The Lehman Moment: The “Normalization” of Fraud

Sept. 15 is the eighth anniversary of the Lehman Brothers bankruptcy. Not enough time has passed yet for me to recall those anxious days without getting angry.

 Sen. Elizabeth Warren, D-Massachusetts, has used the occasion of this anniversary to suggest the next administration should “investigate and jail” those Wall Street bankers who committed crimes. Although I doubt there will be any perp walks, I do have some ideas about how to proceed.

Before we look into the senator’s suggestion, it is time for an honest appraisal of one of the lingering mysteries of the financial crisis: Why were there were no prosecutions of major executives?

It’s a fair question. I believe there were 10 areas where fraud and abuse took place. These were the Mortgage Electronic Registration Systems; mortgage pools; securitization; “misplaced” mortgage notes; force-placed insurance; servicing fees; fake documents; false affidavits, perjury and robo-signing; foreclosure mills; and active military members losing homes while on duty.

I am convinced that these cases were easy to prosecute, that a first-year law student would have a 90 percent conviction rate, that the documentary evidence was overwhelming, especially of mortgage and foreclosure fraud. As we know, there were no prosecutions of any significance — not at the state level, not at a federal level.

After much research, I have come to believe that at the highest levels of government, the financial industry managed to convince prosecutors that it was against societal interests to bust bankers. The revolving door between government and the private sector, between regulators and regulated, figures in this. If you’re a prosecutor, but you might like a big payday from business, do you really want to go hard on the companies that might offer you a job one day?

The bigger problem has been the normalization of fraud. We found out in 2008 that Department of Justice prosecutions and Securities and Exchange Commission enforcement actions against Wall Street had fallen 87 percent. Before you blame the George W. Bush administration, that same lack of prosecutorial zeal continued under the administration of Barack Obama.

On the anniversary of Lehman’s collapse, it is worth recalling just how blatant some of the misdeeds were, and the surprising lack of prosecution for the bank’s accounting improprieties. Of course, among the leading example was something called Repo 105, which involved moving billions of dollars in liabilities off the firm’s balance sheet near the end of each reporting quarter, then putting them back on the books a few days later. The maneuver hid enormous financial weakness. As far as I’m concerned, this was fraud plain and simple, a conclusion supported in the report by the court-appointed Lehman bankruptcy examiner.

Beyond Lehman Brothers, Warren will find the ripest area for prosecution in improper foreclosures. Fraud was rampant; every robo-signed document was an act of perjury; every fabricated signature was fraud. I suspect there were thousands of low-level bank employees guilty of these crimes, and they could be pressured into revealing those responsible further up the food chain. I doubt it was the chief executives who ordered these actions, and the ideas certainly didn’t come from the burger flippers recently hired to work in the foreclosure factories. It was senior bankers who came up with a way to institutionalize perjury.

How and why prosecutors fell down on the job is an area the senator might consider exploring. Maybe take a closer look at the revolving door and issues of regulatory capture. At the very least we still need a dogged probe of the financial crisis like that done by the Pecora Commission, which examined the causes of the 1929 Crash.

This would bring closure, and hopefully move us past the alternative of never-ending scandals and fines. And if you think things have changed, just consider the latest scandal: the thousands of Wells Fargo employees who opened millions of fake accounts in the names of real customers, just to meet unrealistic sales goals. It is more evidence that bad incentives are rampant in the financial industry and top executives either look the other way or that they don’t know what’s going on in the companies they run — a sign, if nothing else, that big banks are too big to manage.

Justice has not yet been served. The time left to see it done is almost over, with less than two years remaining on the longest statutes of limitations. I am not holding my breath.

_ Ritholtz, a Bloomberg View columnist, is the founder of Ritholtz Wealth Management. He is a consultant at and former chief executive officer for FusionIQ, a quantitative research firm.

For more columns from Bloomberg View, visit http://www.bloomberg.com/view.

OneWest — One Step Up from Donald Duck

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Well at least OneWest legally exists and it didn’t originate any loans even though it sometimes tries to give that appearance. But it is clear that this company was literally formed over a weekend to takeover IndyMac business. In so doing it made a number of dubious deals in which it was not to be liable for the shoddy, fabricated documents, and unlawful practices of IndyMac which claimed ownership of loans that were already sold into the secondary market and then subjected to conflicting claims of ownership. It looks like the return on investment was infinite.

OneWest Bank Targeted By Insurer Over $335M In MBS Losses

Law360, New York (August 13, 2012, 9:41 PM ET) — Assured Guaranty Municipal Corp. fired off a suit against OneWest Bank FSB in California on Thursday, claiming the company’s shoddy loan servicing was to blame for some of the $335 million it has shelled out in insurance claims related to mortgage-backed securities.

The lawsuit in Los Angeles court says that since OneWest took over IndyMac Bank FSB’s role as servicer of mortgage loans underlying residential MBS, the loans have experienced delinquencies and defaults at a severe and unexpected rate. That in turn has forced Assured to…

The question is whose loss was this, and why did the insurance company pay it off? The bigger question is that if the loss was paid off, why wasn’t allocated to the underlying assets whose decline in value was the basis of the loss claim?

OneWest Bank Can’t Shake HAMP Loan Class Action

Law360, New York (October 23, 2012, 3:11 PM ET) — OneWest Bank FSB on Monday failed to escape an Illinois class action accusing it of bungling a mortgage loan modification application by unreasonably delaying its response and imposing late fees for payments that were not actually late.

Judge Sharon Johnson Coleman rejected OneWest’s argument that lead plaintiff Stacey Fletcher lacked standing, finding that her complaint alleged sufficient injury from OneWest’s allegedly unreasonable delay in responding to her request for a modified loan under the Home Affordable Modification Program.

Fletcher further accuses OneWest of reporting her to…

It seems like OneWest was too busy  making claims for loss sharing and insurance and guarantees to actually pursue modifications.

OneWest, Soros Accused Of Mortgage Scam In FCA Suit

Law360, New York (October 16, 2012, 9:47 PM ET) — A Florida resident hit OneWest Bank and billionaire majority shareholder George Soros with a False Claims Act lawsuit Monday, saying that through their connections to President Barack Obama, they had finagled a loss-sharing deal with the government that allowed them to scam homeowners and taxpayers.

James Beekman, who originally took out his mortgage with IndyMac Federal Bank, says when Soros and OneWest took over the fallen bank, they entered into a loss-sharing agreement with the Federal Deposit Insurance Corp. Under the deal, OneWest would shoulder the…

Disclosure. Patrick Giunta and I represent Beekman. No further comment

Loan Info Confidential

By Michael Lipkin

Law360, San Diego (November 10, 2014, 6:13 PM ET) — OneWest Bank NA is trying to stop Lehman Brothers Holding Inc. from accessing confidential information about Lehman-owned loans it used to service, alleging in New York federal court that Lehman is trying to blame OneWest for its own bad investments.
In a complaint filed Friday, OneWest claims Lehman is trying to access regulated information about 27 mortgages OneWest used to service, including confidential data about borrowers that OneWest alleges Lehman doesn’t have a right to access. The loans were eventually liquidated after poor performance, and the service agreements governing them have already expired, according to the complaint.

“This action seeks to end defendants’ misguided campaign to try to force OneWest to provide them with confidential information to which the defendants are no longer entitled,” the bank said. “Doing so could subject OneWest to potential regulatory and civil liability for failing to protect private borrower information.”

