Wave of failed deals

Businessman linked to 150 foreclosures

By Burt Hubbard, Rocky Mountain News (Contact), Julie Poppen, Rocky Mountain News (Contact)

Originally published 11:00 p.m., May 2, 2008
Updated 04:52 p.m., May 4, 2008

Judy DeHaas, Rocky Mountain News

An abandoned couch sits behind a housing complex at 85 Grant St. that is among the foreclosures linked to Danny DeGrande.

Judy DeHaas, Rocky Mountain News

Danny DeGrande's million-dollar house in Douglas County is in foreclosure. It sits on a golf course. In better days DeGrande drove two Porsches and was co-owner of an indoor pro football team in Loveland.

Judy DeHaas, Rocky Mountain News

W.C. Williams stands in what should be the dining area in the unit he rents in a housing complex on Rosemary Street in east Denver. He has not had heat or water in more than nine months so he uses the gas stove to heat the unit. The condominium was once owned by Danny DeGrande, a former prison guard turned real estate broker. Williams has given up trying to reach anyone associated with DeGrande Properties. 21

Judy DeHaas, Rocky Mountain News

Danny DeGrande

Judy DeHaas, Rocky Mountain News

W.C. Williams did not have heat or water in more than nine months so he uses the gas stove to heat the house.

A former state prison guard was the key figure in a series of deals stretching from Pueblo to Arvada that are now linked to more than 150 home foreclosures on mortgages totaling at least $21 million.

In the wake of the failed deals by Danny DeGrande, 36, a corrections officer turned Centennial real estate broker, a half-dozen apartment complexes - which he converted to condominiums - stand half empty and in various states of disrepair.

Dozens of investors have ruined credit histories. And some renters left behind in the foreclosed complexes are living in squalor without utilities or garbage service because defunct homeowners associations quit making payments.

The collapsed enterprise has spawned allegations of forged documents and inflated home appraisals that cost one appraiser his license and has another facing a disciplinary hearing next week, according to more than a dozen interviews and a review of hundreds of public records by the Rocky Mountain News.

"It's revolting," Erin Toll, director of the Colorado Division of Real Estate, said of the deals by DeGrande and his associates.

The division has turned DeGrande's case over to Colorado Attorney General John Suthers for possible criminal investigation after taking away his real estate license last month. It has subpoenaed records from a land title company on eight of his deals and a loan company that may have handled some of the mortgages.

In addition, the Jefferson County district attorney has an open investigation into the failed condominium projects.

DeGrande's modus operandi in the transactions included:

* The purchase of apartment buildings which he converted to condominiums.

* Selling the condos to buyers, many of whom were former Department of Corrections co-workers or associates, at prices that were marked up an average of 70 percent.

* Assuring his investors that rental income from tenants would pay most of the mortgage payments. In some cases, DeGrande initially gave his investors the money to make up the difference between rents and mortgage payments.

But when the rental income and checks from DeGrande dried up, lenders began foreclosing on the mortgages held by the investors.

DeGrande said he is a victim of the implosion of the sub-prime real estate market and the tsunami of foreclosures sweeping the country.

In feisty e-mail responses to questions from the Rocky, DeGrande wrote, "The bubble has burst with this type of property and people cannot blame themselves. They have to blame someone and I guess right now that someone is me."

He wrote that he did nothing wrong.

The profit made from his real estate dealings allowed DeGrande to live, until recently, in a million-dollar home in Douglas County, drive two Porsches and co-own an indoor pro football team in Loveland.

But the wheels have come off. His home is in foreclosure, and he had to give up his interest in the football team. Last month, he filed for bankruptcy. He owes the IRS $250,000. The Porsches have been repossessed and, earlier this month, he and one of his business associates lost a civil fraud suit after a jury awarded one of his buyers $236,000.

The foreclosures are typical of those in the sub-prime mortgage industry collapse, which has roiled financial markets worldwide, said Glenn Mueller, professor at the University of Denver's Daniels College of Business.

"Tell us what your income is, we're not going to check it," said Mueller, describing the lack of due diligence by institutions handing out mortgages. "Since real estate prices are going up, we'll make anyone a loan who is breathing."

Red flags in 2006

DeGrande's real estate deals first drew attention on transactions that didn't involve the converted condos.

Pueblo appraiser Ivor Hill got a call in September 2006 from a land title company in Philadelphia. The company had seven mortgages involving the same buyer. No payments had been made in 15 months.

The title company wanted Hill to look into it.

Those seven mortgages were part of more than 30 sales that DeGrande brokered for retired school teachers Jose Ben Aguilar and Joan Aguilar between July 2004 and early 2005. The Aguilars had acquired the single family homes over 25 years.

