Frauds Continue in San Felipe

Earlier this year, Fulano wrote a three-part blog on the massive real estate frauds in San Felipe. Those blogs can be read here, here, and here.

Zeta, the Tijuana magazine, did a follow-up story on the San Felipe real estate frauds. Fulano has translated some if it below:

Corrupción en gobierno, Promotores sin ética
 [Government corruption, Unethical promoters]

That sums up the source of the problem of hundreds of Americans who bought lots, houses, and condominiums in San Felipe, Baja California, and the developers took their money and not delivered the property. Of the 54 developments in the area, only 39 have complied with all government requirements to legally sell the properties, but the Mexican government does not stop the rest from selling even though they are aware of the allegations of fraud. The defrauded foreigners have hired lobbyists in Washington, DC to represent them via media campaigns, talks with Congressmen and U.S. authorities to pressure the Mexican government to solve their problems.

Anne and her husband arrived from North Carolina, came to know San Felipe and chose it as the place they wanted to live. First they bought a property and then sold it six years ago and bought a lot in Playa del Rancho Caracol, part of El Dorado Ranch, through a Promise of Sale Agreement and paid $112,500, and were promised infrastructure, all legal permits and a clubhouse. Today they only have a piece of sand.

Welcome to San Felipe

The American has hired several lawyers to pursue their case, her husband died during the litigation. The lawsuits have not gotten her money back nor have they delivered the house they dreamed of.

According to the head of Urban Management of the City of Mexicali, of the 98 developments operating irregularly in San Felipe, 54 have since been regularized and 39 are in the process of doing so “under a program scheduled to be completed in 6 months”, although there are still five developments that are not in the process of being regularized.

According to one of the organizers of the Baja Property Owners Cooperative, there are dozens of cases of foreigners who have been defrauded, and due to what they consider a lack of response from the Mexican authorities, have warned that they will take it to the next level, not in Mexico but in the United States, where they will lobby Congress to demand the necessary support at the federal level in both countries.

One of them, who insisted on anonymity for fear of retaliation, stated his point of view of the problem:

“The combination of government corruption and a community of unethical developers has created a continuous environment that makes buying land in San Felipe a more dangerous situation for foreigners than the drug cartel violence…” .


Executives of San Felipe’s El Dorado Ranch Charged With Fraud

Link to article in Spanish.

Summarized from the article in the local San Felipe internet newspaper Crisoldesanfelipe:

Pat Butler and Jesús Olmos, executives of Rancho El Dorado, along with their lawyer, Cuauhtémoc Sandoval, have been charged with criminal fraud in relation to a legal conflict regarding the property known as Playa Blanca. Apparently there is a court ruling that an Aarón Sañudo and Marcos García are the proper owners of Playa Blanca.

Rancho El Dorado is accused of supposedly purchasing the Playa Blanca property using the legal description and plans of a similar property in Ensenada.

On March 22, 2011, Aarón Sañudo and Marcos García tried to enter their property at Playa Blanca and were stopped by people associated with Pat Butler, and as a result the municipal police were called.

The editor of crisoldesanfelipe also has a video editorial on this whole land mess in San Felipe that is over 12 minutes long. It is titled “Gringo vs. Gringo.” He basically says the lion’s share of the real estate problems in San Felipe are from gringos committing fraud and bribing corrupt politicians. While he does say that corrupt Mexican politicians are also involved, he goes on to say that “gringo-on-gringo” fraud and swindling is the major reason for the poor view people have of San Felipe.


Multi-Million Dollar Fraud in San Felipe – Part III

This is Part III, which is a posting by the Americans swindled by the San Felipe frauds showing their take on the whole situation.]

Posted July 6, 2010

Profeco, the Mexican consumer affairs have had a couple of meetings in San Felipe over the last month and below is a report of the last meetings. We are posting this report in hopes of getting people to start an online open discussion to increase community awareness.

