MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-First Session
March 9, 2001
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 8:12 a.m., on Friday, March 9, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was video conferenced to the Grant Sawyer Office Building, Room 4412, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Ann O’Connell, Vice Chairman
Senator Dean A. Rhoads
Senator Mark Amodei
Senator Raymond C. Shaffer
Senator Michael A. (Mike) Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Senator Terry John Care, Clark County Senatorial District No. 7
Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1
Senator Bill R. O’Donnell, Clark County Senatorial District No. 5
STAFF MEMBERS PRESENT:
John Meder, Committee Policy Analyst
Scott Young, Committee Policy Analyst
Lydia Lee, Committee Secretary
OTHERS PRESENT:
Margi A. Grein, Lobbyist, Executive Officer, State Contractors’ Board
George Lyford, Director, Special Investigations, State Contractors’ Board
Christina Schofield, Concerned Citizen
Richard Gammick, District Attorney, Washoe County
Ben Graham, Lobbyist, Clark County District Attorney’s Office
John P. Sande III, Lobbyist, Nevada Bankers Association
Greg Welch, Investigative Supervisor, State Contractors’ Board
Charlene Westeen, Concerned Citizen
David Westeen, Concerned Citizen
Joan Buchanan, Administrator, Real Estate Division, Department of Business and Industry
Raymond Ward, Associate Community Builder, United States Department of Housing and Urban Development, Reno
Pat Coward, Lobbyist, Nevada Association of Realtors
Wayne Waite, Director, United States Department of Housing and Urban Development, Reno
Dave Anderson, Concerned Citizen
Michael Pennington, Executive Assistant, Office of the Attorney General
Kimberly Maxson Rushton, Legislative Liaison, Office of the Attorney General
JoAnn Gibbs, Senior Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General
John C. Heide, Senior Investigator, Bureau of Consumer Protection, Office of the Attorney General
Joseph Long, Deputy Attorney General, Office of the Attorney General
Chairman Townsend opened the meeting with Senate Bill (S.B.) 216.
SENATE BILL 216: Makes changes concerning repair, restoration, improvement or construction of residential swimming pools and spas. (BDR 52-1037)
Senator Terry John Care, Clark County Senatorial District No. 7, related the facts behind the introduction of S.B. 216. He said he had a couple of telephone conversations within 2 weeks of each other, about a year ago. He related similar nightmarish stories from the two parties. He said Cascade Pools’ sales people made house calls to distribute attractive brochures. They hoped to tempt the interested homeowners to complete credit applications to obtain financing through Cascade Pools. The applicants who submitted loan applications were not given loan disclosure information, which is required by Nevada Revised Statutes (NRS) 645B.185. He said four houses were actually foreclosed upon. Senator Care testified he believes there are reputable pool and spa contractors operating lawfully in Nevada, but communicated there are some contractors operating fraudulently. He said he estimates there are approximately 150 to 300 victims of these fraudulent pool and spa contractors in Nevada. He said he believes no pool contractor should be allowed to finance a pool loan, or should a pool contractor be allowed to obtain financing from an affiliated or associated lending company. He admitted the bill needed some work, but he maintained it was a good starting point to finding a solution.
Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1, testified he conducted a series of town hall meetings in southern Nevada regarding consumer fraud. He said consumer complaints were mainly against “rogue” pool contractors. He added the reputable pool contractors assisted him in crafting language for a bill to end consumer abuse in Nevada.
Senator Schneider asked whether the counties in Nevada oversee pool contractor licensees who have been licensed by state licensing entities. He suggested perhaps the counties should have greater involvement.
Senator Care said there has been discussion about pool contractors being licensed and classified as a “privileged industry.”
Margi A. Grein, Lobbyist, Executive Officer, State Contractors Board, said that was true. Efforts were made in 1997 and 1998, in Clark County, to impose additional regulations and requirements on pool contractors. Assembly Bill (A.B.) 512 of the Sixty-Ninth Session passed through both houses, but was vetoed by the Governor.
ASSEMBLY BILL 512 OF THE SIXTY-NINTH SESSION: Revises provisions relating to contractors who construct residential swimming pools or spas. (BDR 54-1029)
Ms. Grein said the State Contractors’ Board opposed the measure, since the proposed regulation mimicked existing regulation. She noted there were 283 pool complaints in 1996-97. The year following legislation to address the problems there were 299 complaints. In 1998-99, 244 complaints were filed and in 1999-2000, 274 complaints were filed. This year, to date, there have been 233 complaints filed. She said there are about 112 pool contractors in southern Nevada and about 1 percent of that number are responsible for about 10 percent of the complaints.
Senator Bill R. O’Donnell, Clark County Senatorial District No. 5, gave an overview of the situation that occurs when the pool contractor is also the lender. He agreed something should be done to protect consumers from fraudulent pool contractors. Senator O’Donnell suggested separating the pool contractor services from the company financing the loan to construct the pool. He said he hopes this will help prevent homeowners from being unjustifiably foreclosed upon.
