 3/29/07) DOUCETTE JESSICA View Information 0903900002003000 58 CLARENCE DOUCETTE JESSICA View Information 0882600003035000 75 CLAY DOUCETTE JESSICA View Information 1333100005014000 55 COMO DOUCETTE JESSICA View Information 0905600002046000 62 CONNELLY DOUCETTE JESSICA View Information 0907400004046000 151 COURTLAND DOUCETTE JESSICA View Information 0906600007030000 221 COURTLAND DOUCETTE JESSICA View Information 0798100008014000 353 DARTMOUTH DOUCETTE JESSICA View Information 0882500007028000 373 DEARBORN DOUCETTE JESSICA View Information 0992600007023000 9 DEWITT DOUCETTE JESSICA View Information 0906400004045000 96 DORRIS (sold $40K,3/29/07) DOUCETTE JESSICA View Information 0894300002009000 32 GREENFIELD DOUCETTE JESSICA View Information 0882500005053000 7 GUERNSEY DOUCETTE JESSICA View Information 0903300006015000 110 HASTINGS DOUCETTE JESSICA View Information 0795500002001000 40 HEATH DOUCETTE JESSICA View Information 0888200005008000 29 HELEN DOUCETTE JESSICA View Information 0994200004006000 48 HERKIMER DOUCETTE JESSICA View Information 0796900002001000 2053 HERTEL DOUCETTE JESSICA View Information 0786300003018000 32 HOMER DOUCETTE JESSICA View Information 0887600002041000 359 HOYT DOUCETTE JESSICA View Information 0887600002043000 365 HOYT DOUCETTE JESSICA View Information 0906200003034000 119 HUMBER DOUCETTE JESSICA View Information 0903200006035000 1080 KENSINGTON DOUCETTE JESSICA View Information 0902500003038000 1256 KENSINGTON DOUCETTE JESSICA View Information 1013300001035000 54 KERNS DOUCETTE JESSICA View Information 0776700001029000 429 MILITARY DOUCETTE JESSICA View Information 0904100009031000 52 MILLICENT DOUCETTE JESSICA View Information 1013300001013000 33 NAVEL DOUCETTE JESSICA View Information 0996800001003000 156 NORMAL (fire-destroyed, 154 fire-damaged) DOUCETTE JESSICA View Information 1012300002001000 966 NORTHLAND DOUCETTE JESSICA View Information 0796300006003000 45 NORTHRUP PL DOUCETTE JESSICA View Information 0903100004005000 88 PARKRIDGE (sold $1, 3/19/07) DOUCETTE JESSICA View Information 1332600002017000 38 PARKVIEW DOUCETTE JESSICA View Information 0886700003010000 37 POOLEY DOUCETTE JESSICA View Information 0886700001068000 54 POOLEY DOUCETTE JESSICA View Information 1015800004068000 77 POPLAR DOUCETTE JESSICA View Information 0887400005011000 157 POTOMAC DOUCETTE JESSICA LLC View Information 1102700005006000 382 PROSPECT DOUCETTE JESSICA View Information 1233400004006000 34 PULASKI DOUCETTE JESSICA View Information 0775600002036000 88 ROYAL DOUCETTE JESSICA View Information 0798000002020000 237 SHIRLEY DOUCETTE JESSICA View Information 0798200001005000 435 SHIRLEY DOUCETTE JESSICA View Information 1014200003011000 172 SPRENGER DOUCETTE JESSICA View Information 0902400002022000 313 STOCKBRIDGE DOUCETTE JESSICA View Information 1015700003069000 287 SUMNER DOUCETTE JESSICA View Information 0995100005007000 590 UTICA WEST DOUCETTE JESSICA View Information 0995200003017000 404 VERMONT DOUCETTE JESSICA View Information 0995200005004000 445 VERMONT DOUCETTE JESSICA View Information 1235000001049000 139 WEIMAR DOUCETTE JESSICA View Information 0996700003023000 507 WEST DOUCETTE JESSICA View Information 0888200008015000 1144 WEST DOUCETTE JESSICA View Information 0886600001013000 1328 WEST DOUCETTE JESSICA View Information 1017300005020000 21 WOOD DOUCETTE JESSICA View Information 1238100008001000 11 YALE DOUCETTE JESSICA View Information
0902500005019000 1186 KENSINGTON JD REALTY AND MANAGEMENT INC View Information 0775900002014000 42 RACE JD REALTY AND MANAGEMENT INC
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ecj
