A lawsuit filed in federal court docket final week alleges that two of Maine’s largest non-public actual property lenders and their allies, in addition to a few of Maine’s largest banks, have been working collectively to defraud householders of the value of their properties.
Three males from southern Maine — Joel Douglas of Gorham, Steven Fowler of Portland and James Lewis of Casco — filed the lawsuit alleging racketeering and fraud in opposition to an extended listing of defendants, together with actual property developer and lender Scott Lalumiere and a number of other of his non-public lending corporations.
The lawsuit follows a federal whistleblower lawsuit filed in January by one among his former workers that alleges Lalumiere’s firm Milk Street Capital fraudulently dealt with funds after which fired the worker after she refused to do the identical. It additionally comes after a Bangor Day by day Information investigation, printed in May, examined the collapse of Lalumiere’s community of corporations. The community owned at the very least 84 Maine properties worth about $16 million in November 2019, which is when Lalumiere stopped paying his lenders, turned over energy of lawyer to his daughter and left the state.
After the collapse, buyers in Lalumiere’s corporations misplaced 1000’s, contractors went unpaid for work they did on properties owned by Lalumiere’s corporations, and his tenants have been left with lease-to-own agreements that now not held weight as collectors divided up Lalumiere’s properties for themselves.
Now, the lawsuit filed in U.S. District Court docket in Portland on June 24 claims that Lalumiere and different non-public lenders and banks engaged in a “scheme to defraud” the three plaintiffs out of cash and property worth roughly $1.75 million. It alleges the “pattern of fraud” stretches again so far as 2010 and seeks at the very least $2.75 million in damages.
Richard Olson, the lawyer for Lalumiere, stated his preliminary impression of the lawsuit was that it was “preposterous on its face.” Olson stated the plaintiffs suppose that greater than 20 completely different events, “including three of Maine’s most respected banks and some of its most respected real estate professionals, invested a lot of time, money and effort to defraud them by, among other things, loaning them money.”
The lawsuit names 21 defendants, together with Lalumiere, three firms registered to him and one other the place he was a accomplice till just lately. It additionally names three Maine banks, Camden Nationwide Bank, Bangor Financial savings Bank and Androscoggin Bank, in addition to a number of people and firms who lent to Lalumiere’s operation.
One other defendant is the Falmouth-based actual property agency F.O. Bailey Actual Property and its proprietor, David Jones, whom the lawsuit alleges helped facilitate the true property offers on the heart of the alleged scheme. Jones didn’t reply to a request for remark.
Additionally among the many defendants are three former workers of Milk Street Capital who now work at or run one other non-public actual property lending agency, Maine Capital Group, in line with the lawsuit. Shawn Lyden, Maine Capital Group’s chief working officer, was additionally a accomplice with Lalumiere on the now defunct Pioneer Capital, in line with his biography on the Maine Capital Group web site. Neither Lyden nor Maine Capital Group responded to a request for remark. The defendants are a part of an “organization,” in line with the lawsuit, that lent cash to the plaintiffs beneath fraudulent phrases to accumulate their property after which used that property to borrow more cash to fund the group. By utilizing a number of completely different company entities, the group shielded “the actual lenders from liability for the fraudulent transactions,” in line with the lawsuit.
“We think there’s quite clearly a structured organization,” stated Robert Andrews, lawyer for the plaintiffs. The aim of that group is “to get the equity from people’s homes and leave them with nothing. Then they’ll launder the money to make the transactions appear legitimate.”
The lawsuit alleges that Lalumiere, his allies and their corporations focused the plaintiffs, who couldn’t get financing from conventional lenders. In exchange for loans, Lalumiere’s community would take possession of their property. As a part of the deal, it might permit the debtors to remain of their house as tenants whereas paying off the loans.
Lalumiere’s firm would conform to a purchase-and-sale settlement that might let the tenant purchase again the home at a future date. The settlement would set up a price and “a closing date deadline in the distant future,” in line with the lawsuit. The tenants would then proceed paying the mortgage and in some circumstances even pay a considerable down cost towards the eventual buy. However as soon as the corporate “had control of the Plaintiff’s money and property” it might promote or switch the property to a different company entity within the alleged scheme, the lawsuit stated. It will do that with out telling the tenants, who nonetheless believed they might purchase the property beneath the phrases of the acquisition settlement.
The businesses would then take out loans on the property, often one from a standard bank adopted by one other from a non-public lender, that might empty the house of its value, successfully turning an actual property asset right into a legal responsibility. The tenants would both lose the property in foreclosures or be pressured to repay the brand new loans on the property to maintain it. Both manner, the cash that they had put into the property can be misplaced.
In December 2018, members of the alleged scheme started foreclosing on properties they managed, in line with the lawsuit. This prompted Lewis “to lose the home that had been in his family for generations,” Fowler to “lose the home he had built,” and threatened Douglas’ house, “where he was raising his children with their mother,” the lawsuit stated.
Their lawyer, Andrews, stated he believes there are extra alleged victims. “I am particularly concerned about anyone who thought they had a rent to own agreement with any of the people associated with Milk Street Capital,” Andrews stated. One of many plaintiffs, Fowler, was going by means of a divorce in 2017 and wanted to borrow a “substantial amount of money,” he wrote in an affidavit. Lalumiere supplied to loan him the cash however with a situation: Fowler would wish to switch possession of his Portland house to one among Lalumiere’s firms. In return, Fowler may nonetheless reside in the home so long as he made mortgage funds on it.
In addition they agreed in writing that Fowler may purchase the home again for $200,000 at any time, in line with the affidavit.
Nonetheless, Lalumiere, by means of his firm, then took out a $400,000 mortgage on the home from Androscoggin Bank with out telling Fowler, in line with the affidavit. He additionally took out a second mortgage from an organization referred to as TTJR LLC — which the lawsuit alleges is managed by a number of of the defendants — for an additional $151,000.
Fowler stated the property has a value of close to $600,000 and that Lalumiere “has extracted all of the equity out of my property.”
Olson, the lawyer for Lalumiere, famous that “it is difficult for some people to understand that breaches of a promise or bad decisions are not the same as fraud.”
The lawsuit alleges that Camden Nationwide Bank and Bangor Financial savings Bank — Maine’s two largest banks — in addition to Androscoggin Bank “all had special relationships” with Lalumiere and lent cash to his corporations and their allies “without personal guarantees and without regard to debt to income ratios” of the precise corporations receiving the loans.
Lalumiere and his corporations had at the very least $3.four million in excellent loans with Androscoggin Bank on the time of the community’s collapse in late 2019, in line with a Bangor Day by day Information evaluation of registry of deeds knowledge.
A spokesperson for Camden Nationwide Bank stated the bank didn’t touch upon pending litigation. Via a spokesperson, Bangor Financial savings Bank declined to remark. Androscoggin Bank didn’t reply to a request for remark.