Profeco was 25 minutes late and Bill Casey used that time to tell the 45 people in attendance that all Mexicali government officials (Mayor and on down) are the source of all their problems. He stated that the high officials are great friends with the developers that are in most trouble and a phone call from the developer causes actions and investigations to be delayed by months to years. Casey was particularly hating on Dept. of Urbanization. Casey did mention that there had been two investigations in San Felipe so far, the Marina and Playa de Oro (PDO). He said that they found that Marina was in violation but as for PDO Casey put his hands over his head and stated something like “I can’t believe this”.

Profeco arrived and they started the meeting. Their manager brought an assistant to translate for him. It was explained that Sara (the previous Profeco contact) had been replaced by her manager. There was a lot of discontent about that replacement. It was expressed that Sara doing great job and moving the agenda along and made Profeco look good. Some believe she may have been getting too close and someone made a call, which had her replaced.

Manager started explaining the process that they would use to work with the developers. They would meet with the developer and work out a plan to get the situation fixed. He did state that they have limited resources and that they also cover Mexicali where there are huge problems.

He never got the chance to finish his explanation. Many people were interrupting him with specific questions about their situations. The manager was stunned and started talking about process and thus talking in circles.

A fairly reasonable man was representing about 10 Marina people who have not had power or water for 5 years. He wanted to know the status on the complaint that he had filed. Manager stated that Marina and Hacienda were the top 2 troubled developments that they were going to work on first. (Magdalines and Casa Blanca had been determined to be highest priority last time Sara was here.) Manager stated that they were meeting with Marina owner next week in Mexicali. After tons of pressure and heated questions and demands from the audience he said that they would probably give Marina till the end of the year to provide the promised amenities. If the fixes don’t happen there would be a fine/bond that would need to be posted that the developer would get back when the work was done. Audience was demanding weekly progress reports. At one point the Manger screwed up and seemed to indicate that the Marina Developer said that he would fix his water/power issues but demanded that Profeco investigate and get work out plans with all the other troubled developments first. The crowd went wild. Manager jumped on a bike to back pedal.

Part of a February, 2009 audit report by state auditor of Baja California pointing out that Grupo Munoz Lira,
developer of Las Magdalenas, owes the state 18,833,304 pesos on land purchased and has failed to complete
the construction agreement on 87 homes in Mexicali.

Manager said that he would send out information to Bill Casey, but the audience wanted the information to be sent out to the representatives of each development that were being worked with.

Several people tried to shout down Casey because he was not letting Profeco present their program and was being disrespectful. Casey turned his attention on them and they walked out.

There were several calls from the audience for people to call newspapers up north, and a couple of newspapers were stated to be running investigations. An owner from Las Magdalenas was one of those calling for this. It was stated that it might hurt sales/tourism but others stated there was no sales/tourism anyway so who cares? No thought as to all the local Mexican businesses that would be hurt by an additional barrage of bad news up north.

They went back to the replacement of Sara and basically accused Profeco of replacing her because she was starting to get things moving and getting things resolved. It was stated that she understood their problems and that they had come to trust her.

Manager said that they would be having future meetings regarding individual developments so that there weren’t so many issues and that they could focus on them.

The question was asked if Profeco handled cases of both home sales and lot only sales. The Manager answered both. A couple wanted to get that answer clarified. Seems to me they would be involved with both. Basically anything in the consumer area.

Manager responded to additional accusations that friendships and phone calls to high officials caused investigations to be cancelled by stating that he had developer friends in Mexicali that he had fined in order for them to finish their amenities. Both the Manager and his assistant were very poorly equipped language wise to hand this group. They were so busy translating in their heads that they had no time to respond before they were hit from another direction. It will be fascinating to see how the Mexican Manager’s personality will react to this humiliation at the hands of a bunch of Gringos.

Meeting broke up after this and a few gathered around the officials and started verbally beating on them.

There were a couple of rational voices in the crowd, and there were a lot of rightfully pissed off people that had paid for a home or a lot with promised power/water/title and had nothing after several years of lawyers talking with their developer. The lady representing Hacienda stated that Profeco had told them in a meeting last week that they would use Profeco money to sue the developer if it doesn’t get fixed. The mood seemed to be that they had suffered so much for so long that they do not care anymore who else gets hurt while they get fixed even if it is the local Mexicans from a further drop in tourism.

