Houchen, 7 others indicted

Dave Brooks

A federal grand jury indicted eight people, including former Mayor

Pam Julien Houchen, late Wednesday for fraudulently converting

apartments to condominiums, according to the United States Attorney’s

Office.

Houchen, a real estate broker at Pier Realty, and three others are

also being charged with corruption for concealing that she owned an

apartment building in a redevelopment area where she was prohibited

from doing so, officials said.

Officials are charging Houchen with selling at least eight

condominiums she knew were fraudulently converted, grossing more than

$1.7 million. She is also being charged with 11 counts of mail fraud

and seven counts of wire fraud. She could serve a maximum of five

years in federal prison for each count.

The other seven charged are Philip Benson, 72, the alleged

architect of the scheme and a real estate broker at Pier Realty in

Huntington Beach; Harvey Du Bose, 63, the supervising title officer

at Stewart Title of California in Irvine; Michael McDonnell, 38, an

investor who acted as a “straw buyer” for Houchen properties and

converted several other properties; Thomas Bagshaw Jr., 55, a real

estate agent and notary public who also worked with Benson at Pier

Realty; Howard C. Richey, 78, an investor and client of Benson;

Jeffrey Crandall, 44, an investor and client of Benson; and Michael

Cherney, 57, a real estate agent and client of Benson.

Five of the eight people charged live in Huntington Beach.

Separately, a deal is in the works to clear up the titles of condo

owners who bought illegally converted units, but not everyone is

signing on yet. Only a quarter of the affected condo owners have

agreed to the deal, which has five title companies paying the

majority of the fees to set things right. The rest of them plan to

wait and see how the deal goes.

“A lot of us are going to look at taking the next step and see

what is covered and what isn’t,” condo owner Aaron Frankel said.

“There are still a lot of questions we need to have answered.”

Earlier this year, the city’s Planning Department discovered that

120 condominiums had been converted from apartments without the

proper permits. To help bring the units up to code, the city agreed

to waive several building requirements, but told the new condo owners

they would have to pay as much as $20,000 a piece to help restore the

city’s affordable housing stock lost when the condos were converted

from apartments without the proper permits.

In November, city officials reached an agreement with five title

insurance companies -- Fidelity, First American, Land

America/Commonwealth, United and Stewart -- that would have the title

companies pay $10,000 per insured unit to clear up the title.

The other alternative approved by the City Council is for the

homeowners to pay a $17,900 affordable-housing fee, on top of several

permitting costs. Condo owners who don’t have title insurance can

agree to a $10,000 lien and let the title companies pay, or pay the

$17,900 city fee. The condo owners can also attempt to convert their

condominiums through a variance process, but that process requires

the condo owner to prove some type of hardship and many simply

wouldn’t qualify, Councilwoman Debbie Cook said.

Condo owners can also agree to convert their units back into an

apartment, although its unclear how such a drastic and costly move

would work.

“They now have the full spectrum to work with,” City Atty.

Jennifer McGrath said.

To participate in the settlement agreement, homeowners must also

agree to a number of additional requirements. The general appearance

of the building including roofing, doors, paint, parking and

landscape must be in good condition, and any work done on the

property must meet city codes. The condo owners must also submit a

map of their property and agree to city inspections to make sure the

unit is up to code.

Condo owner Richard Lugen said he won’t sign the settlement

agreement until he knows how much the inspections will cost and who

will have to pay for them.

“The first people who sign on to this, we’ll watch them go through

the process and see what happens,” he said. “They can be the guinea

pigs.”

One road block, Lugen said, is that all condo owners in a building

have to sign on to the agreement for it to go into effect, and he

isn’t sure his neighbors will be able to reach a consensus.

“For whatever reason, some of these people hate each other,” he

said.

Condo owners must chose one of the options to clear up their title

or the city will take legal action, McGrath said.

“Ultimately, the city will pursue these condo owners to cooperate,

or return their condos back to apartments,” she said. “All will have

to agree, or the property will be forced into code.”

Lugen is also worried that he’ll lose his legal recourse if he

signs the agreement. Language in the settlement waives the right of

the condo owners to sue the city for its role in the

conversionprocess, a section that he said concerns him since the

federal investigation into the conversions isn’t complete.

* DAVE BROOKS covers City Hall. He can be reached at (714)

966-4609 or by e-mail at [email protected].