George Lyford, Director, Special Investigations, State Contractors’ Board, testified an investigation began regarding workmanship complaints by homeowners. The investigator repeatedly came across United Federal Financial Corporation, but was unable to uncover any information about that company. The investigator interviewed the contractor involved in the workmanship complaint case. The contractor refused to answer any questions about the United Federal Financial Corporation issue. Mr. Lyford stated investigators discovered the contractor had formed United Federal Financial Corporation. He referred to handouts (Exhibit C) distributed to committee members while explaining the corporation was originally filed in the contractor’s name. He said later the contractor changed the names of the corporate officers to fictitious individuals and filed their names with the secretary of state’s office as he renewed the filing, and he signed a fictitious name on the document. Mr. Lyford stated there were no valid officers in the corporation and the signature itself was fictitious. Mr. Lyford stated the contractor and his employee’s disavowed any knowledge of United Federal Financial Corporation. The investigation brought forward United Federal Financial Corporation was not licensed by the state as a mortgage company. The Division of Financial Institutions, Department of Business and Industry, upon making that discovery, issued the corporation a cease and desist order. The contractor, after receiving the cease and desist order, hired an employee of a mortgage company in Las Vegas. The mortgage company employee assisted homeowners in completing their loan paperwork, which was then turned over to United Federal Financial Corporation. Mr. Lyford stated the mortgage company employee and other employees of the same mortgage company were questioned during the investigation and denied knowledge of any dealings with United Federal Financial Corporation. Completion of the investigation uncovered fraudulent loans had been transferred to another financial company in California. Mr. Lyford concluded his testimony stating the California financial company, which was operated by the contractor’s brother-in-law, issued foreclosure notices to 100 homeowners.
Chairman Townsend referred to an advertisement in Exhibit C for Cascade Pools. He asked whether the advertisement in Exhibit C met the provisions of the deceptive trade practice statute, NRS 598.0915, during investigation by the State Contractors’ Board or by the deputy attorney general.
Mr. Lyford responded he requested a deputy from the Office of the Attorney General during the investigation. He said after learning all the particulars of the investigation, the attorney general’s office sent him a fax (Exhibit D) stating the Cascade Pools issue did not fall within its jurisdiction and assistance would not be provided by the Office of the Attorney General.
Chairman Townsend asked Mr. Lyford to clarify the Office of Attorney General found no impropriety of any business practice according to the information provided by the State Contractors’ Board. Mr. Lyford said that was correct.
Chairman Townsend explained specific disclosure information must be included on advertising for other industries. He said other industries would not be allowed to mislead consumers by using the type of advertising (Exhibit C) Cascade Pools used. Chairman Townsend emphasized members of this committee have expertise in some of these issues, and would be willing to help in this area.
Christina Schofield, Concerned Citizen, stated:
A year and a half ago I didn’t even know what a deed of trust was. If someone would’ve asked me if I had a second, I would’ve said, “Yeah, I’ll be there in a minute.” My husband and I discussed getting a swimming pool; kicked the idea around. We went down to the home show and . . . that’s where I found Cascade Pools. Since then it’s built and built and built and become a full-time job for myself [sic] everyday, all day long. I’ve talked to over a hundred Cascade Pools’, United Federal Financial [Corporation’s] victims. Every time I hear a story, and I think it’s the worst one I’ve ever heard, I hear another [worse] one. It’s absolutely appalling and unbelievable what these people have been able to do and get away with . . . .
My experience with Cascade Pools . . . their creative financing, I think that was a big draw to a lot of people. There are people from all different walks of life involved in this. When they say creative financing, boy, do they mean creative financing! In my instance, they came over and said, “Hey, we know somebody who can refinance your house. So, what we’ll do is refinance your house. You take the equity and give it to my buddy over here for your swimming pool and that’s how we’ll get it started.” Okay, I don’t know the difference. I think that’s another big thing . . . people say, “Well, didn’t you know what you signed? Well, didn’t you know what you were doing?” The fact you have to admit ignorance is pretty embarrassing. That’s how it is. It’s like with me being in the medical profession, I know the medical profession and I know different things. I think a lot of people didn’t have any idea what we were entering into and what was really going on. So, they refinanced my house . . . I got the $16,000 and I put $14,000 toward the Cascade Pools contract for the first 4 phases . . . did the other half of the loan. After I was to put my $14,000 in, City Mortgage was supposed to come [up] with the $27,500. The pool [construction] got started. I paid the excavator, the plumber, . . . until the $14,000 was gone. All work on the pool stopped at that point. I started calling every day and was given an excuse every day about why my pool construction wasn’t continuing.