Of note, one of the defendants not named in this article, but in the lawsuit is IMA Equities. They are a front organization for the Freidlander Creww out of Brooklyn, NY. Using a beard of IMA, they say they represent various investors who operate under other DBAs such as Buffalo Bucks, LLC, Buffalo Bucks II, LLC, WNY Properties, LLC, WNY 1 Properties, LLC, Virginia LLC, and many others. One only has to view some of the properties owned by this group to see the deplorable conditions they are left in. Two are on the lower arterial of Virginia Street, the apartment building on the corner of 10th and the old Whitney Hardware on the corner of Whitney. The argument of trying to do what is best for the investors can no longer be a standard mantra in Buffalo.
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Kernwatch
ecj:
Thanks for mentioning the silence about IMA Equities in the NYS AG press release as the Friedlander brothers & "friends" are virtually taking-over the inner-WS.
The 24 unit 250 Virginia (at 10th) brick apartment building was purchased by Virginia 1 LLC on 3/19/04 for $260K from East Coast Capital in a quick flip from their purchase of $70 K on 1/6/04. ECC bought the 14733 square foot building in foreclosure after ownership by the notorious downstate Deatherage family.
Incredibly, 250 Virginia is assessed at merely $80K, but nobody in Taxation & Assessment will say why.
AFTF NEVER answers a question, or volunteers information when I submit suspicious data to them, so getting very basic information about any questionable real estate transaction is very diffcult. "Open & accountable" government it is not.
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fredrico
Here's my experience with JD Realty.
There was a wonderful gingerbread type house on what later became my street (because I ended buying a different house on that street a few years later). The gigerbread house had been vacant for two years (maybe longer but I knew about the two years). I decided I would look into buying it thinking I would be willing to spend maybe 50,000 dollars on it because it did need a new roof, etc. After checking many records I could not seem to find out who the owner was. Finally I checked the tax records and learned that it was purchased by a JD Realty ( I believe that was the name) in a foreclosure sale (along with approximately 30 other properties). None of the taxes had been paid on any of them. After much stress and effort - really - 30-40 calls later (I started feeling like a private eye) I learned that JD Realty had NO telephone number of any kind and only had a PO Box number for an address. I learned which bank held the mortgage (30 more telephone calls) and through them- the bank- I found out that JD realty had filed bankruptcy but still was able to maintain ownership of the house (I started to wonder if there was some sort of scam going on whereby one buys a bunch of properties cheap - takes out big home equity loans on them - and then files bankruptcy – and still gets to keep the house). Finally I wrote a letter to the PO box expressing an interest in buying the house and never got a reply (perhaps because the PO Box was fake?) Almost four years has passed since then. The house has sat empty and because someone left the top floor windows open there is a lot of deterioration. The back wall of the house has started to buckle out. A few months ago I caught crack dealers selling crack in the yard behind this house (another ignored empty house that borders this yard). A few months after that I chased away a prostitute who was shooting up and doing other things in the yard behind this yard. The prostitute was leaving a lot of lighters and matches on the ground wherever she was (I don’t know if this was from dropping the lighters when she got high?-what a HUGE fire hazard!!) Now the whole block worries what will happen with this house and will it become a site for squatters. It's still empty.
This is an example of the effects flipping can have on homes and neighbors.
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Kernwatch
frederico:
Apparently the property you saw is from a different unscrupled entity.