There are people out there with no power/water/title, homes with unsafe/unsanitary living conditions for their children in some cases (Mexicali). However, there were others in the audience that have power/water/title and they want Profeco to take their limited resources of time and manpower and spend them on their issues.


Multi-Million Dollar Fraud in San Felipe – Part II

[The following is Part II of Fulano’s translation of a long article in Zeta, the Tijuana weekly news magazine. Part III, which is a posting by the Americans swindled by the San Felipe frauds showing their take on the whole situation, will appear tomorrow day.]

A lot of dollars

Among the almost 250 people defrauded are Canadians, Czechs, Germans, English, Irish, Italian, Japanese, Lebanese and of course, Americans and Mexicans. It is estimated that they have been defrauded of around $100 million, and a list has been developed of about 20 developments, among them Baja Palms, Desert Lakes, El Dorado Ranch, Fraccionamiento del Mar, La Hacienda, Las Palmas, Lot 10 (Francisco Villa ) Playa de Oro, San Felipe Marina (Crystal Beach Condo Towers) and Tesoro del Mar.

But there is a list of six developments which highlight the irregularities, among them Casablanca, developed by the Zavala family; Cortez Club, developed by Fernandez Aguilar Kuttler, Hacienda Beach, by Luis Carlos Nápoles; Las Magdalenas, the Muñoz Lira Group; Playa Caracol , by Clemente Guillén and Vista Bella by Manuel Pérez Espinoza.


“There have been a combination of various things and in the final accounting as a consequence, these brought on a series of irregularities, problems and conflicts that lend themselves easily to fraud,” explains the head of the Department ofUrban Management of Mexicali, Juan Manuel Herrera de Leon.

The architect believes that San Felipe has been forgotten and neglected by the authorities, and as an example mentioned that there are a lot of properties where the legal status is unknown.

And in San Felipe, apart from the sun, land and sea there are also ejidos, like Ejido Plan Agrario Nacional, the Legal Fund and the Federal Maritime Terrestrial Zone.

Herrera explained that despite the end of the process of the so-called agrarian reform, involving the regularization of 104 million hectares throughout the country, problems of land ownership persist in some areas, in addition to the practices of “vivales” [hucksters] taking advantage of foreigners seeking a place to relax. “The omissions of the authorities is the lack of attention to see just precisely is the legal status of the land,” said the municipal official.

Herrera states that they began to issue documents on an interim basis, which were used as proof of legal possession.

“To grant a land use requires a number of conditions; when someone requests a specific use permit we solicit registration documents or records of ownership, if there are no such documents we cannot give any permission. The proof of that is that we have been presented with a number of proposed subdivisions, approximately 92 in San Felipe, and of these 92, 46 are illegal because they lack documentation of ownership. Until we have the documents, we can not approve the development or land use, “says Herrera de Leon.

As for Herrera, he believes “authorities have not acted as they should,” which led to the developments going ahead, the land subdivided and sold. He estimated that these practices increased during the last decade, especially during the last three years.

“In the past three years this situation was completely neglected, as a consequence problems proliferated  and conflicts proliferated,” said the architect Herrera, who says he has instructions from Mexicali Mayor Francisco Pérez Tejada to address the problems of foreigners defrauded in San Felipe.

“We already have the analysis and studies from the legal point of view, we will determine where our role was and where it was not from the point of urban development, we will dictate the appropriate measures to punish, to suspend, to stop and to point out who is authorized and has legal certainty to be subdividing. We are going to upload this onto the web portal page of the city, we will publish what developments are illegal and can not be offered for sale or which cannot be regularized because their land title is still uncertain.”

Herrera said that those affected can send an official document to the City which specifies the situation — in terms of procedures and irregular areas — these may serve to make an appearance before a judicial authority.

The official explained that of these 92 subdivisions, there are 37 that are already regularized, which also are formally reported, and said that he has held two meetings with the victims, one in Mexicali and one in San Felipe, and there is another scheduled in San Felipe in two weeks.

“We’re going to give an answer and solution to each of the cases we are considering, we will tell you where you should go, where to head,” added the municipal official.