Ms. Schofield continued:
About that time, Cascade Pools’ license was suspended. He came over early in the morning and said, “I am the president, secretary and treasurer of United Federal Financial [Corporation]. I don’t have any money to finish your swimming pool. If you finish your own swimming pool out of your own pocket, I will take $15,000 off the end of your loan.” . . . I know there’s something wrong here. If I go ahead and pay for my pool, in cash, out of my pocket, why do I owe you a dime, since United Federal Financial never financed a red cent of my swimming pool? He said, “Don’t you think I should make a profit?” I said, “I don’t know, Greg [Gregory Majeroff]. I don’t know what’s going on here, but I know it isn’t right.” He then rolled the loans over to his brother-in-law, B. K. Jobelius, in Riverside, California. I knew at that time the loans were never funded. There wasn’t one red cent United Federal Financial [Corporation] ever funded to anybody, for any reason, for anything.
Ms. Schofield testified:
I contacted Mr. Jobelius immediately upon receiving the letter from United Federal Financial [stating] that [the loan] had been transferred. I told him that none of these loans were ever funded, and that they were null and void and according to the Division of Financial Institutions, United Federal Financial [Corporation] had breached their contract by not funding the loans; therefore, they [the contracts] were null and void. He didn’t care. When I asked him where he found the ads, he said in the newspaper. When I asked him how he knew Mr. Majeroff, he just said, “I found the ads in the newspaper.” He said he hadn’t actually purchased them [the contracts] yet; he was still going through the process at Stewart Title [Company]. I called Stewart Title [Company] to see what was . . . They had never heard of Bruce Jobelius or United Federal Financial. In the meantime, I told Mr. Jobelius, “I’m not paying you a red cent. I never got a dime, and I don’t owe this loan.” I finished my pool by going to Nevada State Bank and taking out another loan and [I] finished my pool. Mr. Jobelius brought foreclosure proceedings through Stewart Title. I got a call from another title company . . . , “We missed your second [mortgage] when we refinanced your house and Mr. Jobelius is foreclosing and you’ll have to make your payments to us.” I called Mr. Joe Hanks from Stewart Title and I said these loans were never funded, and they are fraudulent. They’re null and void and the money never existed. Those [contracts] were sent back, at that time.
I have talked to several other people and found other United Federal Financial and Cascade Pools customers. Every time I find a new person, each one has a 45-minute post-traumatic-stress-disorder story. If you mention Cascade Pools they just cringe. . . . Mr. Jobelius came to the valley [Las Vegas] with the foreclosure notices. I had a meeting . . . . On Wednesday, four foreclosure notices hit the valley and one was mine, [issued] through Nevada Trust Deed Services. I told them that, within the next 30 days, the valley would be inundated with these foreclosure notices. They [the foreclosure notices] would be coming. The next day, 96 more [foreclosure notices] hit the title companies. By that time, the title companies knew something was up; so they sent them back. When I actually got a copy, or list of the foreclosures that they were coming up with, half the people on the list didn’t stop making their payments on their loans. Now we have a bunch of people who never received a red cent for their swimming pools, most of them don’t even have a swimming pool, and now their houses are going to be foreclosed on for a loan that never existed.
Ms. Schofield continued:
We have an attorney . . . trying to find some protection from these people. The fact is, when you sign your name on a deed of trust . . . therefore, they have you. They don’t have to deliver the loan or the swimming pool and they can come and foreclose on your house. Unless you have enough money to retain a private attorney, they will take your house. Since these people have first, second and third mortgages on their homes . . . they don’t have a swimming pool and they don’t have money. The four foreclosure notices from Nevada Trust Deed Services were sent back. They said those foreclosures would be on hold and, to start those foreclosure processes again, they would need to start all over. I knew they were coming back with these [foreclosure notices]. I started writing letters to the attorney general. I went to the district attorney’s office, the Department of Business and Industry, Division of Financial Institutions, and everybody you could possibly imagine to go to, to find some intervention for this. People did actually have the capability to stop them, but getting them to enact [sic] something was a different story.
About a month ago, the foreclosures hit again. There were about 30. The first four foreclosures that came the first time actually came back as notices of auction. They put up my house for auction. [The auction notice] said, your house will be auctioned from the steps of the Clark County Courthouse. That is pretty ironic, since that is usually where you go to find justice. But these people are auctioning your house from the steps [of the courthouse]. We had to get a temporary restraining order against these people to block the auction and block the foreclosures. We got into court and had to post a bond of $5000 for the irreparable damage we were going to cause their clients for not being able to foreclose on our homes with the fraudulent loans and deeds of trust they had. We went back for the preliminary hearing and agreed to make payments into an interest-bearing escrow account. We can’t touch it; they can’t touch it, and at the end of the settlement, the money will be dispersed. . . . If you have a contract with a pool contractor, and you have a separate contract for a loan, how can you be held responsible and how can you be held to be a borrower if you never borrowed anything? If that lender, United Federal Financial [Corporation], never lent any money on your behalf to Cascade Pools or anyone, how can they be a lender? How can they hold a deed of trust on your house and take your house? They have and they will continue [to do so], for a loan that never existed.
Chairman Townsend asked about the present status of her case.
