Real Estate News

This retiree lost his life savings to a Ponzi scheme. Now he’s losing his home.

Kenneth Tuch stands outside the home in Wilton Manors where he’s lived for 42 years. A bank now owns the home. Tuch said he was scammed by a convicted Ponzi schemer, who took out a fraudulent mortgage. But a court said he has to move out by Jan. 6th.
Kenneth Tuch stands outside the home in Wilton Manors where he’s lived for 42 years. A bank now owns the home. Tuch said he was scammed by a convicted Ponzi schemer, who took out a fraudulent mortgage. But a court said he has to move out by Jan. 6th. Miami Herald

Kenneth Tuch lost his life savings to a Ponzi scheme. Now the 84-year-old retiree is losing the Wilton Manors home where he’s lived for 42 years.

Tuch says a bank foreclosed on him because of a mortgage taken out on his home by a convicted Ponzi schemer. The Broward County Sheriff is set to evict him on Jan. 6. Tuch doesn’t know what to do with his lifetime of possessions. Because of his ruined credit, he can’t find a new apartment.

“I’m going to be out on the street,” said Tuch, as he sifted through the reams of paper in his living room that he says prove he was the victim of fraud — despite a judge in foreclosure court siding with the bank.

Here’s how it started: In 2005, before the economy crashed, a day trader named George Elia convinced Tuch (pronounced “touch”) to cash out about $200,000 worth of stock he held from a career ar AT&T. Elia wanted to invest his nest egg. Over steak lunches at Fort Lauderdale’s Capital Grille, he wined and dined Tuch, and about 50 other marks, many of whom lived in Wilton Manors. (“Everybody got taken to the Capital Grille, and then they got taken,” said Frederick Okolowitz, another Elia victim.)

Elia played the part well. He spoke quietly but with confidence. He wore tailored silk suits and drove a Mercedes.

$10 millionAmount Elia was convicted of stealing from investors

“He promised me 8 to 12 percent returns,” said Tuch, who was delighted when his initial investment led to a quick $25,000 payout, which he spent on cruises, a car and home repairs.

“Elia was shrewd,” Tuch said. “He’d be your father, your uncle, your grandfather and everyone else. He’d pat you on the back and tell you how good your money was doing. ... I trusted him.”

He didn’t know he was likely being paid back with his own money.

A costly mistake

Tuch was so impressed that in 2006 he agreed to take out a loan on the four-bedroom home he bought for $56,000 in 1974 — and had paid off in the early ’80s — so he could invest more.

It was the days of easy credit. Tuch made three visits to a Washington Mutual bank branch with Elia and was approved for a loan, despite credit card debt of $8,300. But he never saw a penny. He couldn’t get Elia to explain what happened and assumed the loan had fallen through.

As it turned out, Elia’s financial wizardry was a mirage.

His business hadn’t dropped off during the recession, pleasing his clients. But that’s because it wasn’t a real business. After years of paying his old investors from the proceeds of new ones, in 2011 Elia stopped returning phone calls and sending checks. He’d tapped out of fresh money. Tuch realized he’d been duped when he saw a for-sale sign outside Elia’s home. He called the Realtor listed on the sign, who told him Elia planned to leave the country. “She said he was going to Cyprus,” Tuch said. “I said, ‘Where’s that?’ 

It had been months since Tuch received a phone call from the man who controlled his life savings — and even longer since he’d seen any money back.

Some of the nation’s biggest Ponzi schemes have happened in South Florida.

It was too late. In early 2012, Elia fled the United States for his native Cyprus, his scheme in tatters. He flew back to the United States in April and was arrested at the airport in Las Vegas. The next year, in the third day of a jury trial, he pleaded guilty to fraud. A federal court sentenced him to a dozen years in jail for bilking his clients out of nearly $10 million. James Ellis, a fixture on Wilton Manors’ nightlife scene who recruited victims for Elia, was sentenced to 38 months.

Tuch and 13 other plaintiffs are suing Elia in Broward County court to recover what they can of their investments. Some of it Elia blew on Bentleys, a Rolls-Royce and expensive watches, according to federal prosecutors. Other funds may be unaccounted for. “We think there’s a lot of money offshore,” said Rick Khun, one of the plaintiffs.