Aurora Commercial Corp., formerly Lehman Brothers Bank FSB, is also named as a defendant.

Lehman allegedly bought the loans as part of a pool from IndyMac Bank FSB between 2006 and 2007, with IndyMac retaining the right to service the loans. After IndyMac was shut down by the Office of Thrift Supervision in 2008, OneWest bought the servicing rights from the Federal Deposit Insurance Corp. The deal expressly said OneWest was not liable for previous servicing conduct, according to the complaint.

For the full article see http://www.law360.com

VICTORY for Homeowners: Received Title and 7 Figure Monetary Damages for Wrongful Foreclosure

As a California appellate court decision several years ago noted, “For homeowners struggling to avoid foreclosure, this dual tracking might go by another name: the double-cross.” – See more at: http://calcoastnews.com/2013/09/onewest-bank-pays-7-figures-mortgage-fraud-case/#sthash.xcKP1Tpl.dpuf
As a California appellate court decision several years ago noted, “For homeowners struggling to avoid foreclosure, this dual tracking might go by another name: the double-cross.” – See more at: http://calcoastnews.com/2013/09/onewest-bank-pays-7-figures-mortgage-fraud-case/#sthash.xcKP1Tpl.dpuf

“As a California appellate court decision several years ago noted, ‘For Homeowners struggling to avoid foreclosure, this dual tracking might go by another name: the double-cross.'” Daniel Blackburn, http://www.calcoastnews.com, 9/11/13.

Internet Store Notice: As requested by customer service, this is to explain the use of the COMBO, Consultation and Expert Declaration. The only reason they are separate is that too many people only wanted or could only afford one or the other — all three should be purchased. The Combo is a road map for the attorney to set up his file and start drafting the appropriate pleadings. It reveals defects in the title chain and inferentially in the money chain and provides the facts relative to making specific allegations concerning securitization issues. The consultation looks at your specific case and gives the benefit of litigation support consultation and advice that I can give to lawyers but I cannot give to pro se litigants. The expert declaration is my explanation to the Court of the findings of the forensic analysis. It is rare that I am actually called as a witness apparently because the cases are settled before a hearing at which evidence is taken.
If you are seeking legal representation or other services call our South Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. In Northern Florida and the Panhandle call 850-765-1236. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services. Get advice from attorneys licensed in the jurisdiction in which your property is located. We do provide litigation support — but only for licensed attorneys.
Neil Garfield, the author of this article, and Danielle Kelley, Esq. are partners in the law firm of Garfield, Gwaltney, Kelley and White (GGKW) based in Tallahassee with offices opening in Broward County and Dade County.
See LivingLies Store: Reports and Analysis

Neil F Garfield, Esq. http://www.Livinglies.me, 9/13/13

Victory in California, as we have predicted for years. Maria L. Hutkin and Jude J Basile were the attorneys for the homeowners and obviously did a fine job of exposing the truth. Their tenacity and perseverance paid off big time for their clients and themselves. They showed it is not over until the truth comes out. So for all of you who are saying you can’t find a lawyer who “gets it” here are two lawyers that got it and won. And for all those who were screwed by the banks, it isn’t over. Now it is your turn to get the rights and damages you deserve.

Maria L. Hutkin and Jude J. Basile
Maria L. Hutkin and Jude J. Basile

The homeowners won flat out at a trial — something that should have happened in most of the 6.6 million Foreclosures conducted thus far. U.S. Bank showed its ugly head again as the alleged Trustee of a trust that was most probably nonexistent, unfunded and without any assets at all much less the homeowners alleged loan. Still the settlement shows how far Wall Street will go to pay damages rather than admit their liability to investors, insurers, counterparties in credit default swaps, and the Federal Reserve.

When you think of the hundreds of millions of wrongful foreclosures that were the subject of tens of billions of dollars in “settlements” that preserved homeowners rights to pursue further damages and do the math, it is obvious why even the total of all the “settlements” and fines were a tiny fraction of the total liability owed to pension funds and other investors, insurers, CDS parties, the Federal Government and of course the borrowers who never received a single loan from the banks in the first place. If 5 million foreclosures were wrongful, as is widely suspected at a minimum, using this case and some others I know about the damages could well exceed $5 Trillion. Simple math. Maybe that will wake up the good trial lawyers who think there is no case!

Maria L. Hutkin and Jude J. Basile

A fitting announcement on the 5th anniversary of the Lehman Brothers collapse. the economy is still struggling as more than 15 million American PEOPLE were displaced, lost equity and forced into bankruptcy by imperfect mortgages that were a sham, and thus imperfect foreclosures that were also a sham. Another 15 million PEOPLE will be displaced if these wrongful, illegal and morally corrupt sham foreclosures are allowed to continue.

This case, like the recent case won by Danielle Kelley (partner of GGKW) was based upon dual tracking. In Kelley’s case the homeowners had completed the process of getting an approved modification, which meant that underwriting, review, confirmation of data, and approval from the investor had been obtained. In Kelley’s case the homeowner had made the trial payments in full and paid the taxes, insurance, utilities and maintenance of the property.

The Bank argued they were under no obligation to fulfill the final step — permanent modification. Kelley argued that a new contract was formed — offer, acceptance and the consideration of payment that the Bank received, kept and credited to the homeowner’s account. But the bank as Servicer was still accruing the payments due on the unmodified mortgage, which is why I have been harping on the topic of discovery on the money trail at origination, processing, and third party payments. 

 

The accounting records of the subservicer and the Master Servicer should lead you to all actual transactions in which money exchanged hands, although getting to insurance payments and proceeds of credit default swaps might require discovery from the investment banker. So in Kelley’s case, the Judge essentially said that if an agreement was reached and the homeowner met the requirements of a trial period, the deal was done and entered a final order in favor of the homeowner eliminating the the foreclosure with prejudice.

In this One West case the court went a little further. The homeowners were lured into negotiations, expenses and augments under the promise of modification and then summarily without notice to the homeowner sold the property at a Trustee sale under the provisions of the deed of trust. The Judge agreed with counsel for the homeowners that this was dual tracking at its worst, and that the bank did not have the option of proceeding with the sale. 

 

The homeowners were forced to vacate the property and make other housing arrangements and these particular homeowners were enraged and had the resources to do what most homeowners are too fearful to do — go to the mat (go to trial.)
One West made several offers of settlement once the Judge made it clear that the homeowners had stated a cause of action for wrongful foreclosure. Bravely the attorneys and the homeowners rejected settlement and insisted on a complete airing of their grievances so that everyone would know what happened to them. After multiple offers, with trial drawing near, OneWest finally agreed to give clear title back to the homeowners and pay $1 million+ in damages on what was a six figure loan. 

 

We now have cases in both judicial and non-judicial jurisdictions in which the homeowner was awarded the house without encumbrance of a mortgage and even receiving monetary damages in which the attorneys achieved substantial rewards on 7 figure settlements  that probably would be much higher if they ever went to trial — particularly in front of a jury. This is only one of the paths to successful foreclosure defense. I hope attorneys and homeowners take note. Your anger can be channeled into a constructive path if the lawyers know how to understand these loans, and how to litigate them.

