John Nelson fought Fulton County and the private tax lien industry for years to keep his house in Inman Park. He lost the battle and nearly lost much more.
After the Edgewood Avenue house was foreclosed in 2000 and sold at a sheriff’s auction, Nelson made the best of a bad situation and filed a claim for the excess funds — proceeds from the sale remaining after overdue taxes and other debts were paid. He was entitled to $212,000 under state law.
But somebody got there first, the sheriff’s office told him.
Nelson’s money was in a county fund that now totals $11.9 million, all from the excess proceeds from foreclosure sales. Most belongs to former property owners like Nelson.
It’s a perfect pot of money to attract con artists, experts say: there’s lots of it — Fulton collected $47.8 million over the last 10 years; oversight is easily dodged; and property owners who are due the money frequently don’t know it belongs to them.
Fulton has a troubled history with the fund. Seven years ago, it was at the center of a scandal that reached into the highest levels of county government and deposed a Fulton sheriff.
It’s not clear how often fraudulent claims are made on the fund. The company that filed a claim for Nelson’s proceeds said the claim was made in error.
But property tax and legal experts agree cases such as Nelson’s are not isolated and the fund will attract scam artists as long as oversight is lax.
The county makes little effort to prevent fraud and has demonstrated unwillingness to prosecute fraud even when a property owner brings charges, they say.
Other metro area counties have tougher controls on access to the funds.
Attorneys with knowledge of Fulton’s property tax operations say fraudulent claims on the fund are not uncommon.
“I think a lot of people have been ripped off like this,” said Frank Moore, Nelson’s attorney. “You have however-many millions of dollars sitting in a pot and people thinking, ‘well, how can I get a piece of that?’”
In Nelson’s case, a company named Guishard, Wilburn and Shorts submitted a claim for $212,000 in Nelson’s name, with a photo ID picturing a man who was not Nelson and a forged power of attorney, Moore said. The company has said they believed they were submitting documents provided by John Nelson.
The signature on the power of attorney was not Nelson’s. The notarization was also forged, according to the Secretary of State’s office in Colorado, where the document was supposedly notarized and where Nelson lives.
After Nelson filed his claim, the sheriff’s office asked Fulton Superior Court to settle the competing claims and Guishard, Wilburn and Shorts withdrew the claim they filed. Neither the sheriff’s office or the district attorney investigated, although Moore said he and Nelson requested an investigation.
Nelson took his case to U.S. District Court and a Rome judge released the money to Nelson in October.
Nelson said he never received notice that he owed $1,669 in taxes on the house or notice of the foreclosure auction.
The Atlanta Journal-Constitution has reported extensively on the Fulton Tax Commissioner’s controversial system of collecting overdue taxes by selling liens to private companies. The reporting found that failure to notify is a common complaint among property owners who get caught in the system. Nelson’s lien was sold to Vesta Holdings, the largest purchaser of Fulton’s tax liens.
Something similar happened to Sara and William Cochran. Vesta purchased a tax lien on their house in Fairburn. It was sold at a Fulton sheriff’s auction in 2000. Earlier this year, the Cochrans learned a man calling himself William Cochran had claimed the $65,000 in excess funds.
The Cochrans are still living in the house and fighting to keep it. “It’s just a big rip-off and I don’t know how you fight it,” Sara Cochran said.
The Fulton sheriff’s office referred questions to the county attorney, whose office did not return numerous phone calls. The county made Nelson’s tax file available, but the file doesn’t indicate why Fulton nearly gave Nelson’s money to someone else. Neither Fulton Commission Chairman John Eaves or Vesta Holdings returned phone calls seeking comment last week.
Allen Pendergrass, the sole stockholder of Guishard, Wilburn and Shorts and a Fayette County resident, said the power of attorney in the Nelson case was not forged. Learning Colorado officials considered it a forgery, he said his company did not falsify it.
Guishard, Wilburn and Shorts advertises itself as one of the nation’s leading providers of “asset recovery” services. According to the company’s website, it identifies and collects unclaimed funds held by government agencies and estates for individuals and corporate clients. In exchange, the company keeps a percentage.
The company estimates state, municipal and federal agencies nationally hold $400 billion in unclaimed funds.
Guishard, Wilburn and Shorts had revenues of $300,000 in 2010 and $681,000 in 2009, according to testimony in a pending Chapter 7 bankruptcy the company filed in June.
Pendergrass said his company sends thousands of letters offering its services. The letters ask for a copy of a driver’s license, a signed power of attorney form and a signed form agreeing to a fee for recovery of money the potential client is owed. Guishard Wilburn and Shorts then submits the documents to the government agency to recover the money.
Pendergrass said he is not responsible if people provide fraudulent documents.
“We don’t control what we receive,” Pendergrass said. “We believed it was Mr. Nelson.”
Pendergrass said Guishard, Wilburn and Shorts is a well- established company, but government records show it has had problems beyond bankruptcy.
The Arizona Department of Financial Institutions ordered Guishard, Wilburn and Shorts to stop doing business in the state in 2006 after finding the company was practicing law without a license and operating as a collection agency without a license.
Tempting targets
All Georgia counties collect excess funds and it’s common practice across the country.
The funds are collected by the sheriff’s department or the tax commissioner’s office. If a property is sold for more than the value of the tax bill, penalties and other debts against the property, that excess cash is held until someone claims it.