But all the buyers that DeGrande found for the Aguilars had then allowed the homes to slide into foreclosure, according to Pueblo County records.

One man bought 16 of the houses, while another man, who worked with DeGrande, bought six with his wife, according to the records.

Hill's review of seven of the houses DeGrande had sold for the Aguilars had sales prices inflated between 53 and 138 percent over market value.

"They were garbage," Hill said. "They were grossly inflated."

Hill complained to the state real estate division, which in June 2007 yanked the license of appraiser James Esters, who valued the Pueblo homes. In addition, the Pueblo County Assessor red-flagged all of the sales, saying they were inflated and not to be used for comparison.

But the state's Real Estate Division didn't make the connection to DeGrande at the time, said director Toll. Her new policy to investigate brokers involved with appraisers who had been sanctioned went into place months later, she said.

The Aguilars filed a complaint with the division in late 2007. The complaint and their real estate documents show that more than $700,000 was diverted from the sales of their 31 homes to a shadowy firm called Core LLC.

Neither the Aguilars nor their attorney have been able to find out who was behind Core LLC.

DeGrande, who grew up in Pueblo and graduated from South High there, said he was only the broker on the deals and that the Aguilars worked out the arrangements with the buyers. DeGrande would not disclose his association, if any, with Core.

"Pueblo sellers are looking for a scapegoat," he e-mailed to the Rocky. "Believe me they watched every penny and know exactly where it went."

Aguilar said he had a hard time getting the final real estate settlement documents from DeGrande and when he did, after the sales had closed, he said he found he and his wife's names had been forged on many of them.

The signatures on the documents appear to differ from the Aguilars' signatures and their last name is misspelled on several of them. Even "Joan" was hand-written "Jon" on one.

DeGrande did not address the forgery allegation, which is contained in the complaint to the Real Estate Division.

'Fool proof deal'

While he was brokering the Pueblo sales, DeGrande began putting together deals in the metro area to buy apartment buildings and turn them into condominiums, according to public records.

Through limited liability companies he created and ran, he bought six complexes full of renters between 2004 and 2006 in Denver, Wheat Ridge, Lakewood and Arvada, the records showed.

In each instance, he converted them into condominiums and sold the units to investors. He managed the building and collected the rents on behalf of the new owners. The buildings were purchased for a total $13.4 million and resold as condos for $22.7 million, a markup of 69 percent.

Most of the sales took place within months after his companies bought the buildings, property records show.

Many of the buyers were former or current Department of Corrections workers, according to DOC records.

In all, DeGrande's company sold 140 converted condominiums. As of last month, 125 of them - 90 percent - had either been foreclosed on or were in foreclosure proceedings, according to property records.

DeGrande said he and his investors thought the projects would succeed.

"We obviously as a group believed in these projects. We bought and held units in there as well," he wrote.

One buyer, Alan Solis, said DeGrande categorized the purchase of his converted condos as a "a fool-proof deal. We were just going to buy the properties, send out the monthly payments and then in two years he was going to help us sell the properties and make money with the increase."

Solis was introduced to DeGrande by his neighbor, Obed Luna, who worked with DeGrande. Solis and his brother and sister ended up buying seven of the metro area condos for prices ranging from $130,000 to almost $200,000 each.

DeGrande provided the down payment money and Luna handled the paper work, Solis said. Luna did not return several telephone messages for comment.

"They said they had to show a down payment. They would write a check. The check would be written like from our names type deal," Solis said. "They promised me I wouldn't need any money down."

He said DeGrande told him he would manage the property, collect the rent and turn the proceeds over to Solis. Solis only saw one of the three condos he bought because he was told renters occupied the other two.

Solis received rents from DeGrande for the first several months, but the rents averaged $600 a month and the mortgage payments were $1,200. And then the rent money started to dry up, Solis said.

DeGrande kept making excuses for not forwarding the rent money, he said.

"He was hurting. He was waiting on closing some deals to pay us," Solis said. "He just never did until finally I had to give up on even trying to get anything from him."

Solis said he couldn't keep up with the payments so he hired a real estate agent to sell the properties. That's when he found out they were over-priced.

Solis said the agent told him he would have to come up with $25,000 per condominium to make up the difference between the mortgage and what he could sell them for.

"There was no way I could come up with $75,000," he said. His three, as well as the four owned by his brother and sister, all went into foreclosure.

DeGrande acknowledged that the buyers received help with down payments and "other kinds of assistance," but insisted it was allowed under the types of loans used to finance the deals.

"Everyone was explained the process and knew what they were buying," DeGrande e-mailed.

Buyers said their credit ratings are destroyed. Solis said his credit score fell from more than 700 to 540.

