Atty Gen wants to talk to you...now what?
As a lawyer (now retarded..no,no, that's RETIRED! from active practice), I'm constantly amazed and dismayed at the posts I see about REI's who get a letter from some state's AG and immediately respond and start jumping through hoops for the AG.
As any lawyer who's ever represented anybody in a criminal situation would tell you, this is a dead-wrong thing to do, and a very dangerous reaction.
First of all, every reader on this board is making every effort to NOT do RE in the old way, with either all cash, or by assumption of big debt, etc.
This makes lots of government regulatory agencies very nervous (maybe justifiable, but certainly true) and all such "gummint reg'lators" make every effort to cram all us REIs into some mold of their own limited vision...and to look with deep suspicion on those deals which fall (NOT!) within those strait-jackets that they do understand and comprehend.
So it's increasingly common for one or the other of us to get "the letter" from some AG, inviting/demanding that we immediately call and make an appointment to go in and give a statement (confession is what they want!) as to just what we're up to, all the details of our every such RE deal, etc..
OK, so what should our reaction be with such a summons?
Well, think about the job description of the AG & its staff is. Aren't they just about the same as the DA's office? On another level?
Isn't their job to investigate & PROSECUTE criminals in their respective states?
Not much different from a city/county/state/federal detective is it?
What should any prudent person do if invited to step into the patrol car and start giving a statement? About that person't activities, knowledge, etc.?
Answer is clear to any lawyer who's ever dealt with police, detectives, gvmt. investigators, etc.: DON'T DO IT! You've maybe got a little something to be gained from such cooperation, but a LOT to possibly lose.
As the 5th Amendment to our wonderful Constitution clearly states, and it applies equally to you, me, any other US citizen:
We have the right to remain silent and we're not obligated to co-operate with such cops or agents, and it's our absolute right to refuse to do so.
But, you object, it's our duty to cooperate, and help those folks to understand what we're doing!
Trust me. I'll guarantee that probably 90% of us, who aren't actively trying to hide some criminal act or transgression, feel this same way, and a smart cop takes advantage of this natural "good citizen" attitude.
As any long time or much experienced detective will tell you, most of the crimes they solve are solved because the perpetrator could not STAND to remain silent and felt such an urge to clear his conscience or tell about his evil deeds, that sooner or later he voluntarily confesses. Frequently HORRIBLE crimes, even carrying death sentences! Confessed to!
Often these confessions come years later, after the police have given up all hope of ever solving whatever crime was committed. No other evidence existed, and often, the police did not even have a suspect identified!
Wait a minute! What does all this have to do with the AG's simple request that I go in and fully disclose what I've been doing?
Well, think now- why are they wanting YOU or ME to go in and chat with them?
They have a COMPLAINT about us! They've already got a file going, on a probable (in their minds) criminal violation that we've committed against some other citizen, who was, of course, totally innocent, gullible and naive.
In the AG's minds we're already guilty of something, likely FRAUD (!) and they just want us to voluntarily show up and start "'fessing up"!
Because without our cooperation, they've probably got nothing solid, just an unsworn accusation from the guy we made that "subject to" deal with, and who now wants to back out and deal with somebody else...but of course, this guy doesn't tell the AG this. But accuses US of fraud, concealment, taking advantage of the poor citizen, etc.
In other words, we've already been tried and convicted, but they just want US to sit down and give them a written statement (confession!) that they can then take into a GRAND JURY (sound scary? GOOD! It should!) and get us INDICTED! Then tried and CONVICTED of our crime.
You really, seriously think the playing field is LEVEL for us in such a scenario? Again, trust me...it's NOT!
"OK, OK, I believe you...but what should I do, how should I respond to such a summons/invitation?
Simple: Tell them you want this in writing from whoever it is, in the AG (or DA's) office, which you'll then immediately get to YOUR attorney so he/she can advise you as to what to do.
