Real Estate Contract Scam Exposed

By Staff, Texas Attorney General Gregg Abbott | Fri, 16 Feb 2007

Fraudulent real estate operation bilked buyers out of tens of thousands of dollars

DALLAS – Texas Attorney General Greg Abbott today announced that he has permanently shut down a housing scam that allegedly defrauded primarily Hispanic consumers out of tens of thousands of dollars in the Dallas area.

The lawsuit, filed in April 2005 under the Texas Deceptive Trade Practices Act (DTPA), has resulted in a permanent injunction and default judgment against Dallas-based FCI Equities, Inc. and several individuals who participated in a scheme that involved the sale of homes without valid property titles.

The court imposed fines of $103,000 toward consumer restitution against the operation and its associates, to be paid by the operation’s lead proprietor, Jose Demetrio Murrugarra of Dallas. Jose Menjarez, a Dallas man who posed as an attorney to offer legal services to victims of the housing scam, was charged with $10,900 in civil penalties and restitution for consumers for his part in the deceptive scheme.

“It is a disgrace that these scam artists preyed on consumers’ dreams of putting down roots in Texas by exploiting their lack of knowledge about the home-buying process,� Attorney General Abbott said. “Housing scams like this are a flagrant violation of the law, and I am determined to shut them down.�

The Attorney General’s lawsuit claimed that FCI Equities and other defendants told primarily Hispanic consumers they could buy homes in the Dallas area between $20,000 and $40,000. The scam was carried out under the direction of Freddrick Ray Cartwright, owner of FCI, and was fronted by Murrugarra. Also named in the lawsuit was Menjarez for misleading consumers into believing that he was authorized to provide legal services to help them recoup losses to FCI.

Murrugarra allegedly met most of the victims through a small Mexican restaurant he owned. He convinced the consumers he or other defendants owned all the properties being offered outright and would produce a valid title after the sale was completed. Sales were often carried out quickly using handwritten agreements. The homes, most of which were in the Oak Cliff area of Dallas, were generally paid for in cash.

After consumers bought the homes, they discovered their titles were not valid because the homes were in foreclosure, had been condemned, or had liens for substantial unsatisfied debts that were often in excess of the properties’ market value. As a result, consumers were evicted from homes they thought they had legitimately purchased. Often, consumers spent thousands of dollars remodeling and repairing the homes before facing eviction. The injunction indicates Cartwright, Murrugarra and other participants in the scam knew the titles were not valid when they sold the properties.

When consumers confronted Murrugarra or Cartwright about the faulty titles and demanded refunds, the defendants either dismissed their concerns or falsely promised to provide an unencumbered title. The defendants never provided a refund to any of the consumers.

The court prohibited Menjarez of practicing law without a license. While the lawsuit did not allege his direct involvement in the FCI Equities scam, it did accuse Menjarez of exploiting victims of the scam by offering to handle legal cases against Murrugarra and other defendants through his group, Centro de Asesoría y Liderazgo Latino Americano (Latin American Assistance and Leadership Center). Menjarez allegedly charged $700 per consumer to draft legal affidavits related to the real estate scam and appear in court with consumers who were trying to prevent foreclosure on the properties.

Other defendants named in the suit as participants in the housing scam were Bettie Sue Bailey; Francis Carroll of Dallas; and R.I.C.H. Business and Building Systems of Dallas.

Attorney General Abbott offers consumers the following tips when buying a home:

• Take your time. Be wary of sellers who pressure you to make an immediate decision to buy or sign documents.
• Review all documents very carefully before signing; take them to a trusted independent person, such as an attorney, to help you review the terms if there is something you don’t understand.
• Make sure a title search company is involved in the transaction to determine who the owner of the property is and whether there are liens or outstanding debts for which you could be held liable.
• Never make payments in cash. Use checks or money orders.
• If monthly payments to the seller or financing institution include homeowners’ insurance and property taxes, check periodically with your county tax assessor and with the insurance company to ensure that the accounts are current.

Consumers who believe they have been deceived in the purchase of real estate should report it to the Office of the Attorney General by calling 1-800-252-8011 or by filing a complaint online at www.oag.state.tx.us.