As for PROFECO, the Mexicali sub-delegate Carlos Guillen Armenta explained that February of last year they were told by a tourist official of the problems foreigners living in San Felipe were having. He says he began a series of meetings to understand the problems and explained that many of the complaints under the PROFECO Act, are prescribed to expire within one year. Working groups were formed, as it is an issue that involves several agencies, such as Urban Control, the Public Registrar and ministry of Economic Development.

“We found that not all developers had permits to sell, and they were selling, there was something very wrong,” explains Guillen Armenta.

The federal official says that a substantial responsibility of addressing the problem has to do with the city of Mexicali, but now with the change of government the topic was “in process.” He says there are good expectations from the new municipal administration, especially to prevent further selling without permission.

Guillen Armenta explains that his office has about 50 complaints, although clearly there are more cases, and therefore he sent people to San Felipe to verify the data and initiated an administrative proceeding that will result in a fine. Also, they are in the process of placing warning signs and closing notices, which should be good news for the 200 affected by fraud. The bad news is that PROFECO has little staff and budget and the trip to San Felipe could not be until March.

“Until mexico changes the laws and system to protect the gringos from crooked developers, more gringos are going to return home,” stated Pam Deininger on the Facebook website that hosts the complaints of hundreds of those affected, who maintain hopes of resolving their problems.

Link to Facebook page.


Multi-Million Dollar Fraud in San Felipe – Part I

[The following is Part I of Fulano’s translation of a long article in Zeta, the Tijuana weekly news magazine. Part II is the second half of the Zeta article, which will follow tomorrow. Part III, which is a posting by the Americans swindled by the San Felipe frauds showing their take on the whole situation, will appear the following day.]

Paradise became hell for some 300 foreign buyers.

Ambition, fraud and corruption by urban developers who took advantage of the expectations of hundreds of foreigners seeking a place to rest by the sea. They paid millions of dollars for spacious and attractive places in a paradise, but the offer was only a promise and now are learning about the intricate Mexican reality, that which refuses to change. Those who have been defrauded have formed a Homeowners Association, The Baja Property Owners Cooperative, but the Mexican authorities cannot resolve the problems.

By Sergio Haro Cordero

Attracted by the natural wealth of the Sea of Cortez, the peacefulness of the beaches, the attractive geography and impressive serenity of the area, hundreds of foreigners invested millions of dollars to buy land, houses in subdivisions and attractive condominiums in the port of San Felipe with the idea of having a place to relax and rest beside the sea, close to paradise in the autumn of their lives. But what they find is a Hell of corruption and anomalies that they cannot quite understand.

The attractive resorts that were promised became wilderness areas, and the promise of exclusive country subdivisions with all services, including in some cases a golf course, pool, clubhouse, security, turned into half-built subdivisions, without water, sewer and electricity, with roads of sand and difficult access. In other cases they were even worse, where they were offered a luxurious housing complex, they now appear unfinished and abandoned, only a half built building shell.

There are about 300 cases of this mega-fraud where those sucked dry are Americans, Canadians, Italians, British and even Mexicans that have paid amounts totaling several millions of dollars, and today they do not know where their money is.

And throughout all this ordeal, they have not found an answer with the Mexican authorities. In groups, they have sought out lawyers to bring civil or criminal complaints, others have gone to the Office of Consumer Affairs or the Ministry of Tourism, or the City of Mexicali.

In PROFECO alone there are about 50 cases awaiting execution, and although the unit has continued processing, they cannot keep up due to shortages of staff and resources. According to their supervisor, Carlos Guillen Armenta, they plan to carry out an operation in San Felipe that could result in the installation of seals to prevent further selling of illegal land parcels and fine the subdividers, but the same official also explained that it could not be until March because today they have no budget for the operation.

According to the new head of Urban Management for the City of Mexicali, Juan Manuel Herrera de Leon, of the 92 subdivisions that exist in San Felipe, 46 of them operate illegally and only 37 are now formalized, and were “delivered” to the City, which implies that they have municipal services such as garbage collection and security.