Values cut in half

As the foreclosures mounted at all six metro area properties, they fell into disrepair. Tenants moved out, transients moved in. Arvada condemned a couple of the units on West 59th Avenue.

At the project near West 12th Avenue and Rosemary Street, the water heater in one occupied unit is broken and the water is shut off.

Investor Paul Jazwierski bought one of the units on Harlan Street after it was in foreclosure, and found himself spending $3,000 for delinquent water bills.

Jazwierski has filed a complaint with the Real Estate Division against DeGrande. "He's clearly the guy who orchestrated the whole thing," Jazwierski said.

The resale of the units out of foreclosure illustrated the jarring discrepancy in prices. Condos sold by DeGrande for $169,000 each at East 7th Avenue and Grant Street resold for $55,000 to $65,000 after foreclosure. Condos in Wheat Ridge that sold for $130,000 are being re-sold for $50,000 and less, according to property records.

"How did they appraise at this much money?" Jazwierski asked.

The state agency is holding hearings next week on possible sanctions against appraiser Richard Schock, who was involved in some of the metro area deals, Toll said. Schock did not return phone calls.

Last month, the Real Estate Division revoked DeGrande's real estate brokerage license over a complaint filed by one of the buyers of a condo at the Wheat Ridge building. The division had 19 complaints against him as of last week.

Two weeks earlier DeGrande filed for Chapter 7 bankruptcy liquidation.

In March, he turned over ownership of his Colorado Ice indoor football team back to the league for nothing, according to this bankruptcy petition.

"I am not looking for employment yet," DeGrande wrote. "I have to figure all that out."

Many people have been left to figure it all out.

The foreclosures tied to DeGrande are among the nearly 40,000 homes that went into foreclosure last year in Colorado, a rate that ranked fifth highest in the nation.

Few were immune from the lure of easy money in real estate investments when the sub-prime market was booming, said Byron Koste, executive director of the Real Estate Center at the University of Colorado.

"Everybody was caught up with all the money you could make with no risk," he said. "Everybody was greedy."

hubbardb@RockyMountainNews.com or 303-954-5107

How to avoid mortgage fraud

The U.S. Department of Housing and Urban Development offers these tips to avoid predatory lending:

* Be suspicious of anyone trying to steer you to just one lender. Shop for a lender and compare costs.

* Get price information from other homes in the neighborhood.

* Interview several real estate agents and check references before choosing a broker.

* Don't let anyone persuade you to make a false application on your mortgage application. That includes claiming you are going to live in the house when you, in fact, are going to rent it to someone else.

* Don't sign blank documents.

* Don't be persuaded to borrow more than you can afford to pay.

* Hire a licensed home inspector to check the property for defects.

• May 3, 2008

  12:27 a.m.

  Suggest removal

  happymike44 writes:

  This guy should fry because of what he did.He also is the reason that the mortage companies are in the shape their in.So now he goes belly up and him and people like him are the reason we all are going to have to bail these companies out.What a douchebag,now he is saying I don't know how this happened.What a lying piece of dirt.The real losers are the people who invested in him.

• May 3, 2008

  5:48 a.m.

  Suggest removal

  samsmargolis writes:

  General population housing where he used to work sounds just about right for this guy...

• May 3, 2008

  7:07 a.m.

  Suggest removal

  dano writes:

  The people that bought from him were really blind. Let the Fed's prosecute. The state would F it up, just like they do everything.

• May 3, 2008

  8:45 a.m.

  Suggest removal

  Gene writes:

  Remind me, why I should bail this guy out?

• May 3, 2008

  8:48 a.m.

  Suggest removal

  nonayerbsns writes:

  Interesting choice of words, don't you think? He wrote 'fiesty' emails?!? So, robotoic responses would have been preferred? I guess, I'm at a loss for why the rocky chose that adjective. I don't see the relevance.

• May 3, 2008

  8:59 a.m.

  Suggest removal

  vudumom writes:

  How easy is it in this state to get a real estate license? They probably hand them out like candy.

• May 3, 2008

  9:11 a.m.

  Suggest removal

  hikingartist writes:

  Isn't anyone going to stick up for the capitalists? Where are all the conservative posts extolling the virtues of the "free market" and chastising government regulations as a hinderance to making money?

• May 3, 2008

  10:12 a.m.

  Suggest removal

  blacksho89 writes:

  The fault in this one belongs to everyone. The buyers who did not do their due diligence, DeGrande, the mortgage brokers who facilitated too much money to people who could not afford it, the lenders who actually loaned the money, the appraisers who inflated the value.
  The victims end up being the tenants who will be evicted because of the condemnations and foreclosures, and the taxpayer who will end up bailing these crooks out.
  Rule # 1: If the deal seems too good to be true, IT IS!
  Rule # 2: If you want to get something for nothing, SEE RULE #1!
  Rule # 3: Pull up your pants, put your hat on right, and get a job.