Jessica Doucette, under guidance from her Rochester-realtor mother Elizabeth of Homestar Real Estate, & after consulting with Moshe Friedlander of IMA Equities (1740 Hertel) after the October 2004 City tax-auction, where the family met Friedlander, began "buying" flips in Buffalo from East Coast Capital (ECC) in January 2005 under "JD REALTY&MANAGEMENT INC".
Altho not realtors, she & her brother Joshua opened a "Homestar Realty" office on Bailey, then changed business names, 'buying' a total of 60 houses from ECC under "Jessica Doucette". She later shut-off phones, closed the office & disappeared in January 2007 as troubles mounted, finally re-appearing & being jailed briefly on $1 million bail.
There remain many unanswered questions about the scam, including roles of the never-mentioned reealtor-mother Elizabeth Doucette & the Friedlander brothers, as AFTF has operated under "TOP SECRET" strategies.
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ed12577521
O.K. I’ve had it. Please anyone who believes that the people that purchase these houses are the true root of the problem, take an urban planning class and a real estate finance class or act as if you know what is going on in your community and take ownership of the true problem and stop blaming outsiders or business people for a regional crisis.
I have to make a couple points (and please excuse my grammar I’m at work and must type fast):
First: The City of Buffalo in its glory had a population of 580,000 people in the 1950s and 532,759 in 1960. Buffalo currently (2005) has an estimated population of 279,000. Do the math that means: more than half of the people that lived in the city of Buffalo left between 1950 and 2005.
Meanwhile Erie County: 2005 1990 1980 1970 1960 950,265 968,532 1,015,472 1,113,491 1,064,688
Loss of Population in Erie County 1960 to 2005 114,423
Loss of Population in Buffalo 1960 to 2005 253,759
The difference is people that left Buffalo but stayed in Erie County: 139,336
Now I understand my analysis is not perfect but my quick point is that one of the true reasons Buffalo is facing the problems its facing is because of sprawl and segregation. Buffalonians are using more space for less people!!! Simple economics: Extremely too much supply and a lack of demand, plus no barriers of entry and an inability to live with “one another.” The price of real estate in Buffalo is ridiculously low for those reasons, compared to US housing markets, even yes, unfortunately Rochester. Hints the interest from outside investors. Why is this? Because Rochester never had the population Buffalo had at their respective peaks, therefore never needing the supply Buffalo needed and Rochester’s population slip was never as dramatic as Buffalo’s, giving Rochester somewhat more of a stable housing market.
Local Buffalonians don’t have the capital (even most developers in Buffalo) to compete with outside investors of their stature and this exacerbates the problem because it creates this resentment and a place for blame. But honestly the properties that are distressed would be in the same if not worse condition than they’re in now and that is a fact. Because if they didn’t see a return of investment why would somebody locally be able to, with less capital to invest at the onset. Median income in Buffalo is north 17k, the average Buffalonian couldn’t afford to fix up the houses these people purchased, and wouldn’t want to if they knew the market. WHY? SUPPLY AND DEMAND!!!!!!!!!!!!! Most of these properties that are flip are located on the eastside or in undesirable areas, not Elmwood or North Buffalo or Downtown, because people still want to live in areas like Elmwood and will pay rents that will cover the cost of maintaining those houses.
Just look at how many houses the city has in its inventory and how many violations those houses (should) or do have, but it would be stupid to prosecute yourself right? Most of these houses that were flipped were originally sold by the city at tax auctions anyway, for years after the city knew that there were these flipping incidents, so who’s truly to blame.
I by no means am siding with fraudulent activity but after outside investors won’t want to invest in Buffalo (in about 2 years), the problem will still exist and it is not because of the investors 5 or 6 years of deterioration (THAT WOULD HAVE HAPPENED ANYWAY by the way). The problem roots back to Buffalo’s backwards mentality for the last 50 years of shrinking in population and expanding/sprawling as if it was LA. Flipping and Fraud, It’s a nice headline but it’s not the answer. Portland’s urban growth boundary is the answer, regionalism and less government/municipalities are the answer.
