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Skuzzy stuff

Aftermath of pension scam leaves would-be homeowners in dire straits



"It's a complete mess."

Those words, spoken by attorney Robert Day, don't come close to describing the clusterfuck of problems swirling around a bankrupt company and the Detroit Police and Fire Pension System.

Part of the story has received some media attention, especially from reporter Robert Snell over at The Detroit News.

Snell has done a good job explaining what's alleged to have happened at the front end of a dirty deal allegedly involving bribes paid to Bernard Kilpatrick, father of disgraced former Mayor Kwame Kilpatrick, both of whom are awaiting trial on federal racketeering charges.

Here's what's been reported so far:

In 2008, Bernard Kilpatrick helped engineer a $10 million loan from the Detroit Police and Fire Pension Fund to a newly formed company called Paramount Land Holdings. The money, as Snell reported, was supposed to be used to "buy and restore more than 1,400 homes in metro Detroit."

One of the company's owners, Detroit businessman Abner McWhorter, committed suicide last year after being accused of participating in a Ponzi scheme intended to defraud the pension fund, according to the News.  

In May, the feds arrested McWhorter's business partner, South Carolina businessman George Kastanes, at an airport in Florida following a two-month international manhunt.

The Police and Fire Retirement System has filed a lawsuit in an attempt to recoup millions of dollars that are unaccounted for.

Like we said, Snell has been all over much of this story, and deserves kudos for some terrific reporting, including an interview with Kastanes while he was still on the lam, staying at a ritzy hotel in the Caribbean. Among other things, Kastanes told the reporter that the money paid Bernard Kilpatrick was a bribe (something denied by Kilpatrick's lawyer) and that the $100,000 used to grease the system's wheels came from a Macomb County drug dealer.

It's all sensational stuff, worthy of an Elmore Leonard novel.

What hasn't received much ink, though, is the story of an untold number of people who say they were scammed when they bought homes McWhorter and Kastanes purchased with the pension fund loan.

That includes people such as Kim Pierce and Dana Hill, who bought homes from Paramount on land contracts.

At least they thought they were buying the homes.

Turns out, though, that the titles were never transferred. In addition, back taxes and water bills that were supposed to have been paid by Paramount as part of the deal remained unpaid. 

As a result, the Wayne County Treasurer's Office has foreclosed on the properties.

News Hits met with Pierce and Hill, along with a clutch of their supporters, at Hill's west side home last week. The modest house on Westwood Street was purchased by Paramount for just $1. Instead of rehabbing the place as they were supposed to have done, the company left it unsecured, allowing it to be stripped of just about anything of value. 

Pierce, who works as a security guard, and her husband, Steve Bynum, who is disabled, bought the home on a land contract in January 2011 for $35,000. They put down $560 and agreed to make payments of $400 a month. Then they went to work fixing it up, putting an estimated $8,000 to $9,000 into the place, using money Pierce took out of her 401(k) account to make the home livable.

In March of last year, the couple received notice that the property was in foreclosure. They were shocked to learn that $12,000 in back taxes was owed on the place, which has a market value of less than $5,000.

After learning of the problem with the back taxes, and that she and her husband were at risk of losing their home because of them, she contacted attorney Day at the nonprofit Legal Aid and Defenders Association.

The story is much the same for Hill, a cosmetologist. She too bought a home on land contract from Paramount. Hill put down $750 and agreed to pay $495 a month, with a total purchase price of more than $44,000. The home is estimated to be worth about $15,000. When the furnace went out, she tried to obtain assistance to make repairs, but was turned down when it was discovered she didn't have legal title to the place. Then she learned that the county had launched foreclosure proceedings because more than $16,000 in back taxes were owed.

Both owners are making monthly payments to an escrow account while the mess is being sorted out. 

And, as Day pointed out, it's truly a mess. 

He says that between the Legal Aid and Defenders Association and the nonprofit United Community Housing Coalition, between 25 and 30 families have sought legal help to try to stay in their homes. 

He estimates that there are upward of 100 homeowners who were caught in Paramount's web of fraud. At this point, the county is holding off on evicting people, with the pension board reportedly making payments on the back taxes as the mess gets sorted out.

On top of the homes that were sold on land contract are more than 2,000 other homes Paramount bought with pension fund money, often for as little as $10, or even a $1. They are mostly sitting vacant, adding even more blight to already troubled neighborhoods.

One of those vacant homes sits across from the house Pierce and Bynum live in. They put locks on the doors and boards on the windows, and they keep the grass mowed.

Pierce has made a request to appear before the pension board, which has filed a lawsuit against Paramount. A call seeking comment from the pension board was not returned by press time.

According to Day, the pension board has indicated that it would consider allowing people to stay in their homes if they pay the full purchase price as originally agreed to in the land contracts. The homeowners want to negotiate, seeking an amount closer to the actual value of the property.

The way Day sees it, the board was negligent, doing business with people it didn't adequately investigate and then failing to follow up and keep an eye on how its $10 million loan was actually being spent.

"What we've tried to say is that the pension board made some really bad decisions doing business with these people," Day told News Hits. "And now Paramount, as a company, has basically disappeared."

Day's harshest words, though, are directed at the people who appear to have perpetrated a massive scam inflicting pain on the pension system and unwary homeowners alike.

"It's a crazy situation," he said. "The best thing you can say about all this is that it involves a lot of very skuzzy stuff, and it's all blown up. At this point, the main issue for us is to try and keep these people in their homes" 

News Hits was written by Curt Guyette. Contact the column at 313-202-8004 or

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