CINCINNATI — A judge has granted class-action status to a federal fraud lawsuit filed against Blue Ash-based Build Realty for alleged home resale fraud, opening the case to hundreds of potential plaintiffs in Kentucky and Ohio.
U.S. District Judge Douglas Cole certified the lawsuit as a class action on Feb. 21, a landmark decision that could result in Build Realty and several local businesses having to pay millions of dollars in damages if they lose in court.
“The damages are substantial, with each plaintiff amounting to tens of thousands of dollars,” said Bill Markovits, an attorney with the Finney Law Firm who represents the victims. “A conviction on the racketeering charge would triple the damages.”
Build Realty, which also operated as Greenleaf Funding, promoted itself as a one-stop shop for home flippers. It advertised through its website, social media, direct mail and free seminars, offering to teach people how to flip homes for a profit with little capital and no credit check.
But the lawsuit alleges the rehabbers were duped by a complex fraud scheme based on deceptive marketing, vague contract terms, illegal trusts and mail fraud.
Lot Tan
Attorney Bill Markovits is representing the alleged victims in the Build Realty lawsuit.
Markovits said the program lasted from 2013 until 2019, when the company hired workers to install more than 5,000 road signs advertising Build Realty around Greater Cincinnati, Dayton, Columbus and Northern Kentucky.
“In many ways it was a scam,” Markovits said. “They said, 'We're going to buy in bulk and pass the savings on to you.' But that wasn't the case. They bought off the market, marked up the property, and then the customer paid the marked-up price.”
The alleged victims believed they had signed purchase agreements but never actually owned the properties and “became beneficiaries of a trust,” Markovits said.
Lawyers for Build Realty and the other companies named in the lawsuit did not respond to several requests for comment. In court filings, they argued that they had satisfied many investors and operated legitimate businesses.
Lot Tan
Darryl Smith and Dwight Price said they worked with Build Realty on renovating their North Avondale home and lost $30,000.
The lawyers have asked the Sixth Circuit for permission to appeal Cole's ruling on class certification, and have also filed a motion to stay the case in the meantime.
“This litigation has long been an attempt to make something out of nothing… Plaintiffs have worked tirelessly to turn a minor commercial dispute into an elaborate criminal enterprise,” defense lawyers wrote in a 2021 court filing.
Anyone who paid Build Realty $10,000 to become an investor is eligible to join the class, which numbers roughly 200 to 300 people. The judge also named a smaller class of plaintiffs estimated at 30 to 40 people who lost properties when Build Realty repossessed or resold them after defaulting on their loans, according to Markovits and court documents.
That's exactly what happened to brothers Dwight Price and Darryl Smith after they wrote Build Realty a check for $10,000 to renovate their North Avondale home. They ended up losing $30,000 and hundreds of hours of labor, they said, and with unexpected repair costs mounting, they pulled out of the project because they could no longer afford the $1,800 interest-only loan payments.
Lot Tan
Lakrisha Hicks said she lost $70,000 while working with Build Realty to renovate two homes in Deer Park.
“I thought this was a good deal. Maybe I could find a house I could resell and make a lot of money from,” Price said in a 2019 interview.
Contacted by WCPO on Tuesday, Smith said he and his brother are interested in joining the lawsuit as class-action members.
LaKrisha Hicks, who WCPO first interviewed in 2019, also said this week that she's interested in joining the lawsuit.
“I think there are some legitimate parts, but overall, the way they're selling them borders on fraud,” said Hicks, who said she lost $70,000 on two Deer Park homes after working with Build Realty.
What attracted Hicks to Build Realty was that it could provide everything from property listings to contractors and lenders, which is what makes this case a fraud, Markovits said.
The lawsuit began when local residents who run three small businesses — Compound Property Management, Leone 1 and R&G Cincy Investments — filed suit after a business dispute with Build Realty. The suit was filed in Hamilton County District Court in February 2017.
“A year and a half after the lawsuit was filed and after a state court judge fined Build $10,000 for delaying discovery, plaintiffs were able to obtain documents that demonstrated the depth and breadth of the federal RICO statute's implications,” Markovits said. “As it became clear that this case was at the heart of a federal RICO lawsuit, plaintiffs voluntarily dismissed their state court lawsuit and filed suit in federal court.”
Lot Tan
A judge certified the racketeering lawsuit against Build Realty as a class action.
The RICO statute allows lawsuits to be filed alleging that various defendants acted in concert.
Markovits filed his lawsuit in federal court in February 2019, but it was delayed for years because of the pandemic and changes in judges.
“Class actions are incredibly costly for any defendant, but are particularly burdensome in this country where most of the defendants are small businesses and individuals. This litigation has already significantly affected their businesses and, following certification of the class action, their outlook becomes even bleaker,” the defense lawyers wrote in a motion seeking an injunction to block the lawsuit.
The list of defendants named in the lawsuit is long and includes Gary Bailey, who taught the monthly investment seminars; GT Financial LLC, which allegedly offered revolving lines of credit to purchase homes from third parties; First Title Agency Inc., which is accused of inflating closing costs, creating false documents and making misrepresentations; as well as several limited liability companies and other individuals.
“(They) split profits, commingled funds, had the same business addresses, had the same employees and independent contractors, and made loans to each other…They were all alter-egos of each other,” according to the lawsuit.
Olga Ferry said she lost all the money she had saved after four years in the U.S. Navy when she invested in Build Realty to renovate a duplex in the Walnut Hills neighborhood.
Lot Tan
Olga Ferry, a California real estate agent, said she lost $160,000 after working with Build Realty to renovate a home in Walnut Hills.
“They're always pumping me with this nonsense, luring me in and saying, 'Oh, this is a great investment,'” said Mr. Ferry, now a real estate agent in California. “They're sneaky and they create company upon company, so you can't do anything.”
Ferry estimates her total losses at $160,000, plus two and a half years of hard work. She wants to join a class action lawsuit, but isn't optimistic she'll get her money back.
“I want justice for these people,” she said.
The key question of whether Build Realty is a legitimate business or a fraudulent scheme will ultimately be decided by Cole or a jury.
“The core issues are the legality of Build Realty's business practices and the legal meaning of certain agreements. These central questions will be resolved for the entire class by a single opinion of this court or a single jury verdict,” Cole wrote.