Dismissal sought in Indiana AG’s lawsuit involving tax sale fraud


INDIANAPOLIS (WISH) — Attorneys for out-of-state real estate companies accused of swindling Hoosiers out of thousands of dollars in tax proceeds want a judge to dismiss a lawsuit filed by the Indiana Attorney General’s Office.

Using the analogy of where there’s smoke there’s fire, defense attorney Scott Barnhart told Judge Sheryl Lynch: “In this case, there’s not even smoke.”

Barnhart accused the Indiana Attorney General’s office of conducting a “fishing expedition,” alleging that the attorney general’s lawsuit lacks specific allegations and that it is “vague and unsubstantiated.”

In February, Indiana Attorney General Greg Zoeller’s office filed a lawsuit in Marion Circuit Court. The lawsuit alleges that three out-of-state companies and their owners concocted a tax sale scheme that preyed on vulnerable Hoosier homeowners who were uncertain of the state’s tax laws regarding real estate.

Here’s how Zoeller’s office alleges the scheme worked: When a homeowner falls behind on their property taxes, the county lists that property in the tax sale. The minimum bid for the property corresponds with the amount of taxes owed. If the property is sold for a higher amount, that creates a surplus. If the winning bid includes a surplus, the county keeps the tax money owed and the original homeowner is entitled to any surplus beyond what may be owed to a mortgage lender. The homeowner has one year to redeem the property if he or she can repay the taxes owed.

It is during that one-year time frame that Zoeller’s office alleges FLRC, LLC, Coastal Title, LLC and Oak Tree Title, LLC as well as Diana Castro, Craig Talkington and David Faqua swooped in and deceived 48 homeowners by making misrepresentations about their legal rights to redemption or any surpluses in the tax sale.

Zoeller’s office claimed that “by exploiting the homeowner’s unfamiliarity,” the defendants and their agents persuaded the homeowners to sign quitclaim deeds to their properties in exchange for $450. It is estimated that the defendants paid 47 original owners a total of $13,640 for signing the quitclaim deeds, according to a release from Zoeller’s office. The release also stated the defendants were eligible to submit claims for more than $3.2 million in surplus tax payments.

Barnhart argued in court Wednesday that the lawsuit lacks specifics in defining the roles that each of the defendants allegedly played in this scheme.

“They are required to make specific allegations related to that contention,” Barnhart said.

But deputy attorney Derek Peterson argued that his office has jurisdiction to bring the lawsuit and that it has met legal tests needed to allow the complaint to continue through the court system.

“This isn’t a witch hunt,” Peterson said. “We have a very good idea what we’re talking about.”

Judge Lynch made no decision on the motion to dismiss the case. Instead, she ordered both sides to submit proposed orders in the next three weeks. Another defense attorney, Tarek Mercho, who represents FRLC, LLC filed a separate motion to dismiss. That will be heard later this year.

Afterwards, both Barnhart and Peterson declined to comment and would not respond to follow-up questions.

Michael Stokes, who used to own property in Fountain Square, said he lost out on nearly $41,000, claiming that FLRC, LLC misrepresented themselves.

“It was my mistake; they drove me crazy,” said Jacqueline Stokes, who said she now lives in Plainfield. “They kept wanting me to sign over the title. They offered me a check for $450 and I took it.”

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