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Timeshare Resale Scams Involving Fake Appraisals

Resale Reality

One company which offers resale services for timeshare units, campground sites and deeded vacation holdings says they are agents for English and Danish companies who successfully market timeshare units and campgrounds throughout Great Britain and the European Economic Community ("EEC") countries. They tell you the market for resales is "hot" and that their company has a high success rate in reselling units. They claim to have extensive lists of sales agents and potential buyers.

They say that there is a strong demand for timeshares overseas, and that they can sell your property at a high price. They may even state that if they do not sell your timeshare within a specified time, typically nine to twelve months, you are guaranteed to receive, from another overseas company, 90% of either the appraised value of the property or the property's list price.

They may charge an advance listing fee from $200 to over $4000 for this service. To further entice you, they even offer a money-back guarantee or a $1,000 government bond if they can't sell your timeshare within a year.

Sadly, it is unlikely that the company can sell the timeshare at all, let alone at a price equal to or greater than your original purchase price. Their lists of sales agents and buyers consist of people who have never heard of the company or have no interest in buying a timeshare.

In addition, certain consumers whose timeshares don't sell after a year are presented with a long-term government bond presently worth only $60 or $70. Or, never intending to provide the promised sales or service, the agents simply change names then move their operations, along with your money, to another location.

No Praise for these Appraisals

Four Massachusetts residents and six Florida men have been named in a fifty-count indictment for running a timeshare appraisal scam that took in over $15 million from approximately 38,000 victims nationwide over four years. The ringleader was arrested in St. Maarten, Netherlands Antilles and detained pending his extradition to the United States.

Purporting to represent a real estate investment company based in Florida and Texas that wants to market or buy your timeshare property for a high percentage of its appraised value they would say an appraisal must be performed first.

He and his co-conspirators, established a complex network of more than a dozen companies designed to convince owners who were interested in selling to purchase a $399 "appraisal" of their timeshare which they would reimburse at the time of closing.

They would call saying they represented a large corporate buyer called Swiss American Bank and that Swiss American simply needed an assessment of the property's value. The caller would suggest owners pick a company accredited by an independent multi-listing service then refer you to a purportedly independent service, Multi-State Listing Service ("MLS")-- a second boiler room, which would provide you with a list of three to four "independent" appraisal companies supposedly with personnel in the area of your timeshare.

Selecting one from the list you would then be called by a third boiler room which stated they were actually calling from that appraisal company. In this call, you were coaxed into providing your credit card number and then immediately billed for the appraisal.

These purportedly "independent" companies, spread out across the United States, produced reports which had virtually identical formats, the same standard language and often contained the same typos. Every one was opened for the sole purpose of executing this scheme and was run by friends, family or promoted telemarketers.

They used names such as Resort Condo International Appraisals, Inc., Resort Certified Appraisals, Inc., Resort Evaluations, Inc., Interval International Appraisals. and had locations in Mass., Rhode Island, Florida, Michigan, Nevada, Georgia, Louisiana, and Windsor, Ontario.

Resort Condo International (RCI) Appraisals was a multimillion-dollar international time-share-valuation business which shared office space with a used-car dealership. The owners of RCI Appraisals, a Hyannis couple who live less than a mile from Carquest, were raking in upwards of $80,000 a month by providing appraisals of time-share properties around the world, despite having no experience in real estate.

Roughly eight weeks later, they would mail you out a bogus two-page "appraisal" that falsely represented that your timeshare had been inspected. Netting them over $12 million, the reports were simply printed off a database at a total cost of roughly $25 each.

According to Michael Upton's lawyer, the couple will say Jill's father convinced them to open RCI Appraisals and they believed it to be an honest business. A warrant to search the ramshackle Carquest building yielded 30 boxes of documents, which led to seizures in Texas and Florida.

Over four years, only eleven of the more than 38,000 people who purchased appraisals actually closed on the sale of their timeshare. The vast majority never received an offer or received paltry offers far below the market value.

When timeshare owners pressed for answers, they were confronted with unreturned phone calls, answering machines, disconnected numbers or a litany of excuses for the delay in processing their paperwork.

All of the defendants are charged with multiple counts of mail and wire fraud, each of which carries a maximum penalty of five years' imprisonment and a $250,000 fine, as well as restitution.

Money laundering charges, each of which carry a maximum penalty of twenty years' imprisonment and a $500,000 fine were added because they wired over $7 million to accounts which used these funds to further promote the scheme by paying telemarketer commissions and operating expenses, such as rent, utilities, and the purchase of "lead lists" of potential sellers.

Case Update 10/22/02 (Boston) - Donald L. Gonczy, age 68, of Florida, was sentenced to 7 years' imprisonment, to be followed by 3 years of supervised release, for running a highly sophisticated, nationwide telemarketing fraud operation that victimized over 38,000 people out of $15.4 million.

The judge also imposed a fine of approximately $142,000, representing all of his assets held in his Austrian bank account and barred him from any employment involving sales.

Donald Gonczy, pleaded guilty after the first week of his trial in June 2002 and has been in federal custody since he was arrested in St. Maarten in January 2001.

