Capital Flight

Since 2011, the Detroit Police and Fire Retirement System has appointed four receivers to collect on a $10-million unpaid loan to repair and sell homes to low-income buyers. After discovering an elaborate Ponzi scheme and filing multiple lawsuits against the three debtors, one partner committed suicide while the other two fled and are thought to be in Panama.


Published:

(page 2 of 7)

The fund won judgments against the partners in courts in Miami and Wayne County for amounts that now nearly double the original loan. The trouble is, George and Teresa Kastanes and the more than 17 shell companies they created declared bankruptcy and have no visible assets.

Since 2011, the pension fund, through its lawyer, Marie T. Racine, principal of Racine and Associates in Detroit, has gone through three court-appointed receivers and is now working with a fourth trying to recover some value from the $10 million it lost. The failed attempt to sell the homes on eBay was made by the latest receiver, David Findling, managing partner of The Findling Law Firm in Royal Oak, who was appointed in October 2014 by Wayne County Circuit Court Judge John H. Gillis Jr., at the request of Racine.

Ponzi Scheme

The agent for the properties, Darin McLeskey, says the Internet auction was a “Hail-Mary” effort by Findling to locate buyers before the houses were lost to the county. “It was a last-ditch effort to try and sell some of the houses before Wayne County foreclosed on them,” says McLeskey, a real estate agent at The Loft Warehouse in Detroit. “Some months ago our office looked at them and we figured 10 of the houses could be worth more than the back taxes (owed on them). But since then, the 18 percent interest rate on the back taxes made them go upside down.”

McLeskey says he’s sympathetic to the nearly impossible hurdles Findling faces in trying to get his arms around 1,400 distressed properties in Detroit. He learned firsthand of the problems when he tried to track ownership of a house listed as owned by one of 17 subsidiaries of the defunct Paramount holdings. 

“I know pretty well how to do this, and it took me a month to track down the owner of just this one property,” he says.

While it appears that most of the properties have been lost to foreclosure or abandoned, other than a status report in March by Findling of his preliminary findings — which city sources say showed Paramount’s investment records in disarray — there has been no public accounting of the doomed pension fund investment. Findling did not respond to phone calls for comment for this story.

In fact, none of his predecessors had any success corralling the failed investment. The first receiver, Steven Smith, quit after only a few days due to work conflicts.

The second receiver, James McTevia, founder of McTevia and Associates, a turnaround management and financial consulting firm in Bingham Firms, says he advised the police and fire fund trustees to give it up after nine months, having received little cooperation from the Kastanes. According to McTevia he didn’t get records he asked for. Meanwhile, an FBI-trained expert discovered that 30,000 files in the Kastanes’ computers had been destroyed.

Edit Module
Edit Module Edit Module
Edit ModuleShow Tags

Related Articles

Medical Monopoly

Group Purchasing Organizations are charged with saving hospitals money, but special carve-outs from Congress, a closed and secretive marketplace, and the ability to collect fees and pay rebates all serve to drive up costs for patients.

2018 Powered by Women

From reader nominations, DBusiness selected eight professional women who are driving growth in Michigan, the nation, and the world.

Rising to the Top

After a long ascent, last year Domino’s in Ann Arbor Township became the largest pizza company in the world. Now all eyes are on the CEO transition from Patrick Doyle to Richard Allison.

Change Agent

As the automotive and technology sectors stand at the precipice of a brave new world of autonomous and connected vehicles, Mary Barra, chairman and CEO of General Motors Co., won’t allow the automaker to take a back seat to anyone.

Post-Op

After the historic merger of Beaumont, Oakwood, and Botsford hospitals, John Fox, CEO of the new Beaumont Health, is eyeing growth across the region, developing technology to improve patient outcomes, and embracing transparency — even if it requires admitting mistakes.
Edit ModuleShow Tags

Most Popular

  1. Dearborn’s Ford Motor Co. to Host Winter Festival at Michigan Central Station
    Ford Motor Co. in Dearborn will host a 10-day Winter Festival in front of its recently purchased...
  2. Ford Unveils Redesigned, More-powerful 2020 Explorer SUV
    Ford Motor Co. Wednesday introduced its all-new 2020 Explorer — a complete redesign of...
  3. Economic Development Arm Detroit Regional Partnership Launches
    The Detroit Regional Partnership today announced its launch. The organization is dedicated to...
  4. The Historic Sherbrooke in Detroit’s Midtown Being Converted into 14 Condominiums
    Detroit’s Midtown district will see the conversion of a historic residential building, The...
  5. Oliver Thomas in Birmingham Wins Lawsuit Over Diamond Quilted Handbags
    Oliver Thomas in Birmingham, which in 2017 launched a line of handbags and accessories, has...
  6. Madison Heights’ Greater Detroit Chapter of the Association of Fundraising Professionals Names 2019 Board Officers, Directors
    Madison Heights’ Greater Detroit Chapter of the Association of Fundraising Professionals (AFP)...