Not-So-Real Estate

In fraud investigation, will H.B. councilwoman claim the little-old-lady defense?

Photo by Jack GouldOn May 12, Janet Shomaker resigned from the Huntington Beach Planning Commission, declaring she could no longer do her job in good conscience.

A real-estate broker who owns Huntington Beach-based Pier Realty, Shomaker left just after city police and DA investigators announced they're looking into illegal condominium sales, many of them handled by Pier Realty.

But Huntington Beach City Councilwoman Pamela Julien Houchen —a real-estate agent who once worked for Pier Realty and who appointed Shomaker to the planning commission—hasn't resigned. Instead, she's recused herself from the City Council's closed-session discussions of the scandal, which city officials say involves at least 32 separate properties.

One of those is the Huntington Harbor four-plex Houchen purchased in 2001 and sold off as four condos for a profit of roughly $500,000—without applying for a $7,000 city permit that would have made the sales legal.

Police are investigating whether Houchen committed real-estate fraud in the process.

Proving real-estate fraud isn't easy. It requires evidence that the accused knew what he or she was doing was actually illegal. "If you're a little old lady who sold one of these bogus condos, you could always claim you didn't know," said one real-estate agent who asked to remain anonymous. "You could say that your real-estate agent told you it was okay."

But it would be difficult for Houchen to claim the little-old-lady defense because she was not only the owner of the building and the real-estate agent who converted it into four condos and sold them but also a City Council member. Further proof she knew what she was doing: a Jan. 2, 2002, disclosure form in which Houchen told the buyer the property was "in a condominium conversion." In filling out that form, Houchen attested that no "additions, structural modifications, or other alterations or repairs" were made to the property "without the necessary permits." According to one of Houchen's buyers, Houchen's husband, a construction contractor, was still doing repair work on the building when the for-sale sign went up in front of the four-plex. No city permits were issued for any repair work on the property.

Depending on how police and prosecutors handle their investigation, Houchen could face a felony or misdemeanor count of real-estate fraud for each illegally converted unit. Her professional future could also be in doubt. According to Section 10176 of California real-estate law, Houchen could lose her sales license for any of the following reasons: "making any substantial misrepresentation, making any false promises of a character likely to influence, persuade or induce . . . and any other conduct which constitutes fraud or dishonest dealing."

 
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