Mortgage companies often claim the funds to cover debt.
Often, ownership is unclear or property owners are unaware they can claim the extra proceeds. As a result, the money can sit for years and becomes a tempting target.
Fulton has long-standing issues with the excess funds and with its overall handling of delinquent property taxes.
Former Sheriff Jackie Barrett, now Jackie Washington, was suspended in 2004 after it was revealed she improperly invested $7 million in excess funds. The county lost $2.5 million.
Washington said at the time she was tricked into investing the money. Her chief of staff and an employee of one of the companies went to prison, but Washington was not charged.
Putnam County Sheriff Howard Sills, appointed by then-Gov. Sonny Perdue to investigate, found shell corporations and additional suspects in three states and abroad, according to his 2004 report to Perdue.
Sills said last month he considered Washington to be a fly speck in Fulton County’s property tax problems.
“I also believe there is a systematic pattern of criminal racketeering that has gone on, and continues to go on, related to the purchase of tax liens and the subsequent sale of properties pursuant to tax [liens] in Fulton County,” Sills said in his seven-year old report.
Sills said last month he suspects nothing has changed in Fulton.
Fulton Tax Commissioner Arthur Ferdinand, whose office collects property taxes and sells liens that result from unpaid taxes, would not comment for this story.
Safeguards
John Ayoub, a former attorney with Fulton County and now a real estate lawyer who represents tax lien purchasers, said he submitted claims for excess funds on behalf of various companies, including Guishard, Wilburn and Shorts, until 18 months ago.
He no longer submits claims, Ayoub said, because fraud is too easy.
Forging a power of attorney is simple; often the people entitled to the money “don’t know about it and will never know about it,” Ayoub said.
“There’s an element of shadiness that you can’t really look behind,” Ayoub said. “It puts you in an awkward position if they’re false.”
Even so, Ayoub said, the problem occurs all over Georgia and curbing the abuses is difficult.
Other metro area counties have safeguards to reduce the chances of paying fraudulent applicants.
DeKalb County does not release money to anyone using a power of attorney; Cobb requires court action for anyone other than the property owner to claim funds; Gwinnett requires court action for any claim over $10,000.
Fulton’s primary safeguard is requiring people claiming excess funds to fill out a short application form.
DeKalb stopped accepting power of attorney documents more than 15 years ago, in part to avoid dealing specifically with Guishard, Wilburn and Shorts, said Andrew Booth, DeKalb deputy tax commissioner and director of delinquent collections.
“There’s an awful lot of trickery that’s gone on,” he said. “We don’t open ourselves up to the subject of fraud.”
The best way to prevent fraud is by prosecuting, Ayoub said.
Moore, however, said the Fulton sheriff’s and district attorney’s offices ignored his pleas to prosecute in Nelson’s case.
“Someone came to their office right under their nose to commit a crime and I’ve provided you with the proof on a silver platter,” Moore said.
District Attorney Paul Howard acknowledged in an email that he “apparently” recieved an email from Moore, but Howard said he had no “true awareness” of the issue until it was brought to his attention by the AJC. Now, he said, he will refer it to the state Attorney General’s Office.
Wilmer “Buddy” Parker, an Atlanta lawyer who worked as a prosecutor for 19 years, said prosecuting the case could prevent fraud in the future.
“To deter like-minded individuals, [we should show] we’re not going to let people get away with this; we’re not asleep at the switch.”
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Funds in four metro counties
All Georgia counties maintain accounts to hold the excess proceeds from sales of properties for overdue taxes. Here is the standing of those funds for four metro area counties:
Sources: County tax commissioner’s offices.
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How the process works
The legal process of seizing properties for overdue taxes culminates when the property is sold at a sheriff’s auction.
- Once a property is sold, overdue taxes, penalties and other known debts are paid from the proceeds.
- Any difference remaining between the sale price and the outstanding debt goes into a fund managed by the county sheriff.
- Other creditors, such as mortgage holders, may make claims on the funds held by the sheriff.
- State law gives the original property owner the right to claim any funds left once creditors are paid.
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How we got the story
Over the last year, The Atlanta Journal-Constitution has published a series of stories about the sale of tax liens in Fulton County and the problems with the system.
Fulton routinely sells overdue tax bills to private third parties who then assume collection responsibility.
Gwinnett also sells liens, but does not rely on the sale of liens as heavily as Fulton. Other counties use staff and outside contractors to collect overdue taxes.
Many of the companies that buy the liens and eventually force foreclosure sales also are associated with private companies that buy the properties at auction. None of this benefits property owners or, some argue, taxpayers.
The relationship between Fulton’s practice of selling liens and the number of properties that are eventually sold at auction is unclear, in part because Fulton County has repeatedly refused to release property tax data requested under Georgia’s Open Records Act.
In any case, Fulton’s excess funds pool, generated by tax sales, is much larger than those currently held by DeKalb, Gwinnett or Cobb, even in proportion to the number of taxable parcels of property.
The connections between the sale of tax liens and the collection of excess funds inspired the AJC’s consumer watchdog reporter to examine the administration of excess funds by the Fulton County Sheriff’s Department.
Neither the Fulton County Sheriff’s office, District Attorney’s office nor the county attorney’s office agreed to discuss fraudulent claims on excess funds. But the AJC interviewed current and former county employees, employees of neighboring counties and law enforcement and property tax experts.
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