[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… “
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…