And the money from Tuch’s home loan?

It went straight to Elia, according to documents Tuch later obtained from the bank that inherited his mortgage.

In 2006, Washington Mutual cut a check for $447,840 with Tuch’s home as collateral — but it wasn’t made out to Tuch. A copy of the check shows it was paid to International Consultants & Investment Group Limited Corp., the Fort Lauderdale-based company Elia used to conduct his Ponzi scheme.

A draft copy of the application for the loan is rife with mistakes. The form lists Tuch as an employee of International Consultants with 20 years of experience as a financial consultant. (He worked as an engineer at AT&T for 38 years.) It says he made $10,000 per month, when in fact his pension and Social Security amount to $1,600 per month. And it said his home was built in 1975, not 1954, as is stated in Broward County property records.

I almost had a heart attack.

Kenneth Tuch

“I didn’t even know the loan had gone through,” said Tuch, who obtained the documents after being served with a foreclosure notice in 2014. It was the first time he realized the loan had gone through.

“By then WaMu was closed down,” he said. “And J.P. Morgan Chase bought WaMu. I knew that happened. So I went down to Chase. I played dumb. I said I lost all my papers. And they printed everything out for me. And I see that check. And the check is made out to Elia’s company. And I didn’t see a penny of it. I almost had a heart attack.”

All the while Elia, not Tuch, had been making monthly payments on the loan, bank records show. International Consultants paid $1,584.42 per month to the bank. Those payments stopped on Dec. 1, 2011, according to court records, the same month that panicked investors went to the FBI to report Elia, and about two months before he fled for Cyprus.

If Elia made five-and-a-half years of monthly payments, that means he netted a profit of roughly $343,000, money he could have used to pay back other investors in his Ponzi scheme.

Tuch said he believes that Elia defrauded him with the help of the banking agent at Washington Mutual who handled his loan application. He reported the incident to the Federal Deposit Insurance Corporation, which regulates banks.

Asked about the case, Sharon Tushin, a spokeswoman for the FDIC, wrote in an email that “our policy is not to comment on open matters and this continues to be such a matter.”

The loan payments stopped at the same time that Elia’s Ponzi scheme collapsed.

Elia, who is in federal prison, could not be reached for comment. The Herald was also unable to locate his wife, Darlene. Attorney Stephen Rosen, who represented Elia in court, did not respond to messages.

Preying on the vulnerable

South Florida is a land of Ponzi schemes, with its vulnerable retiree and immigrant populations. Everyone wants to get rich quick.

Some of the nation’s biggest Ponzi schemes happened here, including Joel and Steven Steiner’s Mutual Benefits Corp. ($1.25 billion), Scott Rothstein ($1.2 billion), and Nevin Shapiro ($880 million). The world’s most notorious Ponzi schemer, Bernie Madoff, also conned many victims in Miami, Boca Raton and Palm Beach.

“If you are interested in doing a scam of any type, the place you would target is one that has a lot of money ... and people that are not the most sophisticated investors,” said Jonathan Perlman, an attorney at Genovese Joblove who specializes in helping victims of Ponzi schemes and recently won $4.5 million for the victims of a local scammer who posed as a minister and targeted Haitian Americans. “Florida from the beginning: The only thing we breed better than mosquitos is financial scams.”

Florida from the beginning: The only thing we breed better than mosquitos is financial scams.

Jonathan Perlman

Elia’s victims didn’t stand a chance. A federal complaint in the criminal case against Elia stated: “With the exception of a few, Elia’s investors were not sophisticated, accredited investors, or qualified purchasers.”

Tuch’s nephew, Jay Word, 53, lives with and helps take care of him. He, too, met Elia and was convinced by his act, although he didn’t invest. “It makes us look ignorant now, but we thought Elia was legitimate,” he said.

Tuch admits he was in over his head. He wishes he’d read the loan documents Elia had him sign more closely. The $447,840 check includes Tuch’s name as a remitter, meaning he may unwittingly have signed the money over to Elia’s company, although he doesn’t remember doing so.

“You know how they do it: Sign here, here, here, here and here,” Tuch said, gesturing animatedly with his index finger and thumb. “I would be there four hours trying to read it all.”