• May 3, 2008

  12:11 p.m.

  Suggest removal

  Molly writes:

  He also didn't pay his players on the football team. The league had to step in. Thank goodness the team was bought a few weeks ago by an upstanding business man.

• May 3, 2008

  4:12 p.m.

  Suggest removal

  BTP writes:

  what a dirtbag! I hope the Attorney General and the IRS smack him and smack him HARD! People are supposed to feel sorry for him now? My understanding is he made millions off of these deals. He's filing for bankruptcy and being foreclosed upon but I betcha there is money sitting somewhere out of reach of the federal government. Maybe if Mr. DeGrande spends some time in federal prison he won't get to touch that money again.

• May 3, 2008

  5:35 p.m.

  Suggest removal

  windskull writes:

  In 1972 amid DOUBLE DIGIT INFLATION the folks bought a 2br 1&3/4 bath full basement house w/1 car detached garage off Zuni & Mississippi for $18,000, aside from a new coat of paint that house stands in a neighborhood unchanged today except every vacant lots now contains poorly constructed grossly over priced condominiums borne of greed which is solely responsible for that home built in the 1950`s to have a 2003 inflated worth of $220k when over 40 years time 4 different families diligently made payments that never secured ownership title nor did education or crime improve once it worsened if that does not say where to look for culpability in this grandiose scheme nothing ever will!

• May 3, 2008

  7:16 p.m.

  Suggest removal

  aztlan99 writes:

  All this talk about the feds doing something is bull****. The US Attorney wont touch a case they don't classify as a slam dunk. keep it in the state. That way the convicts and the prison guards (whom he ripped off) can fight over who get to go up in him.

• May 4, 2008

  2:53 a.m.

  Suggest removal

  happymike44 writes:

  What amazes me is we all are supposed to pay for all of this.Let the mortgage lenders eat it.They let the fraud go on unchecked.I feel why should I pay for people who cheated and inflated the housing market.While getting rich at the same time,they are now the ones who caused a lot of undue misery for many people.So they should receive no handout.

• May 4, 2008

  3:16 a.m.

  Suggest removal

  gwats writes:

  When I was a little boy and the Family would gather for Thanksgiving, and there was a little more than the usual amount of food to eat, my mother would say to me "don't let your eyes get bigger than your stomach" meaning : don't be a glutton and overeat simply because it's in front of you!
  Same principle here. People tend to buy more Real Estate than can afford or need if it's in abundant supply and money is cheap to borrow. Choosing a Hummer over a Minivan because you LOOK more successful in a H2. (image= no $$) People chose those sub-prime monsters because they thought they could buy large now and they could re-finance or sell later @ a huge profit before the Rate reset. They trusted the market to grow.
  (didn't happen, did it?)
  Guys like Mr. DeGrande exist to scam you, rob you, and rape you financially. He'll get his time as an inmate eventually. But look at the damage he's done. No amount of jail time will ever fix this mess. The folks like the retired School teachers should have known better and checked DeGrande out before they invested a cent.
  People ......If it's sounds to good to be true.... it usually IS!!!!!!! This is the FIRST LESSON we teach our kids!!
  No bailout for you!!!
  I weep for you but my tears are from LAUGHTER!
  In the future, aim a little lower and keep your goals reasonable. You'll
  be much happier and be able to sleep @ night.
  There are good, decent folks caught up in this mess too but they are in the minority. My prayers are with you and I hope the Government can give you some relief before the middle class disappears.

• May 4, 2008

  8:48 a.m.

  Suggest removal

  Froward69 writes:

  this guy should get a one room condo with bars on the windows.

  If he were a republican donor like bear stearns, a bailout would occur without scrutiny.

  A truly free market has up AND downs, rethuglicans do not want to pay taxes when they succeed. only GET paid from taxes when they fail.

• May 4, 2008

  9:13 a.m.

  Suggest removal

  KaySieverding writes:

  The emperor had no clothes. Because the guy had the expensive house, cars, and suits, and an attitude, people assumed he was legit.

  There is also the problem with not enough of the old style committed civil servant watchdogs.

• May 4, 2008

  9:36 p.m.

  Suggest removal

  happymike44 writes:

  What this guy needs is to get a beat down for cheating eople out of their life savings.Hope he gets put in the same prison where he used to work.Maybe he will enjoy the harsh treatment he sed to deal out to others.Seems like what goes around comes around.