Ms. Schofield responded she went to court about a week ago for the preliminary hearing and will go back in 30 days to try to put together a class action lawsuit. She said the group of people foreclosed on, agreed to make payments into an interest-bearing account, until the settlement occurs.
Chairman Townsend inquired whether Ms. Schofield has obtained a TRW (Thompson, Ramo, Woodridge Incorporated) report to determine her credit rating.
Ms. Schofield answered she has not obtained a TRW credit report, but she is aware that the Clark County Recorder retains foreclosures and other filings. She added she believes all the involved parties should be held accountable for their actions.
Senator O’Connell asked whether she has a chronological account of events regarding her case. Mr. Lyford said he would be happy to provide that documentation.
Senator O’Connell questioned the involvement of the attorney general’s office in Ms. Schofield’s case. She asked for an explanation. Mr. Lyford stated he notified the attorney general’s office saying information would be forthcoming in the case against the pool contractor. He said an investigator from the attorney general’s office, after obtaining information on the case, faxed a response (Exhibit D) stating they had no interest in pursuing the case.
Senator O’Connell asked whether the attorney general’s investigator did not have interest in the case or if they did not have jurisdiction in the case. Mr. Lyford stated he was not aware of which was true.
Ms. Grein added her input regarding the investigator from the attorney general’s office who was present during Mr. Majeroff’s interview. She said Mr. Majeroff admitted he was the lending company and he hadn’t paid his employer’s workers’ compensation insurance. Ms. Grein said she believed, at the time of the interview with Mr. Majeroff, the attorney general’s office would take some further action. She said she thought, since Mr. Majeroff was still conducting business, even though a cease and desist order had been issued, the attorney general’s office would surely continue its involvement in the case. Ms. Grein stated she did not know why the attorney general’s office was so reluctant to help her in this case. She said she requested help from the district attorney’s office and reported the case had gone before the grand jury, which is reviewing about 300 pages of testimony. Ms. Grein said she is determined to find a way to help these victims.
Senator O’Connell suggested restitution to aid those who have already been victimized. Ms. Grein said that would only be possible if set forth by a civil or criminal court trial. She added the State Contractors’ Board took legal action against him (Mr. Majeroff), revoked his license and charged him with restitution to the victims. He has subsequently filed a countersuit against them.
Senator O’Connell asked whether it is possible to file a lien on their assets. Mr. Lyford responded that Mr. Majeroff is hiding his assets. Mr. Lyford reported this case to the Internal Revenue Service and the Federal Bureau of Investigation. He stated he filed requests for prosecution at the district attorney’s office; 20 counts were felonies for obtaining money under false pretenses, 20 counts were for deceptive trade practices, 20 counts were for false advertising, and 2 counts were for filing false instruments at the secretary of state’s office. He said there might also be cases forthcoming through the United States Postal Service inspectors.
Ms. Schofield continued saying the district attorney’s office agreed to indict Mr. Majeroff, but the process has slowed down lately.
Senator O’Connell queried whether the number of victims is known. Mr. Lyford said he believes there are 120 victims, but that figure is based on documentation provided by Mr. Majeroff; so that number could be inaccurate.
Senator Schneider recommended contacting Scott Walshaw (L. Scott Walshaw, Division of Financial Institutions, Department of Business and Industry) and representatives from the bank and mortgage companies to help gain control of the situation and to prevent more foreclosures from occurring. He added perhaps some state agencies could assist in nullifying the loans and take steps to put a halt to the fraudulent contractors, once and for all.
Mr. Lyford stated he was not aware of the scope of this case, initially. He looked in the Las Vegas Yellow Pages and found 17 different pool companies listed. He said each of those pool companies advertise they will arrange financing. Mr. Lyford stated he logged on to the Clark County recorders’ office Web site, and discovered at least six of the pool companies are directly financing the loans.
Senator O’Connell asked whether any victims in this investigation have invoked NRS 598.230, which is the right of the buyer to rescind contracts of sale. Ms. Grein stated that was part of the reason why the attorney general’s office was consulted in this case. She pointed out the current laws do not really protect the consumer. She also stated Mr. Majeroff is now attempting to do business in Texas, where there is no contractor licensing.
Senator O’Connell asked whether the district attorney has subpoenaed his (Mr. Majeroff’s) records. Mr. Lyford responded Mr. Majeroff’s operation is now closed down. Mr. Lyford said he is not aware of the subpoena to Mr. Majeroff of any records in this case. Mr. Lyford said he has received a subpoena from the Internal Revenue Service instructing the State Contractors’ Board to turn over all records, which he has done. He reported all those records have also been made available to the district attorney’s office.
Ms. Schofield added no one currently has the records of United Federal Financial Corporation, and even the Internal Revenue Service has been unable to access them. She stated City Mortgage records have been subpoenaed by a couple of people. Ms. Schofield stated she thought the attorney general’s office would surely be able to assist her in this case, but she was told that agency protects other state agencies, not the public. A determination as to what agency has jurisdiction to handle these issues needs to be addressed, Ms. Schofield said. She also said, new laws will not help with these types of cases, if no state agency has the responsibility to work on contractor fraud cases.