“There’s hope. I feel their pain.” — Danielle Kelley, Esq. , partner in Garfield, Gwaltney, Kelley and White.

http://calcoastnews.com/2013/09/onewest-bank-pays-7-figures-mortgage-fraud-case/

Local Governments on Rampage Against Banks’ Manipulation of Credit Markets

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“When both government and the citizens start acting together, things are likely to change in a big way. There appears to be a unity of interests — the investors who thought they were buying bonds from a REMIC pool, the homeowners who thought they were buying a properly verified and underwritten loan from a pretender lender, and the local governments who were tricked into believing that their loans were viable and trustworthy based upon the gold standard of rate indexes. In many cases, the only reason for the municipal loan, was the illusion of growing demographics requiring greater infrastructure, instead of repairing the existing the infrastructure. As a result, the cities ended up with loans on unneeded products just like homeowners ended up with loans on houses that were always worth far less than the appraisal used.” — Neil F Garfield, www.livinglies.me

Editors Note: Hundreds of government agencies and local governments are on the rampage realizing that they were duped by Wall Street into buying into defective loan products. This puts them in the same class as homeowners who bought such loan products, investors who believed they were buying Mortgage Bonds to fund the loans, and dozens of other institutions who relied upon the lies told by the banks who were having a merry old time creating “trading profits” that were the direct result of stealing money and homes, and misleading the financial world on the status of the interest rates in the financial world. All loans tied to Libor (London Interbank Offered Rate), which was the gold standard,  are now in question as to whether the reset on those loans was true, correct or simply faked.

The repercussions of this will grow as the realization hits the victims of this gigantic fraud broadens into a general inquiry about most of the major practices in use — especially those in which claims of securitization were offered. It is now obvious that the deal proposed to pension funds and other investors was simply ignored by the banks who used the money to create faked trading profits, removing from the pool of investments money intended for funding loans that were properly originated and dutifully underwritten.

Cities, Counties, Homeowners and Investors are all victims of being tricked into loans that were simply unsustainable and were being manipulated to the advantage of the banks they trusted to act responsibly and who instead acted reprehensibly.

The ramifications for the mortgage and foreclosure markets could not be larger. If the banks were lying about the basics of the rate and the terms then what else did they do? As the Governor or of the Bank of England said, the business model of the banks appears to have been “lie More” rather than living up to the trust reposed in them by those who dealt with them as “customers.” Specifically, the evidence suggests that while the funding of the loan and the closing documents were coincidentally related in time, they specifically excluded any reference to each other, which means that the financial transaction as it actually occurred is undocumented and the document trail refers to financial transactions that did not involve money exchanging hands.

The natural conclusion created by the coincidence of the funding and the documents was to conclude that the two were related. But the actual instructions and wire transfers tell another story. This debunks the myth of securitization and more particularly the mortgage lien. How can the mortgage apply to a transaction described in the note that never took place and where the terms of the loan were different than what was expected by the creditors (investors, like pension and other managed funds) in the mortgage bond. The parties are different too. The wires funding the transaction are devoid of any reference to the supposed lender in the closing documents presented to borrowers. Thus you have different parties and different terms — one in the money trail, which was undocumented, and the other in the document trail which refers to transactions in which no money exchanged hands.

When the municipalities like Baltimore start digging they are going to find that manipulation of Libor was only one of several issues about which the Banks lied.

Rate Scandal Stirs Scramble for Damages

BY NATHANIEL POPPER

As unemployment climbed and tax revenue fell, the city of Baltimore laid off employees and cut services in the midst of the financial crisis. Its leaders now say the city’s troubles were aggravated by bankers’ manipulation of a key interest rate linked to hundreds of millions of dollars the city had borrowed.

Baltimore has been leading a battle in Manhattan federal court against the banks that determine the interest rate, the London interbank offered rate, or Libor, which serves as a benchmark for global borrowing and stands at the center of the latest banking scandal. Now cities, states and municipal agencies nationwide, including Massachusetts, Nassau County on Long Island, and California’s public pension system, are looking at whether they suffered similar losses and are weighing legal action.

Dozens of lawsuits filed by municipalities, pension funds and hedge funds have been consolidated into a few related cases against more than a dozen banks that are involved in setting Libor each day, including Bank of America, JPMorgan Chase, Deutsche Bank and Barclays. Last month, Barclays admitted to regulators that it tried to manipulate Libor before and during the financial crisis in 2008, and paid $450 million to settle the charges. It said other banks were doing the same, but none of them have been accused of wrongdoing. Libor, a measure of how much banks must pay to borrow money from one another in the short term, is set through a daily poll of the banks.

The rate influences what consumers, businesses and investors pay on a wide range of financial contracts, as varied as mortgages and interest rate swaps. Barclays has said it and other banks understated the rate during the financial crisis to make themselves look healthier to the public, rather than to make more money from clients. As regulators and lawmakers in Washington and Europe assess the depth of the Libor abuse and the failure to address it, economists and analysts are already predicting it could be one of the most expensive scandals to hit Wall Street since the financial crisis.

Governments and other investors may face many hurdles in proving damages. But Darrell Duffie, a professor of finance at Stanford, said he expected that their lawsuits alone could lead to the banks’ paying out tens of billions of dollars, echoing numbers from a recent report by analysts at Nomura Equity Research.

American municipalities have been among the first to claim losses from the supposed rate-rigging, because many of them borrow money through investment vehicles that directly derive their value from Libor. Peter Shapiro, who advises Baltimore and other cities on their use of these investments, said that “about 75 percent of major cities have contracts linked to this.”

If the banks submitted artificially low Libor rates during the financial crisis in 2008, as Barclays has admitted, it would have led cities and states to receive smaller payments from financial contracts they had entered with their banks, Mr. Shapiro said.

“Unambiguously, state and local government agencies lost money because of the manipulation of Libor,” said Mr. Shapiro, who is managing director of the Swap Financial Group and is not involved in any of the lawsuits. “The number is likely to be very, very big.”

The banks have declined to comment on the lawsuits, but their lawyers have asked for the cases to be dismissed in court filings, pointing to the many unusual factors that influenced Libor during the crisis.

The efforts to calculate potential losses are complicated by the fact that Libor is used to determine the cost of thousands of financial products around the globe each day. If Libor was artificially pushed down on a particular day, it would help people involved in some types of contracts and hurt people involved in others.

Securities lawyers say the lawsuits will not be easy to win because the investors will first have to prove that the banks successfully pushed down Libor for an extended period during the crisis, and then will have to demonstrate that it was down on the day when the bank calculated particular payments. In addition, investors may have to prove that the specific bank from which they were receiving their payment was involved in the manipulation. Before it even reaches the point of proving such subtleties, however, the banks could be compelled to settle the cases.

One of the major complaints was filed by several traders and hedge funds that entered into futures contracts that are traded through the Chicago Mercantile Exchange and that pay out based on Libor. These contracts were a popular way to protect against spikes in interest rates, but they would not have paid off as expected if Libor had been artificially lowered.

A 2010 study cited in the suit — conducted by professors at the University of California, Los Angeles and the University of Minnesota — indicated that Libor was significantly lower than it should have been throughout 2008 and was particularly skewed around the bankruptcy of Lehman Brothers.

A separate complaint filed in 2010 by the investment firm Charles Schwab asserts that some of its mutual funds, including popular ones like the Schwab Total Bond Market Fund, lost money on similar investments.