Gonczy's son, Scott was sentenced to 3 years and 10 months' imprisonment, his daughter, JILL Gonczy Upton, who cooperated with the government, received a sentence of 3 months' community confinement, to be followed by 1 year and 3 months of home detention. Her husband, Michael Upton, was sentenced to 2 years' incarceration. Todd Gonczy, his oldest son, who pleaded guilty at the outset of this case and assisted in the prosecution of his father and siblings, received a sentence of 5 years' probation.

They all say they're broke. On his affidavit filed to obtain a court-appointed lawyer, Donald Gonczy claimed to have just $1,000 cash and no other holdings or property. He had been living, he said, on Social Security payments and dividends from an investment in the Bahamas — an offshore company authorities say he created to hide his money. At the deposition, the government claimed Gonczy moved $1.1 million to the Bahamas and at least $200,000 to a bank in Austria.

Peter Train and Buck Shelton, two unrelated participants, received sentences of 2 years and 3 years and 5 months' imprisonment respectively. Two other defendants, S. Joel Epstein and John Handel, were convicted following a four-week trial and will be sentenced later this fall. Epstein, whose sentencing is scheduled for October 29, 2002, was convicted of conspiracy, mail fraud, wire fraud and money laundering. Handel, 51, of Yarmouth, was convicted on five counts of mail fraud for his role in this scheme and will be sentenced on December 11, 2002.

In addition to the defendants who have already been convicted, one other individual, Roger Canzano, an attorney in Michigan, is facing trial in January 2003 on these charges. Two others who were indicted, Vincent Corey and Edward Loney, are fugitives.

According to the evidence presented at trial, Donald Gonczy, Joel Epstein, and their co-conspirators, established a complex network of more than a dozen companies designed to persuade timeshare owners who were interested in selling their timeshares to purchase a $399 "appraisal" of their timeshare.

The scheme passed timeshare owners through a series of boiler rooms to complete the fraud. First, the defendants established a number of purported "buying companies" based in Florida and Texas which contacted timeshare owners and made a host of misrepresentations, including that they would buy the person's timeshare if the owner obtained an appraisal and that they would reimburse the owner for the appraisal fee at the time of closing.

The buying companies falsely claimed that they received no fees from the appraisal companies and had no part in the appraisal process. Once the buying company persuaded the timeshare owner into selling the timeshare, the buying company referred the timeshare owner to a purportedly independent service, Multi-State Listing Service ("MLS"), which in fact was a second boiler room.

The timeshare owner would be told that the MLS would put the timeshare owner in touch with "independent and internationally recognized" appraisal companies. MLS then provided the timeshare owner with three "independent" appraisal companies supposedly with personnel in the area of that person's timeshare. Every one of these appraisal companies was phoney and established solely to execute this fraud scheme. The "appraisal" companies were run by Donald Gonczy's children, close friends, or former telemarketers from the boiler rooms.

Jill Gonczy Upton and her husband, Michael Upton, ran one of the appraisal companies, known as RCI Appraisals, located in Hyannis, Massachusetts. Scott Gonczy, another son, operated Interval International Appraisals ("IIA") in Providence, Rhode Island. Other "appraisal" companies were opened in Florida, Michigan, Nevada, Georgia, Louisiana, and Windsor, Ontario. At trial, the government proved that after speaking with an MLS representative, and selecting an appraisal company, the timeshare owner was next contacted by a third boiler room operation called the Appraisal Referral Center ("ARC").

The ARC telemarketers falsely represented that they were actually calling from the appraisal company the timeshare owner had selected. In this call, the timeshare owner was coaxed, through more misrepresentations, into providing his or her credit card number. At this point, the timeshare owner was then billed approximately $399 for the appraisal.

Eight weeks later, the appraisal companies mailed the timeshare owner a bogus two-page "appraisal" that falsely represented that the timeshare had been inspected as part of the appraisal process. The government proved at trial that these reports were simply printed off a database at a cost of just $7.50 to the appraisal company.

The established time-share-exchange company RCI (Resort Condominiums International) took issue with the name RCI Appraisals and sued to make the Uptons drop it. Then Interval International, another property-exchange business, challenged Scott Gonczy for naming his Providence company Interval International Appraisals. (The Providence business took another jolt when Scott was nabbed for soliciting minors over the Internet and jailed for two years.) As all this was happening, Michael and Jill Upton faced complaints from their credit card processing companies, which revoked their merchant accounts.

They weren't very good at eluding authorities though. When Donald traded in his Bentley for a BMW, he asked the dealer to deliver it to the Caribbean island of St. Maarten. Pam, meantime, leased a post office box in Pompano Beach and had their mail forwarded to High View, 54 Guana Bay Road, St. Maarten, Netherlands Antilles.

Experienced fugitives would have settled on the French side, St. Martin, since the French are more hesitant than the Dutch to extradite people to the United States. But Donald and Pam were right there on Guana Bay Road on January 30, 2001, when authorities arrived. Jill and Michael were also there, and after learning they, too, were facing indictments, they returned home to surrender.

John Handel signed roughly 10,000 fraudulent appraisals for RCI and IIA, and was paid $5 for each report he signed. He also signed several thousand reports using a fictitious name he created, James Rose.