Senator O’Connell asked whether Ms. Schofield received information that they would be unable to assist her, by mail or verbally. Ms. Schofield stated the first response was verbal. She mentioned she received a response to a letter she sent to Frankie Sue del Papa, Attorney General. Ms. Schofield received a written response from the consumer protection agency (Bureau of Consumer Protection, Office of the Attorney General), which said this case did not fall within their jurisdiction. The letter referred her to the district attorney’s office.
Senator O’Connell clarified her earlier question regarding Ms. Schofield’s response from the attorney general’s office. She asked, specifically, if Ms. Schofield received printed documentation indicating, “the attorney general’s office does not protect the people of Nevada; we only protect the government agencies.”
Ms. Schofield said information from the attorney general’s office was verbal only and no printed matter with that statement exists.
Chairman Townsend recommended the committee subpoena Mr. Majeroff to appear before them.
SENATOR O'CONNELL MOVED TO SUBPOENA GREGORY MAJEROFF TO APPEAR BEFORE THE COMMITTEE ON THURSDAY, MARCH 15, 2001, AT 7:00 A.M.
SENATOR SCHNEIDER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Richard Gammick, District Attorney, Washoe County, testified his office deals frequently with contract disputes. He added criminal prosecution could occur if fraudulent conduct can be proven against the contractor. He emphasized those cases are very difficult to prove. He suggested some cases should be referred to a board or commission, where steps can be taken to withhold a license, or at least jeopardize the license of a contractor suspected of conducting fraudulent business practices.
Chairman Townsend synopsized the events that have taken place in Ms. Schofield’s case. He reiterated the State Contractors’ Board revoked Mr. Majeroff’s contractor’s license.
Mr. Gammick testified revocation of a contractor’s license by the State Contractors’ Board does not necessarily make the contractor a criminal. The more victims there are in a case, unfortunately, the easier it is to prove criminal intent, he added.
Senator Shaffer asked whether there are any statutes addressing deceptive business practices or theft by deception.
Ben Graham, Lobbyist, Clark County District Attorney’s Office, stated:
There are limited statutes dealing in this area. As Mr. Gammick indicated, in order to get a fraud-type action, you have to show from the beginning that they [the contractor] intended to never perform. We have dealt with cases where they’ll deliver a load of rock or blocks for a wall. That is really generally enough to show that when they started they were going to do it, and then they changed their minds later on. That way it is difficult to get a fraud action, because it appears they didn’t enter in to it with fraudulent intent. This is a difficult area to deal with, and we have a special unit that deals with fraud in our office. We work on putting these cases together but generally, unfortunately, the people are out of their money and the criminal sanctions really never get anybody’s money back for them, except if we can seek restitution.
Senator Shaffer suggested perhaps a loophole exists in the statutes, and maybe the existing law could be altered to close the loophole.
Chairman Townsend stated this committee has jurisdiction over deceptive trade practices and the Senate Committee on Judiciary has jurisdiction of all criminal activity. He recommended a dialogue among the experts in this field and other interested parties to discuss what remedial actions the committees should take.
Mr. Gammick made a recommendation to change the law. He said requiring substantial compliance with the contract terms by a contractor would give his office greater strength to deal with these cases.
Chairman Townsend stated he wants to make sure all available tools are utilized to assist the agencies that handle contractor fraud issues. He related the circumstances of the cease and desist order that was issued to United Federal Financial Corporation by the Division of Financial Institutions. Chairman Townsend asked for expert opinions and clarifications from Mr. Gammick and Mr. Lyford concerning the cease and desist order. Mr. Lyford clarified that following the order to cease and desist issued to United Federal Financial Corporation, City Mortgage was engaged by Mr. Majeroff to continue processing the fraudulent loans.
Chairman Townsend asked Mr. Lyford to explain at what point Mr. Majeroff’s brother-in-law got involved. Mr. Lyford said that happened after the State Contractors’ Board revoked Mr. Majeroff’s contractor’s license. Mr. Lyford added that Mr. Majeroff’s brother-in-law is the one who began foreclosing on the homeowners.
Chairman Townsend inquired, “Since two people are involved and they are in two states, would the RICO [Racketeer Influenced and Corrupt Organizations Act] apply in any way to this case?”
Mr. Gammick stated if a federal agency was willing to be involved in the case, the RICO Act possibly could apply in this case. He added if any part of a crime occurs in this state, his agency maintains jurisdiction.
Senator O’Connell asserted it is important the law define which agency has jurisdiction in fraud cases such as this one. She emphasized the public needs to know exactly who to contact if contractor fraud occurs. She added the bill should also state what the penalties are.
