MAILANDER’S MUSINGS - Carmen Trutanich is taking his ambulance chaser mindset to a new level in a wistful, wishful suit with which he hopes to shake down one of the City's largest de facto landlords, Deutsche Bank.
I call them a de facto landlord because Deutsche Bank is largely a note-holder--not even a landlord--of residential properties without residents. Deutsche Bank picked up a lot of distressed, liar loan-financed properties especially from Morgan Stanley and also from the likes of WaMu and IndyMac on the cheap in the US financial service meltdown of 2007-8. They also traded like Pokemon cards the financial instruments that bundled these properties, and probably still don't know exactly what they even own.
To the instant matter: there are 166 properties listed in Carmen's suit --the first comprehensive listing the City Attorney has provided the bank--and most of the violations go back to 2008. City law, the suit claims, entitles you to pray for $2,500 per day for every day you're in violation of LAMC code. Carmen is asking the Bank for the maximum $2,500 per day on properties like the one at 1762 North Glendale Boulevard--where the suit maintains "plywood being used to replace missing window glass." Carmen wants $2,500 per day since April 2009 on this property--or $1.9 million in fines, for boarding up a window, on a property that's worth about $200,000 total.
This kind of computation threatens the lawsuit, as it pencils out to $3 million in fines on any property tagged by Building and Safety in 2008. Most of these properties aren't worth more than $200,000...yes, Carmen in this suit is asking for over 10 x the value of the property in most cases.
This appears to me to be putting the suit in danger of being dismissed as frivolous. This kind of capricious filing, which we've seen before from Carmen, may even in fact threaten the bank's Trust department's solvency. While DB is an enormous bank, the Trust department at Deutsche Bank presently does not maintain assets worth much more than $150 million dollars stateside. But Carmen is asking Deutsche Bank for over twice the amount of its stateside trust assets. (The commercial side of the bank is far more robust.)
Deutsche Bank has some cards to play here, and they may not be to the City's liking. What if, in the worst case, pleading poverty, they simply walked away from these properties? If Deutsche Bank Trust thought it might actually approach a loss of even 30% on any given property--about 30 days' worth of fines--it would simply be wisest to try to forfeit the properties to the City at its earliest convenience. The City wouldn't collect a nickel and would be obliged to wait years while a long rolling bankruptcy sale shook the properties out of the City's hair.
Which would be funny, because in the meantime the City's Housing Department, already the City's biggest landlord, would be obliged to manage the properties--and the HD has about the same track record at property management as offshore banks do.
But let's say this lawsuit is remotely successful at shaking down an offshore custodian who owns properties nobody really wants. Let's say that Deutsche Bank and the Carmen come to a deal whereby the City collects a reasonable sum on the properties, say $20,000 a property, winning about $3 million in total--a figure that wouldn't even keep the City's smallest department, the Department of Cultural Affairs, running for six months. ( I think $3 million is a realistic ceiling, because much above that and the bank has to consider forfeiting property). But the truth is that the figure won't even pay for the cost to the City of suing Deutsche Bank in the first place.
And wait a minute--what kind of damage does such a lawsuit do to our City? The Miami Herald today, in reporting the lawsuit, notes that it points to "boarded-up, graffiti-scrawled, trash-strewn eyesores that have led to increased crime in neighborhoods and contributed to falling home prices." It takes a lot of PR to undo a rap sheet like the one just presented to an AP real estate scribe for consumption all around the country. I don't think $3 million is going to cover it.
An ambulance chaser mentality doesn't work well in attempting to administrate civic government. This is a complicated case, and I expect this one, like so many others, will end very badly for Carmen Trutanich's team--or, like the medical marijuana purveyor's cases, never end at all.
(Joseph Mailander is a writer and an observer. He blogs at street-hassle.blogspot.com where this column was first posted.) -cw
Vol 9 Issue 36
Pub: May 6, 2011