Taken to the cleaners: A bank gets burned

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

Good morning. One of the few major real estate fraud prosecutions in the region is the federal prosecution of an alleged fraud ring in Beverly Hills that operated from 2000 to 2003.

Today the L.A. Times takes a second look at the case, and it doesn’t reflect well on Lehman Brothers, which is the alleged victim of a series of fraudulent transactions, appraisals and loans.

Not that Lehman Brothers did anything wrong. But the bank seemed awfully eager to lend, and awfully clueless: ‘Kathy Moore’s loan application sailed through the mortgage desk at Lehman Bros. Bank, and little wonder. With sterling credit, deep pockets and two appraisals pegging the value of the Benedict Canyon house she wanted to buy at $2.5 million, she seemed a perfect fit for a $1.47-million loan. Had the bankers taken a closer look, they might have discovered that the home was worth just $775,000 and that Moore’s borrowing power existed only on paper.’

Another house in Brentwood sold for $759,000 in November 2000, and just two months later sold again for $2.2 million. Lehman was the lender on the second sale.

In all, Lehman says it made loans totalling $142 million to the same cast of characters in Beverly Hills. The bank isn’t commenting as the various cases wind their way through the courts. ‘I think the bankers deserve what they got. They were incompetent,’ said real estate investor Max Baril. ‘You have to do more than just keep opening the mail and depositing the checks.’

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.