The complaints being voiced by municipalities are mostly related to their use of a popular financial contract known as an interest rate swap. States and cities generally enter into these swaps with specific banks so that they can borrow money in the bond market. They pay bondholders based on a floating interest rate — like an adjustable-rate mortgage — but end up paying their bankers a fixed rate through a swap. If Libor is artificially lowered, the municipality is stuck paying the same fixed rate, but it receives a smaller variable payment from its bank.

Even before the current controversy, some municipal activists have said that banks took advantage of the financial inexperience of municipal officials to sell them billions of dollars of interest rate swaps. Experts in municipal finance say that because of the particular way that cities and states borrow money, they are especially liable to lose out on their swaps if Libor drops.

Mr. Shapiro, who helps cities, states and companies negotiate these contracts, said that if a city had interest rate swaps on bonds worth $1 billion and Libor was artificially pushed down by 0.30 percent, which is what the lawsuits contend, that city would have lost $3 million a year. The lawsuit claims the manipulation occurred over three years. Barclays’ settlement with regulators did not specify how much the banks’ actions may have moved Libor.

In Nassau County, the comptroller, George Maragos, said in a statement that according to his own calculations, Libor manipulation may have cost the county $13 million on swaps related to $600 million of outstanding bonds.

A Massachusetts state official who spoke on the condition of anonymity because of potential future legal actions, said the state was calculating its potential losses.

“We are deeply concerned and we are carefully analyzing all of our options,” the official said.

Anne Simpson, a portfolio manager at the California Public Employees’ Retirement System — the nation’s largest pension fund — said that the fund’s officials “are sifting through the impact, but there certainly is an impact.”

In Baltimore, the city had Libor-based interest rate swaps on about $550 million of bonds, according to the city’s financial report from 2008, the central year discussed in the lawsuit. The city’s lawyers have declined to specify what they think Baltimore’s losses were.

The city solicitor, George Nilson, said that the rate manipulation claims meant that the city lost out on money when it needed it the most.

“The injury we suffered during the time we suffered it hurt more because we were challenged budgetarily,” Mr. Nilson said. “Every dollar we lost due to illegal conduct was a dollar we couldn’t pay to keep open recreation centers or to pay police officers.”


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WELLS FARGO-NORWEST-CONDOR CONNECTIONS INFO — FOR SECURITIZATION RESEARCH

submitted by MARY COCHRANE

Wells Fargo & Co. ‘a private label tradename’ purchased 11/2/98. Foothill & Norwest & UBS … do business using ‘private label brand’ and all of the existing agreements and former registrations stayed open. Already in business in 1994/1996 with Lehman Brothers, Structured Asset Securities Corp, Bear Stearns, former Wells Fargo, Norwest, GMAC-RFC, Chase Manhattan Mortgage Corp, Deutsche Bank Securities, Foothill Capital Corp a sub of Foothill Group, who all merged with Wells Fargo HSBC Trade Bank 11/2/98. All of the existing agreements as priviate members of the financial exchanges survived.

Restated Letter of Credit & Guaranty Agreement 8/1/94 among Foothill Capital Corp, Union Bank as agent and issuing bank

Subsidiaries Foothill Group Inc

Wells Fargo & Co. (Wells Fargo & Co/MN formerly known as Norwest Corp)

Norwest Corporation:

Condor Investments LP, Minnesota LTD
 (John Nickoll, Dennis Ascher, Jeffrey Nikora ‘Managing Partners filing persons, Foothill Capital is a wholly owned subsidiary.

Condor principal business address
Norwest Center, Sixth St & Marquette Ave
Minneapolis MN 55479

Principal Business engage in the business of investment in various financial assets.

4G-382
Condor Investment Company DC Mendota He MN XR
LP-7122
Condor Investments Limited Partnership LPI Mpls MN
Filing Number: LP-7122 Entity Type: Limited Partnership
Original Date of Filing: 2/22/1996 Entity Status: Inactive
Entity Date to Expire: 12/31/2025 Chapter: 322A

Name: Condor Investments Limited Partnership
Registered Office Address: 6th & Marquette 17th Flr %Norwest Corp
Mpls, MN, 55479-1026
Home State: MN

Registered Agent: Stanley S Stroup


8K 6/30/95

5/15/95 Norwest Corp signed a definitive agreement for the merger of the Foothill Group, Inc. with Norwest.

Foothill Group Inc is a specialized financial services company which operates two tightly linked businesses: commercial lending and money management.

Foothill Capital Corp, its wholly-owned subsidiary, provides asset-based financing to businesses throughout the USA.

Parent Co. money mgmt operation conducts business thru institutional lP’s seeking above avg returns by investing in debt instruments of companies in reorg or in process of restructuring.

Norwest Corp is a bank holding company formed under laws DE
 Foothill Capital Corp CA, &
 Norwest Corp (NORWEST) a bank holding corp laws of DE,
 the Company will be a wholly owned subsidiary of Norwest.

Amendment 2/1/95:
Revolving Credit Agreement
Foothill Capital Corp, CA Corp, subsidiary of The Foothill Group, Inc. Parent.

the banks
-Bank of America National Trust and Savings Association, as a bank and agent

Recitals:
-other than Long-Term Credit Bank of Japan, LTD (LTB)
NationsBank of Georgia, N.A. (Nations)
Bank of America National Trust & Savings Association (BOA) as Agent

Foothills Capital Corp, Inc. and BOA as Agent

LTB, NATIONS & NORWEST have each agreed to become new banks under the Agreement

BOA bank & agent & Foothills Capital Inc & Foothill Capital desire to amend agreement to reflect LTB, NATIONS, NORWEST become New Banks.

7/12/95 8K EX-28
Norwest and Foothill Group, Inc. signed definitive agreement for acquisition of Foothill Group by Norwest 4th Qtr 1995.

Wells Fargo & Co/MN [formerly Norwest] 6/7/95 SC 13D/A

Stanley S. Stroup
EVP & General Counsel
Norwest Corp
Norwest Center
Sixth and Marquette
Minneapolis MN 55479-1026
DE Citizen
CUSIP 345109-20-1
Tax ID 41-0449260
Bank Holding Co

Through Commercial bank subsidiaries general banking & trust business in
AZ, CO, IL, IN, IA, MN, MT, NB, NM, ND, OH, SD, TX, WI, WY.

TAKE THE MONEY AND THEN TAKE THE HOUSE TOO: WHAT A DEAL!

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

New Questions Raised in Mortgage Financing

EDITOR’S COMMENT: I worked on Wall Street and I was an investment banker. I know the mentality. If money is sitting there, they will take it and worry about it later. This article is the tip of the iceberg and it belongs on Page 1. I agree with the NY Times editorial staff about how important this article is. It didn’t get blocked because it was about Bear Stearns, which is defunct. But the story is the same for all the mega banks. They screwed the investors, stole the money, then screwed the investors again, along with the homeowners, and stole the house. And it is still going on.

The “secret pocketing of money” is no secret amongst those who work on Wall Street. To them it was a game and they won and each time a news article comes out missing the point again they have another laugh. Unfortunately the regulators and legislators are buying the spin in the media instead of investigating the facts.