That leads into my next point, JOBS.
Why was Rochester’s slip less dramatic: jobs. Xerox and Kodak kept Rochester running, on fumes, but running, if you don’t believe me go visit their suburbs, look at their malls and look at the median income of their suburbs compared to ours (Victor for example). There has been no significant job growth in the Buffalo region, and no, GIECO is not a significant addition, retail is not a significant addition, substantial jobs are needed and that routes back to government not getting the job done.
So, basically, sprawl and jobs are my points. I am a Buffalonian born and raised and when I die I’ll probably rest at Forest Lawn so I’m not an outsider looking in. But I am only checking back in and the more I do the more I see the problems with mentality the region faces. I stayed home when everyone told me to leave, I went to UB and tried my hardest to help Buffalo in achieving their renaissance, I even did my masters capstone on Buffalo while in New York. But I’m in my mid 20s, have a BA from UB and a Master’s from NYU (a member of the creative class Buffalo so desperately seeks and complains it can’t retain) and have decided to move on with my love affair with Buffalo. New York City is my new home, unfortunately, I wish I could move back to Buffalo, but I don’t think I can or will. I can’t risk my future, unborn children’s future and my dreams to save a city that can’t get its stuff together and doesn’t even want to be saved. I still defend Buffalo and promoted it to all of my classmates and coworkers and anyone I run into but it’s different now. When I was 18 and want to exhaust every possibility to help the city hints the reason I took urban planning as a major in undergrad and worked for the city but, I became exhausted. Hopefully someone who’s 18 now doesn’t let Buffalo and people that have nothing better to do with their time than to blame others run their enthusiasm away.
Thank you.
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fredrico
ed12577521 -
Thank you for your accurate clarification that population loss is the cause of all these abandon houses. You are correct. I, sadly already knew that. BUT THE FACT REMAINS that the practice of flipping is hurting the houses in my neighborhood, creating dangerous atmospheres and hurting me.
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ed12577521
I respect where you’re coming from. But action not reaction is the only thing that will save Buffalo. My true point is it doesn’t matter who owns it, a vacant house is a vacant house. If no one is there to rent it the owner can’t make right with the property. The other true point I was trying to make is that roughly the loss in population in EC has been close to 10% whereas Buffalo has experience 50%+ population loss from peak stats. It’s not so much the population loss but the way it’s distributed. The Buffalo region is very wasteful with land as you can probably tell by now seeing the issues inter-ring suburbs are facing with blight (Sheridan and Bailey or Walden at the Cheektowaga/Buffalo boarder for example) and outer-ring Suburbs like Clarence still building and expanding further and further from the urban core and the urban problems. (More utility, infrastructure and transport costs). The true FLIPPERs are the Benderson’s of the world that build strip malls and residential developments further and further from the city then move their headquarters to Florida and sale their portfolios to other out-of-towners like Developers Diversified that don’t know the true value of the land going forward, just like a lot of the investors from out of town didn’t know why the land was so cheap, and some body had to buy it or the city would have had to take care of it and would have had no one to blame but themselves for the high taxes they charge residents and business in the region because there is too much duplication in the Buffalo MSA. Take for example, why is it true that at Niagara Falls Blvd and Kenmore you have an opportunity to receive a ticket from four municipalities, two of which really overlap? Buffalo, NY city proper is 42 square miles there are ghettoes in Houston bigger. I believe Miami and Boston are the only city in the country that are smaller than Buffalo (sq mi) and have a high population (at least from 2000/1990 stats). Jacksonville is 700 sq miles with a pop of 700k+, if that was sq miles figure was Buffalo the pop would be 900k+. We are by no means at a loss, we are still one of the densest city in the country, we are overburdened. But public official would like you to believe that it is the outsider not your representative that is screwing you over. There jobs are more important than preserving the region, after all how would they be able to “put food in their kids mouths” as one so eloquently stated. Maybe they would have to get a real job, and then they would see how well our economic growth is.