Tell them nicely, but very firmly that you're NOT going to be giving ANY statements of any kind without first talking it over with your lawyer.
"But I'd really like to help them understqnd this, and I'm sure once I explain it, they'll fully agree and probably pat me on the back!"
Anybody who believes this is probably also out in the field on Halloween awaiting the Great Pumpkin.
"But won't it go against me if I just refuse to talk to them like that?"
NO! Remember the 5th Amendment says not only can you NOT be forced to talk to them, against your will, but also that such a refusal can NOT be used against you in a court of law.
"Won't they be so upset & angry that they'll just go ahead and prosecute me if I don't help them?"
Amazing truth here! I'll bet 80% of all such are NEVER prosecuted or heard from again, unless the suspect is truly involved with a criminal activity or has been out there really cheating the poor and innocent in a big way. In which event they'll indeed persist until they do nail the perp. May take years, but with enough smoke, they'll just plug away until they can get a conviction.
But so often, without our active HELP they have nothing to go on, no real evidence, and have far too little in their file to do anything.
A true story: Once when I was in active law practice, an obviously very shaken and frightened citizen called me and told me the following...he was a City employee, whose job it was to pick up and then deliver US Mail to the various city agencies and offices. Which he'd been doing for some years.
But earllier that very day, he'd got a call from USPO Postal Inspector (Federal Post Office Detective), asking him to "drop by their office" in the USPO and just give them a statement...and they'd let him know they were investigating some mail thefts and just wanted to "clear the air" about this fellow.
As I said, he was very shaken & frightened, (and likely guilty and frightened with good reason!)...and wanted my advice about what he should do.
I told him to come down to my office and then I'd call the USPO Inspector and see what this was all about.
He did come in, I did make the call, and within minutes a couple of Postal Inspectors walked into the office. They immediately demanded he give them a statement.
I responded that he would NOT be favoring them with any such, and short of thier serving him with an arrest warrant should NOT be bothering him further.
As you might imagine, this did not set well with those two PI's and they grumbled and griped a good bit, and said we'd be hearing more from them.
Which we NEVER DID! Their only evidence against the guy was to come from the suspect himself!
Should he have been gullible and frightened enough to talk to them, I suspect he would have been arrested on the spot and then likely cowed into pleading guilty of mail theft.
"But that's different!"
OK, you've now been warned.
Your choice.
Thank you for a well needed and well written post.
From a used car dealer to an attorney,
Shawn(OH)
Excellent, and much needed, article.
Roger
John,
Great Post!! I happen to be on the other end and can tell you first hand that you are correct!!
Max
Private Detective
What a great article. We often think we are helping others understand what we do. The problem is that most people refuse to think outside of the box. So you end up confusing them further and making them believe even more strongly that you are doing something wrong or illegal. Again, thx for the article. tm
I can't thank you enough for this timely article. I posted a comment about what my husband and I are going through with our AG's office on this site.
We were told through our attorney that if we did not give the information that the AG's office wants (namely, all the names and contact numbers, and copies of all the paperwork of the couples that we bought houses from "Sub. to" using a land trust), that they will "issue a civil investigative demand for the information which she contends will allow her to review your company's documents and to question officers and directors of the corporation under oath." The AG's office sites NC General Stature 75-10 as her authority.
The AG's office also contends that we violate another law in NC - N-C-G-S. 75-1.1. When I went to visit the AG's office (I know that was not a good idea), but the *****istant told me that our ad that use to read, (back when we were able to do business), "We Buy Houses" that what we are doing is deceiving people. If we are buying "Sub. To" using a land trust instead of the "correct way" of going to a bank, that we are not actually buying the houses. So the ad is lying to people. The AG's office also says that our website, "reads like an infomercial". I had two people who sat in on that intial meeting at the AG's office, an attorney and another woman who covers internet fraud. So far, they say that we are immoral for the type of business we do and that we are deceitful. The AG's office will not believe that people in their right minds would sign paperwork without us verbally telling them something that defied what they paperwork spelled out. She said that we either lie to our sellers as they are signing the paperwork, or that our paperwork has information buried within the paperwork only in fine print that the sellers don't or can't read. Neither of these things are true.
