Attorney General's News Release

August 4, 2006

Jackson County victims in land tax sale scams — some elderly or ill — lost at least $375,000, Nixon says

Kansas City, Mo. — More than 50 people who had property sold on the steps of the Jackson County courthouse in land tax sales were deceived into signing papers that resulted in them being paid pennies on the dollar for the excess proceeds from the sales, Attorney General Jay Nixon is alleging in four lawsuits filed in Kansas City. The victims — some of whom are elderly or ill — lost at least $375,000 total, Nixon said, with one victim receiving only $500 for signing over the rights to seek proceeds of more than $37,000.

Nixon is asking the court to stop three Missouri residents and two Kansas residents and their businesses from making misrepresentations or failing to tell consumers critical information in order to defraud them in connection with the land tax sales. The following defendants — not affiliated with each other — are facing lawsuits:

• Edward Pendleton of Kansas City and his business, Equity Recovery Co., 1819 Vine, Kansas City;
• Gregg A. Kugler and Ronald J. Blum, both of Kansas City, and their business, re Vitalized, 445 W. 58th Terrace, Kansas City;
• Cyrus D. Contractor of Lenexa, Kan., and his businesses, National Recovery Title and Property Clearing House, 14904 W. 87th St., Suite 112, Lenexa; and
• Victor W. Kearns Jr. of Shawnee, Kan., and his business, Land Title Services, 6552 Maurer Road, Shawnee.

“The victims in these cases don't realize what they're signing away,” Nixon said. “The defendants have taken advantage of that confusion and purposely don't tell the consumers they may be entitled to the excess proceeds. We're going to court to put a stop to these practices and to recover consumers' money.”

Land tax sales are used in Missouri to satisfy delinquent taxes on real estate and, in many counties, take place on the courthouse steps after notices are posted in local newspapers. In Jackson County, such sales take place in Independence and downtown Kansas City. Proceeds of these foreclosure sales are first used to pay the delinquent tax bills and the costs of holding the sales. The circuit court then determines how the excess proceeds will be distributed; parties that want to apply and receive excess proceeds must submit a form for the court's consideration. Unclaimed proceeds go back to the state after two years.

Nixon said the defendants used misrepresentations, deception and omission of facts to persuade the consumers that the defendants will help them get their homes back or that the defendants need to clear the property title. Some victims were led to believe the defendants were interested in purchasing the property.

The victims would receive small amounts — typically from $100 to $500 — in exchange for signing over assignment of rights, warranty deeds or quit claim deeds that enabled the defendants to seek thousands of dollars in excess proceeds. While the court has rejected some of the applications for proceeds from the defendants, other claims have been paid with the defendants often receiving proceeds of $10,000 to $20,000 or even more, Nixon said.

The Attorney General is seeking temporary restraining orders because the next land tax sale in Independence is scheduled for 10 a.m. on Aug. 7 and the next land tax sale in downtown Kansas City is scheduled for 10 a.m. on Aug. 14.

Nixon's lawsuits ask the Jackson County Circuit Court to order the defendants to permanently cease any and all acts or practices which violate Missouri's laws in connection with the land tax sales, and to pay full restitution to consumers who lost money as a result of the violations. Nixon also is seeking appropriate penalties and costs from the defendants.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818