Fictitious “Bonds” (i.e., non-existent) were sold by fictitious “trusts” or “SPV’s” (i.e. non-existent) on the CLAIM that each SPV or Trust consisted of a fictitious pool (i.e., non-existent) each pool containing fictitious “assets” consisting of the fictitious (i.e. non-existent) obligations of homeowners who had been “loaned money” from a fictitious company pretending to be a bank or lender. The practice on Wall Street was called “selling forward” which means you are selling something you don’t have, like selling short, which is selling a stock before you buy it.

THEN a fictitious transaction (i.e., non-existent) was recorded and reported between the party pretending to be a lender but who was acting, at most, as a mortgage broker (unregistered and unregulated). This was the promissory note and mortgage deed or deed of trust. The transaction described in the note and mortgage never happened and was never meant to happen. All the “securitized”loans were table funded, so none of the “lenders” were creditors. They were fee based servicers. The REAL transaction was never committed to writing or recorded or reported.

 

The pretender at the closing merely transmitted a flat data file like a spread sheet with various pieces of data that the originator inserted manually. If they changed the date of the loan from the closing date tot eh recording date, they now had a second loan to sell to a second loan aggregator, who knew what was going on because they were giving the orders on what to write, when to write it and who to send it to.

The ACTUAL TRANSACTION between the homeowner and the ACTUAL source of funds was never disclosed to either the lender nor the borrower nor ever committed to writing. Hence the representation that there ever was a secured loan was false, and through no fault of the borrower. The documentation from the closing was neither lost nor destroyed but often described as one or both. The sole reason they didn’t want to produce the original documentation was that it would not conform to the deal proposed to the investor and did not conform to the deal made with the borrower. Better to say you lost it or accidentally destroyed it than to admit criminal fraud.

The effect was obvious. The investment bank took the money from the investors and the money paid by borrowers and the money paid by third parties through insurance, credit default swaps, and under cover of cross collateralization and over-collateralization kept the money, obscuring the fact that they were neither paying nor allocating money received to the investor who was the payee of the money nor the borrower who was the obligee.

Thus neither one knew the true status of the loan. The investor was kept in the dark about the continuing receipt of money by the investment firm, and the borrower was kept in the dark (a) about the real lender not being paid money that came in and which was required to be paid against the borrower’s obligation and (b) about the ALLOCATION or ACCOUNTING for the money that the investment bank was receiving and disbursing in the name of the payor (borrower) and payee (lender/investor).

On an arbitrary basis, computations were made an strategies employed to give the appearance of a normal mortgage market but in fact that was all a fiction. The end result is that the investors and insurers were defrauded out of billions fo dollars on losses that never occurred and paid to parties who had no insurable or ownership interest. The very existence of Notice of Default, Acceleration and Notices of Sale, Complaints for foreclosure was and remains a fiction that cannot be supported by the facts. The strategy employed by the pretender lenders is to use the documents describing fictitious transactions as a substitute for alleging real facts and THEN introducing the documents as proof of those facts alleged.

Judges relying on their law school days or when they practiced law before this historical scheme was developed, are ruling on the basis of presumed facts that do not exist. They are presuming those facts based upon documents that describe transactions that do not exist. The sole hook on which they hang their hat is whether the borrower received the benefit of the loan. But Judges to themselves, the judicial system and most importantly the title recording system a disservice when they presume that the documents are anything more than ink on paper without any value, derived or otherwise.

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By LOUISE STORY

Banks have been fighting with disgruntled bond investors and insurers for months, arguing that they do not need to buy back soured mortgages they placed inside securities before the financial crisis.

Now, it turns out, some of those banks may have secretly collected partial payments on those same mortgages several years ago and pocketed that money.

At least that is a theory being pursued by plaintiffs’ lawyers in some of the largest mortgage bond lawsuits, in which banks are accused of filling mortgage bonds with loans that did not belong there.

The theory surfaced in a recently unsealed lawsuit against a mortgage unit at Bear Stearns, the failed investment bank that is now part of JPMorgan Chase.

In the suit, the Ambac Assurance Corporation, which insured some mortgage bonds created by Bear Stearns, contends that the bank was partly compensated by loan originators for mortgages that became delinquent shortly after they were packaged into securities. Bear Stearns’s mortgage desk kept the payments, according to the suit, rather than apply them to the bonds that contained the delinquent loans.

Interviews with more than a dozen former workers at several big banks, including Lehman Brothers and Deutsche Bank, suggest that several banks received millions of dollars at a time in such payments, known as early-payment-default settlements.

But the money trail of these settlements is murky. It is unclear how much of the money was added to bankers’ profits — and bonuses — and how much was forwarded to buy out bad loans from mortgage bonds.

Whether or not the settlement payments were shared with mortgage investors, they are likely to be used in court to show that Wall Street banks knew about the growing stream of mortgages that had missed payments within their first 90 days, a common sign of mortgage fraud. That sort of evidence may matter to government investigators at places like the Securities and Exchange Commission, which is looking into whether banks misrepresented the sorts of mortgages placed in bonds.

At Bear Stearns, there seems to have been some knowledge of the failing loans, according to the Ambac case. Ambac says there is evidence of more than 100 early-default settlements for batches of loans that soured quickly. An example in that case describes an $11 million payment for one batch of loans. For another batch of “at least 12 loans,” there was a $2.6 million payment.

Ambac’s case was filed in federal court, but a judge there ruled this week that the case belonged in a different jurisdiction. Erik Haas, a lawyer for Ambac, said the company planned to refile in state court.

JPMorgan Chase, which bought Bear Stearns three years ago, said Ambac was a sophisticated investor that knowingly took risks in its deals.

“We do not believe Ambac’s claims are meritorious and intend to defend Bear vigorously,” said Jennifer Zuccarelli, a JPMorgan spokeswoman. Ms. Zuccarelli would not comment on Bear Stearns’s use of settlement payments.

Banks like JPMorgan face lawsuits brought by insurance companies and large asset managers that had purchased mortgage bonds when housing was booming. These investors want to return the bonds to the banks and get their money back. The banks disagree, saying the buyers of these securities were sophisticated investors who bought the bonds with open eyes and should have understood the risks.

Some lawyers in those cases said the accusation against Bear Stearns, if true, would be a stunning instance of wrongdoing, because it would indicate that its mortgage operation essentially double-dipped: selling a mortgage into a mortgage bond at full price and also pocketing a settlement for that same mortgage when it went sour.

“If they knew the loans were defaulting, the money should have been passed on to investors,” said Jerry Silk, a lawyer with Bernstein Litowitz who is representing numerous mortgage investors in suits against banks. “We’ve heard this a lot, and we’re trying to prove it. It would be a home run for us.”

The search for a home run has compelled mortgage bond investors to look back to when they first bought their investments. Around 2005, the number of mortgages that went bad began rising. Bankers were in the middle, between the firms that originated the loans and the investors who bought bonds with them.

Mortgage originators at that time did not have enough cash to buy back the loans in full. So banks offered a deal: if the originators gave them a partial cash payment, or a discount on future loan purchases, the banks would drop their requests that originators repurchase the delinquent loans.

This helped the mortgage companies preserve cash, and it appeased the bankers. But, in many cases, it is unclear if the partial payments benefited holders of the mortgage trusts that held the relevant mortgages.

It seems there was no standard accounting of the payments among the various banks, particularly in cases where banks received future discounts or other benefits instead of cash.