To make matters worse, another couple who have since remarried other people and gotten on with their lives have had an attorney file a complaint that says, we are not filing with the IRS concerning our trusts. Well, our CPA says that is rediculous. It is not something that has to be done. Their other complaints are:
That we had the sellers *****ign their beneficial interest in the Land Trust to our LLC while using our Corp as the Trustee. Their attorney says that this violates our fiduciary duties to his clients. They refer to this as a "fraudulent land trust scheme". The attorney also claims that his clients did not get consideration for their home. We took over a $154,000 loan with a payment of $1500. a month. We have kept those payments current every month. They also said that we promised that the loan would be out of their names within one year. We did not promise that and the paperwork does not say that.
By the way, this couple had the house sold through a real estate agent before they called us. The house sold right away, but the problem was, that the agent said, bring $9,987.00 to the closing and we can do the deal. They didn't know that they would have to make up the difference between the payoff and the selling price of the house and pay the commission to the agent. They backed out of the deal and called us. They were so happy that we could help them.
This couple's attorney pleaded with the AG's office in his letter to the AG, "Please investigate these above-mentioned parties so that future home owners will not be taken advantage of in such a manner."
Well, we have never taken advantage of anyone and I can't believe that we are being depicted like this.
Our other sellers have come forward saying, "we'll speak on your behalf", "don't worry about this", "you helped us and we can't believe that you are going through all this" . But we are. And we are having a difficult time trying to make our attorney understand. I believe that this case is too complicated for our attorney. He doesn't care if this goes into court.
I do want to thank all of those people who took time out of your busy schedules to respond to my first plea. It made me cry to see how people were generous enough to write a post. This is a great website that allows this type of interaction to extend throughout the country (really the world) and I thank Joel Webb for putting together a premier site for all of us to take advantage of who are involved with creative real estate investing. I fear that at least in the state of North Carolina, that our rights to continue to do "Subject To" deals and land trusts are in jeopardy. Even our ability to have websites that sell anything, seems to be coming under fire. There is always something to learn, no matter how much you think you know.
Thank you for your reponses. I appreciate your help with this matter.
Fire your present weak-kneed lawyer and go get one with some guts...and my advice would be do not go back to AG, or talk to them directly again. Your lawyer should do that for you, and the 5th Amendment applies to you too....you have absolute right to remain silent.
A great article by an honest lawyer!
Most lawyers are out to make money on the sorrows and problems of other people, but John Merchant talks/writes like an honest man and with a good sense of humor.
It is a very sad thing what happened to Diane Barberio and her husband. On top of it a stupid lawyer who is not really helping, and no doubt taking their money.
Would it not be better to get a lawyer who does understand this?
I do thank John Merchant for his advise and great article, wish more attorneys would be like him.
I wish I could help Diane and her husband. I pray that they find an intelligent lawyer to get them out of this mess, so they can leave all this behind them and get on with their business, which helps so many people.
The people who started this mess are very ungrateful, after they saved them so much money and solved their problem.
Ladybug
Wow! Very interesting. Great post.
John,
What does make sense anymore?
I can speak about my state...California is notorious for coming up with obviously illegal laws. Take for example smog impact fee that allowed CA DMV to collect billions in $300.00 per car impact fee for vehicle coming form other state. How difficult was for anyone to realize that this was illegal interstate commerce that even The Supreme Court of California sad it's illegal, give people their money back now that you've been collecting it unjustly for years.
Now they came with this 5 days cancellation law that allows mentally sound adult to brake the contract against UC code. In this crazy new world after 9-11, anything goes and nothing surprise me any more.
And btw, great article!