Senator Amodei suggested an expedited way to possibly clear Ms. Schofield’s homeowner title. He advised the committee, if possible, to legislatively take action to clear any mortgages or deeds of trust held by the two fraudulent mortgage companies. He stated clearing the titles could be accomplished by filing with the Clark County Recorder. He said only a court-issued order stating validity of the loan would validate it. Senator Amodei stated it would be better to let Mr. Majeroff go to court and try to prove the homeowners owe him money, rather than placing the burden of proof upon the homeowners. He added proceeding in this manner, the homeowners’ titles would be clear, at least for the time being.
Chairman Townsend stated, “Scott [Mr. Young], if you could get one of our legal folks to look into that, and have that [legal response] by Monday.”
Senator O’Connell suggested Assemblyman Joseph (Joe) E. Dini, Jr., Lyon and Storey Counties and part of Carson City Assembly District No. 8, be contacted immediately and an emergency measure be processed as soon as possible, per Senator Amodei’s recommendation.
Chairman Townsend added:
John [John Meder, Committee Policy Analyst] would you e-mail leadership in the other house, including the chairman of the committee of jurisdiction, of the seriousness of this problem? . . . Over the next couple of days . . . substantial cooperation to expedite this in an emergency fashion.
John P. Sande III, Lobbyist, Nevada Bankers Association, testified he agrees with the provisions in the bill, which would not allow any affiliation between the pool contractor and the lender. He referred to the Las Vegas Sun newspaper article, which reported a judge has granted an injunction in the case. He said if the homeowners prevail, they would be able to recover their court costs. Mr. Sande said he believes the issue is to enforce the existing laws, perhaps tightening up the laws regarding fraud. He added if the contractor does not honor his end of the contract by producing the work contracted for, the contract becomes invalid. He stated he does not believe the loan itself is the problem. He added, based upon what he has heard today, the loans issued by United Federal Financial Corporation and City Mortgage are unenforceable.
Chairman Townsend asked Mr. Sande whether language to clarify the laws regarding loan enforceability is needed. Chairman Townsend said he wanted the committee to do whatever it could to assist the homeowners regain title of their properties. Mr. Sande responded extensive statutory and case laws regarding contractual enforceability issues presently exist in this state. He noted, based upon what has been testified to today, the foreclosure actions have been stopped. Mr. Sande added the contracts in this case are apparently invalid and the homeowners will only need to notify TRW to correct their records.
Chairman Townsend stated the consumer might encounter many difficulties due to their clouded credit ratings. He said there are many potential implications the consumer is not aware of yet.
Senator Schneider asked whether City Mortgage is a legitimate financial institution. He wondered whether it was connected to Citibank. Mr. Sande interjected City Mortgage is not affiliated with Citibank. Mr. Lyford also responded stating City Mortgage is a licensed mortgage company in Las Vegas. Senator Schneider asked if City Mortgage is a “fairly legitimate” mortgage company. No response was tendered.
Chairman Townsend inquired whether the City Mortgage license is still valid. Ms. Schofield responded City Mortgage brokers, Paul and Janice Gregus, surrendered their brokers’ licenses immediately following the contractor/loan fraud exposure. She reported the couple is presently conducting business, without a license, at their office in Las Vegas. Ms. Schofield stated Mr. and Ms. Gregus are billing consumers for mortgage insurance, which they claim is now due.
Senator Schneider stated, based on Ms. Schofield’s testimony regarding the revocation of City Mortgage’s license, the attorney general’s office should be contacted. Chairman Townsend inquired what the penalties are for noncompliance of the license revocation. Mr. Young indicated penalties would indeed apply for conducting mortgage related business without a license.
Chairman Townsend asked for clarification regarding the location of a site identified in Exhibit C. He referred to Federal Regulation Z (Exhibit C), which is a representation of a payment schedule statement given to another client of Mr. Majeroff’s. Mr. Lyford agreed to provide a map pinpointing the location to committee members.
Senator O’Connell advised Ms. Grein, in the future when circumstances such as these arise, she should appeal to the Legislative Commission for expedited resolution. She said waiting for a session to convene is not necessary. Chairman Townsend stated the Legislative Commission also retains subpoena authority.
Ms. Grein responded to a request for information from Chairman Townsend. She said a public hearing on behalf of Manuel and Laura Martinez revealed a $40,903 swimming pool contract with Mr. Majeroff. The actual cost of the pool construction, including finance charges was $307,587.60. Ms. Grein stated the location of that site.
Ms. Schofield related circumstances regarding another case of fraud by Mr. Majeroff. She said a Mr. Chanel in Henderson, who suffers from triplegia, lost $60,000 to Mr. Majeroff. She added the only thing Mr. Chanel has to show for his money spent is an excavation site and rebar on his property, and he continues to make payments to Countrywide Mortgage Company. Ms. Schofield clarified the money actually goes through Countrywide Mortgage Company and is then deposited into an account belonging to City Mortgage Company. She indicated there are so many people who have been victimized by Mr. Majeroff.
Chairman Townsend asked the testifiers and committee members to stay in contact.