The appraisal reports issued by these purportedly "independent" companies had virtually identical formats and standard language, and often contained the same typographical errors. The bank records at trial proved that the defendants sold $15,409,000 in fraudulent appraisals to approximately 38,000 timeshare owners located throughout the country.

The evidence at trial also established that Epstein and Vincent Corey, ran the financial operations of these enterprises, resulting in Epstein's money laundering convictions for using the proceeds of illegal activity to further a mail fraud and wire fraud scheme.

The vast majority of the more than 38,000 timeshare owners who purchased appraisals as part of this scheme either never received a purchase offer from the buying company or received "low-ball" offers that were 15% of the "appraised" value. When timeshare owners pressed the buying companies for answers, they were confronted with unreturned phone calls, answering machines, disconnected numbers or a litany of excuses for the delay in processing their paperwork.

Only 11 out of the 38,000 people over the course of the five years the scheme operated were able to sell their timeshares to the buying companies.

At their upcoming sentencings, Epstein and Handel each face maximum penalties of 5 years' imprisonment and a $250,000 fine on each mail fraud and wire fraud conviction, as well as Epstein's conspiracy conviction. In addition, Epstein faces maximum penalties of 20 years' imprisonment and a $500,000 fine on each of the 5 money laundering counts.

The case was investigated by the U.S. Postal Inspection Service and the Florida Department of Law Enforcement.

So, if you own a vacation timeshare, go for a company that offers to sell for a fee only after the timeshare is sold.

Timeshare Terrorism Tax

As far as getting out of contracts - that's a tough one.  You probably already know there is little resale value on a timeshare so that usually isn't an option.  A lot of the people I've talked to have been willing to lose their original investment if they could just stop paying the annual fees and walk away but the company won't let them.

Our friends at RHC just sent out a letter to their members - this year everyone is getting a "special assessment" in addition to their annual fees due to 9/11.

PT 10/26/02

Real Estate Liquidation Firms

Tens of thousands of frustrated property owners across the United States and Canada are getting sucked into an explosion of real estate “liquidation” firms. The liquidation firms, in exchange for an advance fee in the area of $250 to $1,000, promise to find buyers for un-salable property. With a barrage of sophisticated direct mail and telemarketing solicitations, these firms are telling weary property owners that the up-front charge is a marketing fee needed to cover the cost of promoting the properties on television, radio, a nationwide computer database, mass mailings, ad nauseum. Property owners are assured that their property will be marketed until sold!

The fact is, that in most cases, once the fee is collected, the firm is never heard from again. That is  called the “No-Pester” guarantee. Once you send them your money, we’ll guarantee they won’t pester you. It leaves the person still holding the property and the loss of hundreds of dollars. These land liquidation promotions have generated complaints in almost all US states and Canadian provinces. Further, a lot of these land liquidation schemes use assurances such as stating they are registered and bonded by state agencies, giving the false impression that they can also provide real estate brokerage services, even though they are not licensed to do so.

These liquidation scams are cruel because they exploit the desperation of property owners who want to sell a piece of land or a property, but have not been able to do so. The land liquidation firms use familiar abuse tactics to get the people to part with their money. Owners of raw land, timeshares, and trailer park lots are particularly susceptible.

These firms are under investigation all across the United States. In Texas, where a woman sent in a $388 check to a liquidation firm, she was told she would momentarily be receiving a contract in the mail. Of course the contract never arrived.

In Oregon, a man sent $495 via Federal Express to the liquidation firm so he could sell his timeshare. When a contract was sent to this man, he refused to sign it because the terms differed substantially from what was discussed on the phone solicitation. But the company refused to refund the sales fee. A recorded conversation between real estate liquidation sales persons in Idaho got one couple on the hook for a fee of $695 by stating: “At a price of $16,000, I am showing that if you keep it at that, I have got between 18 and 20 buyers registered in the computer that we can show it to today.”

In Arizona, Cease and Desist orders have been issued against seven out-of-state and six in-state real estate liquidation firms. In Alabama,  one man sent in $250 in response to someone offering to sell his property for seven times its actual market value.

Let’s face it, this is a typical scheme: Empty promises, sophisticated outreach to potential victims, and demand for advance fee, followed by unresponsiveness. But in these particular cases, the author does not feel particularly charitable toward most of the victims. As in any fraud, you need a perpetrator and a victim. Both of them must be willing participants. In this, as in almost every other case, the perpetrator has hit the greed (and admittedly in some cases the desperation, for which we do feel sympathy) factor on the victim. The victims think they are going to put something over on someone else and unload a worthless piece of real estate.

Some of the companies involved that have received cease and desist orders are:

ADNET Inc., DBA the Advertising Network (Texas);
American Land Liquidators, Inc. (Texas);
Resort Properties Marketing, AKA Resort Nationwide Land Liquidators, AKA Nationwide Liquidation Services Inc., (Texas);
Prime Property Locators, Inc.(Missouri);
Properties Marketing (Texas);
TRY-VIEW Inc.(Texas);
Universal Land Liquidators Inc., AKA Universal Liquidators, Inc., (Texas).

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