At the mortgage company New Century, for instance, banks agreed to reduce the number of souring loans they returned to the originator in exchange for the right to buy some of the originator’s next batch of loans, according to testimony given to Michael Missal, a lawyer with K&L Gates who prepared New Century’s bankruptcy report.

That deal with New Century was valuable to banks because they needed more mortgages to keep their lucrative mortgage bond machines going.

It is also unclear whether the banks had a legal obligation to pass the benefits from early-default settlements to the mortgage investors.

Workers who negotiated some of these settlements at Bear Stearns or at other Wall Street firms said last week that they did not know where the payments ended up. “The further and further I get from that business, the more I realized how siloed we were,” said one former mortgage salesman at Lehman Brothers who spoke only on the condition of anonymity. “No one knew what anyone else was doing.”

A former Bear Stearns worker, who negotiated such settlements between it and originators, said: “I was the messenger of the bad news. I was going back to these originators to say ‘Listen, we purchased some of these and they’re having problems.’ ”

“But,” this worker said, after he received the settlements, “I had no visibility into where the money went when I sent it up the food chain.”

Even Ambac’s lawyers at first did not know the extent of the payments at issue, but the company filed an amended complaint describing them after learning some new information from the producer of a coming documentary about Bear Stearns, “Confidence Game.”

Tracing such payments is tricky because of the large number of players in the mortgage machine: mortgage originators sold loans to banks, and then the banks packaged them into mortgage bonds to sell to mortgage investors. The originators did not generally communicate with mortgage investors, so neither side knows exactly what Wall Street’s middlemen did with the money or side agreements.

Tom Capasse, a principal at Waterfall Asset Management in New York, ran models to spot early signs of trouble in the bonds he purchased. He said that about 75 percent of the time that he found a problem, the bank that created the deal came forward without prompting and repurchased the bonds.

But a quarter of the time, Mr. Capasse said, he had to report a missed payment and raise questions about the loans for them to be repurchased by the bank. Banks, he said, might not have minded if other investors did not report such problems. “Banks were facing a death spiral in terms of early mortgage defaults,” he said, “so they just didn’t buy them back.”

APPRAISAL FRAUD: DEVIL IN THE DETAILS

From Brian Davies

COMMENTS ON CALIFORNIA MELLO ROOS FRAUDS PERPETRATED BY LENNAR, RYAND, SUNCAL.

THE BUILDERS AND SUNCAL THE DEVELOPER FUNDED BY LEHMAN BROTHERS GOT THE APPRAISER (IN THE 990 PAGE MELLO ROOS DOCUMENT ATTACHED) TO SAY THAT A RECENTLY SOLD DEVELOPMENT WAS WORTH $81 MILLION.

THIS APPRAISER FRAUD WAS BASED ON SALES PRICES TO THE SOLD BUILDER AREAS A FEW MONTHS BEFORE.

THIS FRAUD DID NOT INCLUDE AREA COMPS BUT COMPS SOLD TO THE SAME PLAYERS. THE BUILDERS RECEIVED CREDITS (KICKBACKS) OF $13-15,000 PER LOT. THE SCHOOL TAX WAS PAID.

OUT OF THE AMOUNT THE DEVELOPER WAS PAID 25% ADMINISTRATIVE HIDDEN FEES, AND WERE REIMBURSED FOR MANY ITEMS ALREADY PAID FOR.

THIS THIEVERY WAS SO OUTRAGEOUS THAT THERE WAS $1.6 MILLION CHARGED BY THE DEVELOPER (SUNCAL SEE WSJ ARTICLE ON LEHMAN HOLDS SUNCAL CEO PERSONALLY FOR BONDS AND OTHER DEBTS) WHICH WERE FOUND TO BE PRIVATE STREETS. THEY WERE REIMBURSED FOR MANY UNQUALIFIED PROJECTS. THAT AMOUNTED TO BREAKING THE TAX FREE STATUS OF THE BOND OFFERING.

THE WORST THING IS THAT THERE WAS AN AREA 2, ADDED TO THIS MELLO ROOS TAX AREA.

AREA 2 WAS NOT PROPERLY ANNEXED, BUT REGARDLESS IT WAS PUSHED THROUGH AND SOUTHWEST SECURITIES, FULLBRIGHT AND JAWROSKI LLP APPROVED IT. THE OFFERING WAS SOLD AND THE FUNDS DISTRIBUTED.

AREA 2 THE INELIGIBLE AREA BY ALL LAND RECORDS AND LAWFUL ANNEXATION PROCEDURES, RECIEVED $6 MIILION OF INFRASTRUCTURE UPGRADES.

THESE WERE BACK BONE STRUCTURES. THEY ARE IN THE GROUND NOW AND THE AREA 1 WHO PAID FOR THEM WILL NEVER BENEFIT. IT WAS A SCAM AND IT IS IN CALIFORNIA.

A GOOD NEWSPAPER COULD EASILY AGREE WITH THE ASSESSMENT. HOWEVER IT IS TOO DIFFICULT.

THIS AREA WAS NOT ANNEXED TO THE DEVELOPMENT PROPERLY. IN FACT THERE WAS A LETTER WHERE BY THE DEPT OF THE INTERIOR SAID THAT THEY DAMAGED ENDANGERED SPECIES.

THEY DID NOT CARE AND THE DEPT OF THE INTERIOR HAS NO POWER ONCE THE CITY WHO FACILITATED THIS MASSIVE CONSPIRACY ALLOWED THE PULLING OF PERMITS.

I HAVE ALL THIS DOCUMENTED. THE OVERSIGHT BODIES ARE WEAK. THIS $26.3 MILLION DOLLAR MELLO ROOS TAX IS NOW ITSELF OVER 2% OF THE TAX AMOUNT.

THAT MAKES THE TOTAL TAX OVER 3.5% FOR THESE PEOPLE. THIS IS WELL DOCUMENTED AND IT IS SO BAD. THIS IS ONLY PART OF THE STORY. THE DEVELOPER/BUILDERS STEERED 70% OF THE LOANS TO THEIR SUBSIDIARIES. FOR A $500,000 HOME THEY MADE $25,000.00.

CALIFORNIA DOES NOT CARE. THE AUTHORITIES DO NOT UNDERSTAND THIS COMPLEXITY, AND IT IS CRIMINAL.

http://www.scribd.com/doc/10738315/City-of-Indio

HERE IS THE BOND OFFERING. I HAVE DOCUMENTED THE ENTIRE SCAM. THE CITY HAS DEFEASED $ 3MM OF A SPECIAL ESCROW TAX. THAT WE HAD TO FIGHT SO THE DEVELOPER WOULD NOT GET IT. IF THERE WERE NOT ACTIVISTS HERE WE WOULD HAVE LOST THAT PART ALSO.

http://www.scribd.com/doc/38833584/Letters-to-Indio-City-Manager-December-5-2009-MELLO-ROOS-TAXES-BURDENED-HOMEOWNERS-2-30-YEAR-TAX

