Bend has always touted its beauty, its charm, its “healthy outdoor lifestyle” and its mythical “300 days of sunshine a year.” But we may be on our way to inadvertently becoming famous as something else: the real estate fraud capital of the United States.
Today a federal grand jury in Eugene handed up indictments against 13 people in connection with the Desert Sun Development company. The indictments charge that fraudulent activities by DSD’s principals – Tyler Fitsimons, 31, of Prineville; Shannon Egeland, 35, of La Grande and Jeremy Kendall, 33, of Redmond – and others associated with the company and its developments caused financial institutions to lose $9 million. The crimes alleged include conspiracy, bank fraud, making false loan applications to banks and money laundering, according to a news release issued by federal prosecutors.
In its story on the case today, The Oregonian notes that in May 2008 it published an exposé of “Desert Sun’s controversial employee home ownership program, in which the company assisted employees [to] get financing to build or buy homes. Many of the employees got nothing but vacant lots or partially built homes and a half-million dollar mortgage.”
In addition to the home ownership deals, today’s indictments charge fraud in connection with financing of commercial projects.
“The indictment alleges that the defendants sought construction financing for five commercial buildings in Bend and Redmond Oregon which were never built,” the news release says. “As part of the scheme, the defendants are alleged to have made representations that construction was underway when it was not.”
Besides the three principals, those indicted include John Partin of Bend, owner of Advance Steel; Robert Brink of Junction City, a construction loan officer at Umpqua Bank; DSD employee Garret Towne of Culver; mortgage brokers Shaun Little and Del Barber, both of Bend; bank loan officer Jeffrey Sprague of Bend; loan processor Barbara Hotchkiss of Redmond; building materials supplier Kevin Palotay of Bend; Teresa Ausbrooks of Bend, alleged to have made false statements about her income in applying for a bank loan to pay for a house DSD was building for her; and Michael Wilson of South Carolina, alleged to have been DSD’s residential construction superintendent.
Speaking of lifestyles, the release also mentions that the indictment “seeks forfeiture of a Ferrari, two Viper automobiles, and other assets related to the fraud and money laundering allegations.”
(I would just like to note in passing that all but one two of the alleged perps are good old Central Oregon boys and girls, not the stereotypical greasy California developer with a Lamborghini, a silicone-inflated trophy wife and 20 pounds of gold chains on his chest. We grow plenty of our own crooks here – no need to import ‘em.)
“The economic hit that a community like Bend takes in a case like this one is very real,” said Arthur Balizan, special agent in charge of the FBI in Oregon. “When a development company collapses under the pressure of fraud – as is alleged in this case – we are left with millions of dollars in losses, empty lots and abandoned buildings. Everyone loses.”
The real crime is that during the bubble days the local news media largely ignored the possibility that real estate fraud was happening in Central Oregon, including warnings from appraisal expert Richard Hagar, who began giving seminars here about fraud and how to avoid it way back in 2005.
Another crime is that, though the Desert Sun case is probably just the proverbial tip of the iceberg, the great majority of the scam artists who brought about Bend’s bubble and catastrophic bust most likely will skate.
“Off the top of his head, Hagar can think of at least 30 Bend residents who would deserve to be indicted, tried, and convicted for their role in the fraudulent activities that artificially inflated the local community’s housing bubble,” Christina Davidson wrote in The Atlantic in early October. “However, he says, ‘The reality is only about 5% will ever be caught.’”
This article appears in Nov 19-25, 2009.
MAKE LOCAL JOURNALISM HAPPEN
Republish our articles for free, online or in print, under a Creative Commons license.
Mr Miller, Thank you for your post… the perps of the bubble and burst as well as the fraud need to be brought to justice.
However, your ‘comment in passing’ about the “Greasy Californian” comes to me with the sound of flatulence… I have heard many stories about how it is “Their” fault that the housing boom in Central Oregon was fueled by Californian money… -Give me a break!!
Oregonians embraced the growth of all those jobs and extra tourism the recent growth fueled without complaint,, that is until the proverbial bubble burst.
Then…. it’s all “their” fault… the greasy, trophy wifed, gold chain laidened Californians… again,, Give me a break!!
I am born and bred Californian, and I moved here two years ago to get out of the rat race fueled by all the incomers FROM ALL OVER THE COUNTRY…!!.. -Do I blame a certain group of people for ‘ruining my state’.?!.. -No, I dealt with it by moving and sought out better life… here.
The “greasy Californian” you speak of is most likely not from California, and to blame “THOSE” people on our present problem is just ludicrous.
Thanks for fueling a stupid point of view.
MGM: Hey, I moved here from California myself, 25 years ago — and NOT to invest in Bend real estate. (Wish that I had, and cashed out in 2006!) The paragraph is meant to ridicule the stupid local attitude that “Californians” are to blame for all of Bend’s problems. You and I are on the same side.
Well… My bad then, Sorry to point out the ‘greasy comment’ of which is such a problem from what I see… -too many folks have such a bad attitude and blame others for a local problem,, Looney in my eyes. Nice to know where you are coming from, -As the journalist I am sure you will be more wary of your wording and not invoking a snappy retort from someone like myself whom is on your side.
For the few months I still had a Cali license plate on my vehicle,, I had SO many tailgaters obviously telling me they do not like me here,, well, I am here… and instead of being a part of the problem and complaining about being unemployed (I was laid off 7 months after moving here, despite a promise of year ’round work that brought me here)… I volunteer my time to the city, I have helped paint the Veterans Memorial (Newport) Bridge, I have pulled truck loads of weeds,, and help out at the local schools and a thrift store to help the homeless… all for no pay.
Too often I see folks being a part of the problem ((Meth addicts, theives anyone?!)) instead of offering a solution.
Again I apologize for coming at ya with both guns blazin’…
MGM
No apology needed.
HBM writes, “The real crime is that during the bubble days the local news media largely ignored the possibility that real estate fraud was happening in Central Oregon…”
Laziness? . . . O-or perhaps you are suggesting that The Bulletin, et al, have the interests of others than the public at heart?
Jack: I’m not singling out The Bulletin for criticism on this — all the local media (including the Source) dropped the ball. As the local news outlet with by far the most resources, however, The Bulletin was best equipped to ferret out the DSD scandal. As it turned out, it took The Oregonian to do it. In fact even after The Oregonian published its story The Bulletin didn’t pick up on it, as far as I can tell from looking through its archives.