But he acknowledges: “They used me as a patsy.”

A judge didn’t see it that way.

After Elia stopped making the monthly loan payments, U.S. Bank foreclosed on Tuch’s home in 2014.

The Minneapolis-based bank had acquired the mortgage after Washington Mutual failed during the banking bust and was taken over by the FDIC. It serves as a trustee, meaning that the loan servicing company was responsible for the decision to foreclose, according to U.S. Bank spokeswoman Teri Charest. That company, Select Portfolio Servicing, which is headquartered in Salt Lake City, did not respond to a request for comment. (In 2003, it agreed to a $40 million settlement with federal regulators over charges that it engaged in deceptive and illegal lending practices.)

SPS is now owned by Credit Suisse.

$310,280Assessed value of Tuch’s Wilton Manors home

Tuch hired a law firm with offices around the state, the Ticktin Law Group, to fight the foreclosure. Under oath, an employee of the loan servicing company testified that it was not clear who received the loan or who was making the payments.

But Broward County Court Judge Carol-Lisa Phillips ultimately sided with the lender. She said the fact that payments had been made on the loan showed Tuch was responsible, according to a court transcript. And she questioned why Tuch — who said he was never informed of his court date — didn’t show up to the trial.

The nation’s foreclosure crisis had its epicenter in Florida, and its courts were overwhelmed by cases. A 2014 investigation by the Center for Public Integrity found that as Florida tried to clear the backlog, homeowners often lost out to banks. One Broward County judge (not Tuch’s) closed 786 cases in a single day, CPI found.

Tuch brought in a new lawyer but lost on appeal. He’s now spent about $12,000 on legal fees. He’s also been turned down by nine landlords because of his bad credit. U.S. Bank and Select Portfolio Servicing own his home, valued at $310,280 by the Broward County property appraiser. It would likely fetch more on the open market, with its pool and waterfront view of the Middle River.

Attorney Lawrence Shapiro now represents Tuch. He says his client has been repeatedly wronged and should never have lost his home.

How could the bank make the check out to someone other than the borrower?

Lawrence Shapiro

“How could the bank make the check out to someone other than the borrower?” Shapiro said. “That should have been a huge red flag.”

But he said Tuch lost his best chance to save his home when his original lawyer declined to file a countersuit against the bank.

“If you don’t bring the counter-lawsuit, you lose the right to do it later on,” Shapiro said. “[Ticktin] did him a severe disservice in the way they handled the case. This was black-and-white fraud. The bank was in on it. There are too many things that took place with this loan that are highly irregular and unorthodox. By not filling a counter-claim right away, they lost the right to go after the bank.”

Jamie Alan Sasson, managing partner at Ticktin Law Group, said countersuits are rarely successful.

“We don’t typically file countersuits,” Sasson said. “We found that they don’t work. … It makes it a much more difficult kind of case. It’s a really upward fight going against the banks. If we had brought a countersuit, the judge would have made the same ruling.”

“We really fought hard for this client,” he added. “We went to trial, we presented evidence, we filed an appeal out of our own pocket.”

A last hope

Tuch has one lifeline left, but it’s a legal technicality: When the foreclosure was filed, Tuch’s address was recorded as being in Fort Lauderdale, not Wilton Manors.

An attorney for the lender requested a court correct the error at a November court hearing, but Judge Joel Lazarus declined.

“You’re getting Christmas and Hanukkah in one,” Lazarus told Tuch.

The decision means it is up to the Broward County Sheriff to decide whether to remove Tuch from his home. It’s possible the sheriff could tell the court no such address exists and decline to carry out the removal order, Shapiro said. But it’s more likely officers will show up on Jan. 6 and move Tuch’s furniture onto the street, if he hasn’t already left.

Tuch is still looking for a new place to live, after months of denial and dreaming he would be allowed to stay. He’s placed his hopes in lawyers, in the courts, even in this newspaper article. None have the power to save his home. Why should the sheriff be any different?

With his life savings gone, the credit card companies are suing him, too, said Tuch, shaking his head outside the county courthouse in Fort Lauderdale.

“The house was free and clear,” Tuch said, “before all this mess happened.”

Nicholas Nehamas: 305-376-3745, @NickNehamas