Greg Welch, Investigative Supervisor, State Contractors’ Board, introduced Charlene Westeen and David Westeen via videoconference from Las Vegas. He stated they are also victims of Gregory Majeroff and Cascade Pools.
Charlene Westeen, Concerned Citizen, stated her involvement with Mr. Majeroff, Cascade Pools, City Mortgage, and United Federal Financial Corporation. She told the committee she intended to finance $37,000 for the construction of a pool, landscaping, and patio cover. Ms. Westeen said after spending $20,000 she wound up with an excavation site and rebar. She and her husband withdrew money from their retirement fund, and enlisted a different contractor to complete the project. Their payment is nearly $1000 per month, considerably more than the amount for which they had originally contracted. Ms. Westeen mailed out letters asking consumers victimized by Mr. Majeroff to contact her. She was very surprised at the number of victims who responded. She stated her dismay that no agency she contacted was able, or willing, or had jurisdiction to assist her and the other victimized consumers.
David Westeen, Concerned Citizen, reiterated his wife’s testimony, stating Mr. Majeroff signed a “request for reconveyance” on their behalf; so, for the time being, there is no foreclosure in effect. He added that does not mean Mr. Majeroff cannot come back at a later date and try to foreclose. Mr. Westeen stated Mr. Majeroff is only one part of the whole picture of this problem. He said the title companies, loan companies, and brokers also are involved.
Senator O’Connell stated staff in the attorney general’s office in Las Vegas is available to assist the consumers in Las Vegas.
Chairman Townsend suspended the hearing on S.B. 216 and opened the hearing on A.B. 153.
ASSEMBLY BILL 153: Clarifies that appraiser who completes statement of visual condition required for federally insured home loan is exempt from provisions governing inspectors of structures. (BDR 54-402)
Joan Buchanan, Administrator, Real Estate Division, Department of Business and Industry, stated a conflict exists for appraisers completing visual condition reports, which are required to complete FHA (Federal Housing Administration) loans. Ms. Buchanan distributed a packet (Exhibit E) containing a sample of the combined form and a memorandum of explanation regarding A.B. 153.
Raymond Ward, Associate Community Builder, United States Department of Housing and Urban Development (HUD), Reno, testified the FHA and HUD have combined their forms and created one standardized form acceptable for both agencies to use.
Pat Coward, Lobbyist, Nevada Association of Realtors, said he endorses this emergency measure to clarify this issue, allowing smooth transactions to take place.
Wayne Waite, Director, United States Department of Housing and Urban Development, Reno, stated his support of the A.B. 153 amendment.
Dave Anderson, Concerned Citizen, home inspector, testified he endorses Assembly Bill (A.B.) 153 as amended. He explained and read from documents (Exhibit F) distributed to the committee members. He stated a problem exists for consumers, because of confusion between appraisal reports and home inspections. He cited cases where consumers have defaulted on their loans because they did not discover problems with their property. He said, usually, these problems are uncovered during a home inspection, but not during an appraisal.
Ms. Buchanan stated the Real Estate Division takes its responsibility seriously and will hold the appraisers up to the competency standard. She added the FHA conducts training and testing of the appraisers. Ms. Buchanan said the exemption is appropriate since the Appraiser Certification Board, Department of Taxation, will continue monitoring the appraisers. If an appraiser fails to perform up to the competency standard, she said disciplinary action would be taken.
SENATOR O’CONNELL MOVED TO DO PASS A.B. 153.
SENATOR SCHNEIDER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR AMODEI AND SENATOR RHOADS WERE ABSENT FOR THE VOTE.)
*****
Senator Townsend reopened the hearing on S.B. 216.
Michael Pennington, Executive Assistant, Office of the Attorney General, gave the names and titles of staff in the Office of the Attorney General, Las Vegas. He said staff would be available to assist consumers in Las Vegas regarding the consumer fraud issues.
Kimberly Maxson Rushton, Legislative Liaison, Office of the Attorney General, introduced staff members in Las Vegas via videoconference.
JoAnn Gibbs, Senior Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General, stated the State Contractors’ Board has obtained law enforcement status.
John C. Heide, Senior Investigator, Bureau of Consumer Protection, Office of the Attorney General, Las Vegas, stated, until about 1½ years ago, the State Contractors’ Board relied on the attorney general’s office investigators’ subpoena power and law enforcement status when such services were needed. The State Contractors’ Board investigators gained law enforcement authority 1½ years ago. He stated since those abilities were gained, the State Contractors’ Board investigators now file their cases with the district attorney’s office, not with the attorney general’s office. He added the only exception to that is cases in which deceptive trade matters are at issue.
Chairman Townsend asked if Mr. Heide was familiar with the Cascade Pool issue, in relation to fraudulent loans. Mr. Heide stated he was generally familiar with the case.
Chairman Townsend asked Mr. Heide to identify which agency has jurisdiction in these types of cases, when criminality could be an issue. Mr. Heide responded the State Contractors’ Board has initial jurisdiction. He said a deceptive trade violation is a misdemeanor, but it is an opening door for the attorney general’s office to initiate involvement. If the attorney general’s office discovers theft amounting to $250 or more, an additional felony charge could be imposed.