“In a meeting with buyers people came from England,” says Herrera de Leon. Among  those defrauded were top executives of multinational companies who came from Boston or New York, but also retired people, professionals who invested their savings looking for a quiet place at this stage of their lives.

“The work of the American Embassy is to build good relations with Mexico, not to fight for the rights of Americans in Mexico,” ironically says Bill Casey, a high technology specialist who worked 20 years for companies in Silicon Valley, near San Francisco, and who nine years ago chose San Felipe as the ideal place to live. He is now part those who were defrauded and who have organized a homeowners association, the Baja Property Owners Cooperative, a group of about 250, and desperately hoping the Mexican authorities will resolve their problems.

“Where is our money?” That is the question that most of them ask, meanwhile still not understanding what is happening with the Mexican government.

The subdividers have disappeared. Phone numbers and addresses in Mexicali and San Felipe on websites or business cards and advertising on the banners either do not exist or are “temporarily suspended”.

A piece of heaven, outside your door

One of many examples is the Casablanca project which, according to its website, is a housing development designed in the Mediterranean style.

“The idea came from the details you see in the romantic Greek islands like Santorini and Mykonos…take the beauty of those magical places and the result is Casablanca”, where they say they have combined the natural advantages of the terrain with a clean architecture, user-friendly spaces and planned, well distributed streets. The project included a clubhouse and a restaurant facing the sea.

Now Casablanca is faced with seven complaints before PROFECO, since it is just a barren piece of land without buildings, only just leveled. Of course, there were buyers who paid about $300,000, deceived by the developer, Mario Zavala. In response to an email sent by one of the buyers in December 2009, demanding the return of their money, Zavala replied:

“The reason why we have not returned your money is very simple, WE HAVE NO MONEY TO RETURN TO YOU (capitalized in the original), at least during these difficult times. We originally thought we could do it when we had signed agreements with lenders… “

Mario Zavala

The purchase prosess included the signing of a Pledge of Trust between the client and Casablanca Developments SA de CV, represented by Mario Zavala Cardenas, and according to the boilerplate in the documents, in 2006 the company acquired 242 million square meters of land in San Felipe, “which has pending before the municipal authority authorization to subdivide and develop the land to carry out urban development.”

The document, a copy of which is in the possession of ZETA, only includes the sale of the lot for about $60,000 and the developer affirms that the land will have a water distribution network, sewage system, finishings and walkways, paved streets, electricity and street lighting. The document was signed before the Notary Public number 5 on December 20, 2007.

According to official data at the Mexicali  Urban Management Department, as of now Casablanca is technically “under analysis” in the approval process (F3) and lacks approval by the city of Mexicali.

According to information displayed on the worn canvas banner installed at the entrance of what would be a luxury subdivision, Casablanca Developments has an office in Mexicali supposedly located in Lázaro Cárdenas 1358, which is nonexistent.

Another similar case is the Las Magdalenas project of the Muñoz Lira Group, which has accumulated 16 complaints with PROFECO.

Among other actions, those who have been defrauded opened up a Facebook space to gather testimonial evidence. On the Facebook space, there are more illustrative stories. Like that of Ben Burneo, who along with his wife gave a 20 percent down payment in 2005 for a space in that complex, located at the entrance to San Felipe.

“We were promised construction according to U.S. codes, a fideicomiso and title, as well as electricity, water, sewers and paved roads. As of July 28, 2010 we have nothing,” says the American, who explains he won his lawsuit before the Supreme Court in Mexicali, but the developer had no money to pay him. He has also appeared before PROFECO, but publicly wonders whether they could be of help in this matter.

“San Felipe is a hot bed for this type of fraud. So far there are about 17 projects involved, over 170 families involved …. “

They show a glimmer of hope because they believe that the judicial system in Mexico has changed, with the North American Free Trade Agreement they will be treated the same as Mexicans during their stay in Mexico and consider that the Mexican government has done a good job combating the drug cartels in Mexico, so perhaps they could do something to solve this problem in Baja (California).

Another defrauded person reports the same situation — no home, no roads, no titles, but warns that he and his wife have been threatened with death by one of the developers (Muñoz Lira) and their employees.

