A Greene County grand jury has indicted five former executives of Springfield-based Greenleaf Cos. LLC and The Real Estate Co. Inc. on more than 50 counts of securities fraud and unlawful merchandising practices for its home buying and selling operation.
The companies were barred from buying or selling homes and ordered to pay $338,000 in restitution when the Missouri attorney general’s office secured a summary judgment in December. Now, operators of the sister companies face criminal charges.
- Eric Gagnepain, of Springfield, part-owner of Greenleaf, is charged with 10 counts of securities fraud and nine counts of unlawful merchandising practices.
- Scott Dasal, of Springfield, president of The Real Estate Co., was indicted on 10 counts of securities fraud and nine counts of unlawful merchandising.
- Misty May Perkins, of Highlandville, Greenleaf director of investor relations, faces 10 counts of securities fraud.
- William Strong, of Springfield, Greenleaf vice president of finance and daily operations, is charged with one count of securities fraud and five counts of unlawful merchandising practices.
- Robert Batchman, of Ozark, former real estate broker for The Real Estate Co., faces four counts of unlawful merchandising.
Each charge of securities fraud carries a maximum potential sentence of 10 years incarceration and a $1 million fine. Each charge of unlawful merchandising practices carries a maximum potential sentence of four years behind bars and a $5,000 fine.
Additionally, Lane Sanders, of Ozark, former president of Greenleaf, pleaded guilty to one count of securities fraud and one count of unlawful merchandising practices on Feb. 3. A sentencing date has not yet been set, according to Nanci Gonder, a spokeswoman for the Missouri attorney general’s office.
The companies have been under investigation since late 2008, Gonder said.
Greenleaf Cos. recruited investors with good credit from several states, including Missouri, Iowa, Colorado and Virginia, to take out loans for new homes in southwest Missouri, northwest Arkansas and the Kansas City area. Investors would typically earn $10,000 for their roles in purchasing homes.
The Real Estate Co. then marketed those residential properties to people with less attractive credit histories. Buyers such as Cyndi Cody, of St. Louis, signed contracts for deed and agreed to make monthly payments to Greenleaf to cover principal, interest and insurance payments. Those consumers, in most cases, agreed to obtain conventional home loans after making three years of payments.
Cody said she paid $2,630 per month for three-and-a-half years for her home in Nixa after making a $5,000 down payment, but she lost her home to foreclosure despite never missing a payment.
According to information compiled by the securities division of the Missouri secretary of state’s office, Greenleaf enlisted investors through untitled agreements, contracts for deed and “private-placement memorandums.”
Between May 11, 2004, and Sept. 24, 2007, the company executed untitled agreements with 66 Missouri investors representing a total investment of around $15 million, according to the state securities division. Another 30 residents of Missouri who signed contracts for deed invested a total of about $7.4 million between Nov. 7, 2006, and Jan. 31, 2007. And at least 23 state residents signed private-placement memos as Greenleaf investors.
The state charges Greenleaf solicited investors to purchase homes, and in selling securities related to the purchase of those homes, omitted key facts and made misrepresentations. In addition, when the companies sought to sell those homes, consumers were not told critical information regarding the ownership and financing of the homes.
“Greenleaf failed to tell its investors Greenleaf’s financial condition or income and cash flow information,” Gonder said via e-mail. “In addition, Greenleaf willfully failed to disclose to investors the low frequency of refinancing for properties included in the investment program and the high vacancy rate for properties included in the investment program.”
Gonder said Greenleaf also hindered its investors from learning the identity of the consumers who were purchasing the investors’ homes. Further, Greenleaf failed to tell consumers that warranty deeds on real estate for sale by Greenleaf were held by investors and that Greenleaf was failing to make timely payments to those investors.
“I hope they go to jail,” Cody said. “There is a price to pay for what they did.”
Investor Tom McKinley, of Indiana, has a foreclosure now on his credit history through his experience with Greenleaf Cos.
“I just feel really badly for the people who were buying the homes,” McKinley said, adding that he had hoped for a class action suit but talks have fallen apart.
All five defendants were released from custody after posting bond. The defendants will next appear at pre-trial conferences in May – Batchman on May 3; Dasal and Perkins on May 6; and Strong and Gagnepain on May 18.
Springfield attorney Jason Coatney, who represents Dasal and Gagnepain, said he planned to file for a change of venue Feb. 17 in light of the heavy media scrutiny the case has received since 2008.
“This is the kind of stuff that garners media attention,” Coatney said, adding that his clients’ business model failed when the real estate market took a dive in 2008.
He said authorities seized hundreds of boxes of records, and those records would take a considerable amount of time for attorneys to sort through.
“I don’t expect a trial to take place anytime soon,” Coatney said.
Springfield attorney Nancy Price, who represents Batchman, said her client is innocent.
“We plan on fighting this tooth and nail,” Price said.[[In-content Ad]]