Department of the Interior Report for Area 2
United States Department of the Interior
FISH AND WILDLIFE SERVICE
Ecological Services
Carlsbad Fish and Wildlife Office
6010 Hidden Valley Road
Carlsbad, California 92009
In Reply Refer To: FWS-ERIV-4301.1
Dec 10 2004
Ms. Susan E. Williams Community Development Services
Building and Safety Director
100 Civic Center Mall
Indio, California 92201
Subject: Notice of Intent to Adopt a Mitigated Negative Declaration and Draft
Environmental Assessment for the Proposed Terra Lago East Project, City of Indio, Riverside County (EA No. 04-11-404)
Dear Ms. Williams:
This letter responds to your request for agency comment on the above referenced Notice of Intent (NOI) and draft Environmental Assessment (EA) for the proposed Terra Lago East project, dated November 4, 2004. The U.S. Fish and Wildlife Service (Service) has reviewed the subject notice and accompanying draft EA, and we offer the following recommendations to assist you in planning for the conservation of sensitive wildlife species and plant communities within the project area. In particular, the Service has concerns regarding impacts to the federally endangered Coachella Valley milk-vetch (Astragalus lentiginosus var. coachellae; hereinafter milk-vetch) and its habitat. This species is known to occur just east of the proposed project boundary and suitable habitat occurs on portions of the project site. We are concerned that impacts have recently occurred to the milk-vetch adjacent to the project site that were to be avoided under the former SunCal project. Furthermore, we are concerned with the lack of effective mitigation measures proposed in the Mitigated Negative Declaration for project impacts on the Palm Springs ground squirrel (Spermophilus tereticaudus chlorus; hereinafter ground squirrel) and the honey mesquite (Prosopis glandulosa) hummock plant community found on-site. Additionally, the Biological Resources section of the draft EA does not address Environmental Evaluation letter f: “Conflict with the provisions of an adopted Habitat Conservation Plan, Natural Community Conservation Plan, or other approved local, regional, or state habitat conservation plan?” This section should be completed and circulated for public review.
According to the EA, the proposed Terra Lago East project is a consolidation of the previously approved Hills (November 1996) and Indian Lakes (May 2000) projects, and is designed to be consistent with the SunCal Indio

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Project Master Plan that was approved December 2003. The proposed Terra Lago East project is geographically located within a subset of these previously approved projects. A biological assessment (BA) was prepared for the proposed SunCal project by James Cornett, dated June 28, 2003, which enveloped the project footprint for the proposed Terra Lago East project. A review and update of the 2003 BA was prepared for the Terra Lago East project by AMEC Earth and Environmental, Inc., dated September 20, 2004. We appreciate the opportunity to comment on the NOI and draft EA and our concerns are addressed in detail below.
Coachella Valley Milk-vetch
According to the 2003 BA (page 13) for the SunCal project, milk-vetch was detected in eastern portions of the site adjacent to Dillon Road, and ‘habitat was found to be suitable for this species on portions of the project site.” The conditions of approval (condition number 4) and Mitigation Monitoring and Reporting Program (BS-2) for the SunCal project required the project proponent to confer with the Service regarding acceptable mitigation for the milk-vetch and to ‘provide proof to the City of Indio of consultations held with the U.S. Fish and Wildlife Service regarding any mitigation measure requirements for loss of potential milk-vetch habitat.” However, a letter submitted to our office by the law office of Hewitt & O’Neil, dated March 12, 2004, stated that ‘no mitigation is offered as no impacts to the milk-vetch will occur as a result of SunCal’s project.” Nonetheless, according to the 2004 BA (page 2), site visits conducted by John Green and Dave Kajtaniak in September 2004 found that extensive blading had recently occurred in the eastern portion of the project site. Though the 2004 BA does not clarify if the occupied milk-vetch habitat was disturbed by the blading, the area has been cleared to Dillon Road, which undoubtedly adversely impacted the milk-vetch population on-site. Because the proposed Terra Lago East project is proposed to be consistent with the approved SunCal project, the City’s mitigation measures for milk-vetch have not been complied with, and this outstanding responsibility still needs to be satisfied. Please see our recommendations below.
The eastern boundary of the proposed Terra Lago East project has been moved to the west, apparently to avoid the previously identified milk-vetch occurrences, however, the 2004 updated BA (page 1) states that, ‘Habitat is similar on the adjacent Terra Lago East site, so by natural seed dispersal, there is at least a chance that it could now occur there as well. Focused surveys during the blooming season of this plant would be required to confirm this possibility.” If the grading that occurred earlier this year redistributed and leveled sandy soils without transporting this material off-site, milk-vetch seeds would remain on-site and the seed bank should remain viable, assuming that some of the bank remains within sprouting depth of the soil surface.
Mitigation measures to offset impacts to milk-vetch should be included as permit conditions for the proposed Terra Lago East project. We recommend that the City require the project proponent to restore and protect, with a permanent conservation easement, the entire milk-vetch habitat that was to be avoided, per the letter from the law office of Hewitt & O’Neil. This area includes those lands along Dillon Road that the current project was reconfigured to avoid. Additionally, focused surveys for this species should be conducted on the remainder of the site during the appropriate blooming season and survey reports, including survey methodology, date of surveys, survey results, and surveyor qualifications should be submitted to the Service and the City for review prior to permitting the proposed project. This information is required to adequately evaluate the current status of this species on the project site, and determine the significance of potential impacts and appropriate mitigation measures.
Palm Springs Ground Squirrel and Mesquite Hummocks

The 2003 BA for the SunCal project reports more than 50 observations of the ground squirrel on-site and states that this species can be expected over most of the area surveyed, which includes the proposed Terra Lago East project site. The 2004 updated BA concludes that, despite clearing of many mesquite hummocks (discussed below), ground squirrels are still likely to be present on-site. This species is a candidate for Federal listing (candidate species are those for which the Service has on file sufficient information indicating that listing as threatened or endangered is warranted by the species has not yet been proposed for listing), and is considered a species of special concern by the California Department of Fish and Game (CDFG), because it is a narrow endemic species that largely occurs in the Coachella Valley within sandy habitats, and is most abundant in mesquite hummock habitat. In addition, the ground squirrel is proposed for conservation in the draft Coachella Valley Multiple Species Habitat Conservation Plan (draft CVMSHCP) to avoid the need for future listing, and provide adequate conservation so that if the species were to be listed in the future, additional funding or habitat would not be needed in the plan area.
Though the draft CVMSHCP provides a habitat model for the ground squirrel that suggests relatively widespread distribution in the Valley, the Service has conducted a 2-year study of the ground squirrel and found that it is largely restricted to stands of mesquite, including substantially higher population densities than in other habitat types, and currently appears absent from much of the modeled suitable habitat. Given the substantial reliance of the regional ground squirrel population on mesquite habitat, the future survival of the ground squirrel appears dependent on the conservation of that habitat type. Historically, the amount of mesquite hummocks in the Valley has been dramatically reduced by agricultural and urban development, to the extent that only about 945 acres of such habitat currently remain. Most of this habitat (about 570 acres, as calculated in the draft CVMSHCP) occurs in isolated patches that were excluded from the proposed CVMSHCP reserve design because of disjunct distribution, small size, and lack of connectivity with larger blocks ofhabitat. Therefore, only about 375 acres of mesquite hummocks may be protected in the future if the draft CVMSHCP is approved. However, most of the habitat that is proposed for conservation under the draft CVMSHCP is threatened by groundwater over-draught, and substantial death and degradation of the remaining mesquite habitat currently is evident. As such, the future survival of the ground squirrel in Valley appears to be at high risk, which adds to the significance of conserving those remaining stands of mesquite that still support the ground squirrel. The CDFG considers this community to be a rare vegetation element in California and of significant importance regionally due to high ecological value and increasing rarity/threat. Please see Enclosure 1 for additional information on the regional importance of mesquite hummocks and threats to this vegetation community type.
The 2003 BA for the SunCal project identified mesquite hummocks (some as high as fifteen feet) within the northeastern and southwestern portions of the proposed Terra Lago East project site, and the 2004 updated BA reports “extensive, extant hummocks within the existing golf course, particularly in the eastern portion of the course, north of the canal, and west ofWasteway Number Three” that were not identified in the 2003 BA. According to the 2004 BA (page 2), site visits conducted in September 2004 confirmed that all of the mesquite hummocks in the northeastern project area and some hummocks in the southwestern area had been bladed. Observations by Service biologists in April 2004 found that all of the mesquite hummocks onsite were undisturbed. Therefore, blading occurred between April and September 2004. Based on available information, the bladed area between the eastern boundary of the proposed Terra Lago East project and Dillon Road is no longer part of any proposed project for unexplained reasons. That the former SunCal project boundary was moved farther west in the current Terra Lago East proposal, suggests that an attempt was made to avoid the area previously documented to support the milk vetch. However, why this area would have been bladed before the City and developer completed its coordination with the Service, pursuant to the City’s mitigation requirement for the milk-vetch, is perplexing. The 2004 BA reports that extant mesquite roots that were bladed this summer are