So how can it be fixed. My plan would be a regionalism/ growth boundary hybrid. You have regions like Buffalo and Lackawanna that have struggled and should be paired as a borough (yes I’ve been in NYC for too long but hear me out). Our region is very segregated and trying to go against that would be suicide for any forward think idea. So role with it pair the likes with the likes. Buf and Lack (possibly Kenmore just because of density), Amherst with Clarence, West Seneca with Orchard Park. Five boroughs five individual goals with one City Governing the entire set then create an urban growth or build boundary. Clarence fine you don’t want to stop building to allow infill in Buffalo’s Eastside, but Amherst (at Sheridan and Bailey better be filled before you build further out). Get the drift. This would allow for one police force, one everything, don’t even paint the police cars just put a Greater Buffalo Sticker on them, our better yet, Lets call the new City Niagara, New York for promotional preference. With boroughs of Buffalo, Amherst, Cheektowaga, Southtowns and Tonawanda. Everyone keeps there identity and pays less for it. The city hall would have a reason for all those floors. But seriously Fredrico flipping is not creating dangerous atmospheres and hurting you, your local government is putting you in harms way. People and business locate places because of education, workforce and quality of living and Buffalo is having a hard time maintaining all of those. But chicken or egg right? Well definitely not flippers. Flipping is a trend as is the real estate market cycle, so the blame can only stay on them for so long.
thanks again...
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ed12577521
Again please excuse my grammar/spelling I’m at work and must type fast
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fredrico
to ed12577521
Sincerely, I see the points you are making and they are good ones. Chicken or the egg it's true- but they are excellent points. I'd like to see you on one of these planning boards you suggested. You seem like you have alot of inventive ideas to offer. One thing that comes through loud and clear in your writing is that you have a passion for Buffalo (as do I) and I am grateful for that - that is what we need.
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MisterChips
Ed, I am SO with you on the need for an urban growth boundary. You can't fill the bathtub if you don't plug the drain. As long as population is dropping instead of growing, every new build empties out an existing house.
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rockette
Ed, I understand what you are saying, and agree that dealing with our massive population loss is key for the future of Buffalo. But the illegal house flipping "industry" is helping our city neighborhoods become undesirable and therefore cause people to flee to the suburbs or out of Buffalo all together. While many of the above named properties are probably horrible houses and should be taken down to make way for smart decline, some were nice little houses until the flippers got their hands on them. I speak from the experience that one of the houses is on my street, which is not in an undesirable place to live. It is a nice street, with nice people who care about their neighborhood but are struggling to deal with the changes. It's true that some of those changes were brought on by population decline, but who fills in the gaps? Illegal house flippers. The house on my street is a small cottage, was very cute and totally affordable for a young family looking for a first home. It wouldn't have been hard to heat. One flipper after another got their hands on it and very soon it became derelict. No one ever maintained it or cut the grass for several years. Now it's destroyed and beyond anyones means to fix it.
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sanmitchell
ed12577521- I totally agree with you.
Flipping is not where the problems came from. The only victims of flipping are those out of states investors who buy from flippers. They are the real victims, not buffalo. Those properties were already beyond saving and has no value if not negative, no matter who buys them or sells them. Those are just transection on the paper. And you and me and City all know that whoever become the owner will not and will be financilly prohibitted to do anything with that property. Let's just say that there is no flipper at all in Buffalo, what difference will it make??? Government needs to step out and do something from people using those properties to scam other people's money. One way is to prevent these properties enter into market. Do not put those inhitable properties in the auction. Don't let the flippers sell these properties before alll violations have been corrected. I am on the side of City should demo those properties. I think it is the only solution.
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