At Las Magdalenas there are houses built, but without the promised services, they use water from cisterns and have no electricity. The roads are dirt and there are no signs.

According to some reports, in the absence of owners, the developers have entered their houses and taken refrigerators, appliances, washing machines, to be installed in other houses to show potential buyers. According to the defrauded group, just in Las Magdalenas alone, there are over 2 million pesos ($160,000) of back property tax payments due.

In the case of Las Magdalenas, the Muñoz Lira Group developers produced a document they called the Home Reservation Agreement and in that document the developers say they are the legal owners of lots 63 and 64 located in the northeast part of San Felipe, where they set up the project. Each lot (with a home constructed thereon) was sold for $199,000. The agreement included the signing of a document later known as a “Promise of Sale.”

According to official documents, the Muñoz Lira Group S de RL de CV was established in Mexicali but notarized and recorded in Reynosa, Tamaulipas in December 2005. They also executed with the foreigners a “Pledge Agreement for Allocation Trust.”

According to official data from the Mexicali Urban Management Department, Las Magdalenas does not have permission for Transfer of Title (F4) because they have not fully completed the infrastructure improvements.

Part II continues mañana…


American Residents of Rosarito Complain of Multi-Million Dollar Real Estate Fraud

[Translated by Fulano.]

Monica Gutierrez Sambrano, attorney for Americans in Rosarito

U.S. residents in Rosarito who purchased in the La Esmeralda condominium project reported a fraud in excess of $ 4 million as the developer will not deliver the property.

This was announced by Monica Gutierrez Sambrano, legal representative of a group of four people, who will proceed with prosecution, and who went to Playas de Rosarito City Hall to file a complaint, 

She said that for these people alone, the fraud amounts to $2 million, however there are five others not involved in this lawsuit who are also suing, as such the damages could increase.

For his part Antonio Ruiz Cuevas, manager of the office of foreign resident care in the city of Rosarito, said that they can help handle these requests and support the plaintiffs so that they proceed properly.

He is calling on all the people who are affected to come to the city facilities, it is unfortunately not the only case they have received, although this is one of the largest.

Link to article in Spanish.


From Another Mexico Message Board

Baja Ripoff

“Like all of you, we went to Mexico to retire. Our first mistake was going to a fair in Yuba city and going to El Dorado Ranch. We went down to San Felipe and bought a half acre on the mountain side with no electricity. Then we bought at Mission las Sahuaros. This development is the best. Got a fideicomsco has all utitilies and all amendments to it. Got taken by the builder Varlea, who is now in jail for Fraud in Arizona.

Then the nightmare began. Bought at Las Magdalenas, again believing in the dream. We bought the front lot in Dec. 05. The house was to be built by Ildefonso Munoz by April 06. Of course, that didn’t happen. We lived on the property when Munoz did not build our house, at his expense. While there, we saw and took pictures of houses that were supposed to be built by US codes. Of course, that didn’t happen.

While there:

  • We were threatened with a slander suit by a homeowner who was hired by Munoz. 
  • We won all the way to the supreme court. 
  • Power was turned off while my husband was using his breathing machine because we did not pay $500 for the electricity, which according to Munoz was free until our house was done. 
  • We were given 1 week to move from the model house. We hired a mover to move on Friday since we had until Saturday. Thursday, Lupita and I went to pack up and here are 2 employees of Munoz destroying our furniture and property. They were put in jail. They stated Munoz put them up to it. He is still free while the workers were in jail. 
  • We were threatened by Munoz and his bodyguards. Our lawyer, told us to hide and change our car as Munoz told people to find us and the guards were to take us out. 
  • They had already threatened our lawyer and the lady from the court. 
  • Even though we have won, we have not received anything from the San Felipe courts. The criminal cases are still up in the air.

    We have since moved back home. We have left a lot of good friends and you guys now who you are. One thing I have learnt from the experience, Do not speak freely as you can be sued on the criminal side for slander, true or not true. You are guilty until you are proven innocent. As they say, Screwed, Blued and Tatooed. Thanks for listening.”