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currently resprouting. This regeneration indicates that despite the significant degradation caused by the grading, the mesquite stands remain alive and likely will naturally reestablish if left undisturbed, to again provide suitable habitat for the ground squirrel.
The two BAs and the draft EA do not quantify the acreage of mesquite hummocks that occurred on the property at the time of the 2003 assessment for the SunCal project, the amount of mesquite hummocks that have subsequently been bladed, nor the amount of mesquite hummocks still extant on the proposed Terra Lago East project site. Given the proposed elimination of an unquantified amount of mesquite for housing within the existing golf course matrix, and the documented presence of ground squirrels in the existing golf course/mesquite hummock complex, a thorough assessment of the extent of mesquite and ground squirrel habitat is needed to assess the adverse effects of the project proposal. The Service has performed a preliminary assessment based on available aerial photography to help determine a threshold of significance for these potentialimpacts. Though a more careful assessment is needed, we have initially estimated that at least 50 acres of contiguous mesquite hummocks
occurred in the eastern area of the project site, and this entire area was bladed, as reported in the 2004 updated BA and confirmed per personal communication with John Green ofAMEC on December 10, 2004. We did not estimate the acreage of mesquite hummocks that were reported bladed in the southwestern portion of the proposed site. Additionally, we preliminarily estimate that at least an additional 20 acres of mesquite hummocks are extant within the rest of the project site. Based on the potential significance for adverse effects that this threshold assessment has identified, a more rigorous and accurate analysis is needed to quantify adverse effects so that effective mitigation measures can be formulated.
Given our threshold analysis above, the mesquite hummocks on the project site represent one of the largest remaining contiguous blocks of such habitat in the Coachella Valley. These mesquite hummocks are contiguous with, and part of, the regional habitat linkage that supports and connects the ground squirrel population along Dillon Road with those on the Coachella Valley Preserve. This linkage is identified in the draft 2004 CVMSHCP as part of the East Indio Hills Conservation Area.
Based upon review of our records, it appears that the City did not require mitigation for impacts to the ground squirrel and mesquite hummocks, perhaps based on findings in the 2003 BA (page 17), where Cornett suggested that due to the limited size of onsite mesquite hummocks, their isolation from other such habitats, and off-road vehicle impacts, payment of the $600 per acre Coachella Valley fringe-toed lizard Habitat Conservation Plan (CVFTLHCP) fee is adequate mitigation for loss of this community type on-site. The Service does not agree with this assessment. As described above, the extensive acreage of mesquite hummocks that remain extant and those that were bladed are contiguous with, and part of, an important regional habitat complex that supports and connects the ground squirrel population in this area with the populations to the west in the Coachella Valley Preserve. The CVFTLHCP mitigation fee was designed solely for that species and planning program, which did not address the conservation needs of other species, such as the ground squirrel and milk-vetch. To suppose that mitigation for the fringe-toed lizard also offsets significant adverse effects to other species with different habitat requirements suggests an inappropriate double counting of mitigation credits. Therefore, payment of the CVFTLHCP fee does not offset the significant impacts to the ground squirrel from the proposed project.
Summary
The proposed Terra Lago East project is associated with several previously authorized projects (Hills, Indian Lakes, and SunCal), however, it appears that adequate mitigation for impacts to Palm Springs ground squirrel and mesquite hummocks was not provided in the permits associated with these related projects. Furthermore, the

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permit condition to avoid impacts to Coachella Valley milk-vetch associated with the SunCal project apparently has been violated. Any impacts that have occurred, or potentially could occur, to sensitive species and habitats should be addressed through the permit requirements for the Terra Lago East project.
Because of the regional biological significance of the project site for the ground squirrel that cannot be mitigated through off-site replacement/fee payment, we recommend that the project (1) be reconfigured to avoid and connect the extant (ungraded) mesquite hummocks throughout the project site, and (2) protect the graded mesquite hummock habitat along Dillon Road that has been avoided in the current project proposal. As discussed above, the bladed mesquite hummocks are resprouting, which we anticipate will reestablish former hummocks over time, to again provide habitat for the ground squirrel and milk-vetch. Given the unaddressed impacts and mitigation responsibilities discussed above, (3) intensive restoration and management also should be required to accelerate natural regeneration and recolonization processes, and (4) all mesquite hummocks that were bladed (both within the proposed project site and east of the project site) should be monitored for recovery. As previously discussed, on-site restoration and preservation is required to achieve conservation of the regionally significant ground squirrel population found on-site; however, any mesquite hummocks that do not recover despite adequate recovery efforts should be mitigated off-site through habitat replacement at a 3:1 ratio, and (5) the on-site and off-site mesquite hummock habitat should be permanently protected through a conservation easement or donation to a public agency. Additionally, (6) all impacts to the Coachella Valley milk-vetch habitat that were to be avoided, per the letter from the law office of Hewitt & O’Neil, should be offset through restoration and protection of the graded area along Dillon Road, as discussed in #2 above.
If the City does not require mitigation adequate to offset significant effects to Palm Springs ground squirrel and Coachella Valley milk-vetch in the Mitigated Negative Declaration, additional environmental analysis and documentation, and coordination with the Service would be needed to address the unmitigated significant effects of the proposed project.
Please contact Sandra Marquez of my staff at 760/431-9440 if you have any questions or comments concerning this letter.
Sincerely,
//s//Sorensen, for
Therese O’Rourke Assistant Field Supervisor
Enclosure
cc: Kim Nicol, CDFG, Bermuda Dunes
Brian,
I understand from my colleagues in Western Riverside County that you may have more questions about the process on the Terra Lago East project. That

falls within my Division, so I don’t think they will be able to help you. Let me know what your questions are, and I’ll try to come up with some answers!
-Carol
__________________________
Carol A Roberts
Division Chief, Coachella and Imperial Valleys Carlsbad Fish and Wildlife Office 6010 Hidden Valley Road, Suite 101 Carlsbad, CA 92011
(760) 431-9440 ext. 271/fax -5902
carol a roberts@fws.gov

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