Ms. Gibbs added the pool contractor fraud case was referred directly to the district attorney’s office. She said the district attorney’s office is handling it. She stated there is no need for the Bureau of Consumer Protection to be involved now.
Chairman Townsend stated:
Perhaps a little history is necessary. Since the Chairman [Senator Randolph J. Townsend] created the office of consumer advocacy 20 years ago, subsequently restructured along with former Consumer’s Advocate Frederick Schmidt and Attorney General Del Papa, into your office, the Bureau of Consumer Protection, I’m not sure if there’s anyone who does know what your jurisdiction ought to be, or why you are in existence, better than I. We would hope, . . . given the legal flexibility . . . we believe you have just testified to as to possible dual jurisdiction or dual track, that the level of seriousness to which these problems have arisen would have given you an opportunity to join with the district attorney to bring this to a swift and just conclusion. I would include finding ways to protect consumers through the dissolution of the contract actions into which they have entered, and which the other party has obviously fraudulently participated.
Ms. Gibbs responded her office is working with the district attorney’s office in this matter. She said Mr. Heide is in contact with the district attorney’s office on a weekly basis. Ms. Gibbs explained her office is not taking the lead in these cases, but working jointly with the district attorney’s office on the contractor fraud cases. She said protecting consumers in this state has always been the priority of her office.
Chairman Townsend continued:
I have worked strongly [sic] with the attorney general and her credentials in the area of consumer protection are as strong as there are in this country. I want to make sure there are not any misunderstandings between she and you about your role in that [consumer protection]. Whatever intensity you can bring to helping the district attorney’s office and/or the State Contractors’ Board with something that is so scathingly fraudulent, we would certainly appreciate it.
Ms. Rushton noted the Cascade Pools case came to the attorney general’s office from two state agencies and the district attorney’s office. She said the Division of Financial Institutions as well as the State Contractors’ Board enlisted cooperation from the attorney general’s office on this case. She said her office takes these matters very seriously.
Chairman Townsend referenced the cease and desist letter issued by Lyndon Evans, the Deputy Commissioner with the Division of Financial Institutions, to United Federal Financial Corporation on August 11, 1999. He encouraged the use of stronger language when drafting this type of correspondence. He suggested stating the violation and the penalty in the letter. Chairman Townsend recommended Mr. Long meet with Mr. Evans and Mr. Walshaw, and then report back to him next week regarding changing the language to be used in a cease and desist order.
Joseph Long, Deputy Attorney General, Office of the Attorney General, testified from Las Vegas, stating he has spoken to Mr. Evans and Mr. Walshaw about the letter to cease and desist and about the events leading up to its draft. He said the Division of Financial Institutions informed Mr. Majeroff that United Federal Financial Corporation needed to turn the loan-processing activity over to a licensed loan broker. The loans could then be reassigned to United Federal Financial Corporation. He stated when that occurred, Mr. Majeroff would not be in violation of chapter 645B of NRS.
Chairman Townsend stated:
We are just trying to get to the bottom of a very serious issue. When consumers have a perception, I’m not saying what occurred is in fact true, but when they have a perception every time they call somebody that’s supposed to be a regulatory agency and their answer is, “Well, it’s the other agency’s responsibility,” it’s a very tough thing for people to accept. In this case, foreclosure on their home is the result of this problem. We would hope our lines of communication could be very good on behalf of consumers and, more importantly, let’s work together to clarify this jurisdictional issue on something this serious.
Ms. Rushton commented about a telephone call she received last week, regarding a jurisdictional issue. She responded to that call by explaining to the caller the Bureau of Consumer Protection (BCP) represents the state agencies and commissions. Ms. Rushton explained, also, the main jurisdiction of the BCP was to protect consumers. She added the BCP works alongside law enforcement to protect the citizens of Nevada.
Chairman Townsend closed the hearing on S.B. 216. Chairman Townsend presented Bill Draft Request (BDR) 53-556, BDR 53-577, and BDR 53-765 for committee introduction.
BILL DRAFT REQUEST 53-556: Revises provisions relating to safety programs for certain employers. (Later introduced as Senate Bill 316.)
BILL DRAFT REQUEST 53-577: Makes various changes to provisions concerning administration of Nevada occupational safety and health act. (Later introduced as Senate Bill 315.)
BILL DRAFT REQUEST 53-765: Makes various changes to provisions governing occupational safety and health. (Later introduced as Senate Bill 314.)
SENATOR O’CONNELL MOVED FOR COMMITTEE INTRODUCTION OF BDR 53-556, BDR 53-577 AND BDR 53-765.
SENATOR SCHNEIDER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
As there was no further business, the meeting was adjourned at 10:27 a.m.
RESPECTFULLY SUBMITTED:
Lydia Lee,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: