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22
Sun, May

LA Federal Judge Advances Trailer Park Fraud Lawsuit

AFFORDABLE HOUSING POLITICS - A federal judge in Los Angeles has ruled that a mobile home park investment fraud civil lawsuit, which I described in an earlier column as being in its "early days," can move ahead.

In effect, the court dismissed a defense argument that the case lacked enough merit to continue. 

The case (Robert Brine v. MHPI VII LLC et al, CV 21-1648-GW-JCx) is against defendants Ryan and Jamie Grady Smith, a high-profile couple in the mobile home park industry and Brain A. Dahn. In backgrounding the case, U.S. District Judge George H. Wu explained that "Brine alleges that Defendants defrauded investors, including himself, by misrepresenting their previous experience and capability to manage the Fund, by structuring the Fund as a Ponzi scheme, by incorporating numerous provisions that would extract excessive fees, and by misrepresenting the anticipated success of the fund." 

The judge also noted, as is routine in such early lawsuit hearings, that "the court must construe the complaint in the light most favorable to the plaintiff."  

The judge's ruling indicates that the lawsuit involves an investment fund created to purchase, manage and eventually sell mobile home parks. Part of the strategy, the plaintiff alleges, was to cash out equity from time to time via refinancing. Brine, among other things, also argues that the fund creators didn't re-finance so much as buy with cash then create fees by financing the already purchased parks. 

The case has national implications in part because of the high-profile Smiths and in part because the defendants are involved in many many mobile home parks through investment vehicles that are not tied to the fund questioned by the Brine lawsuit. Jamie Smith is the author of Trailer Cash, a how-to look for potential trailer park investors, while Ryan Smith has appeared alongside one of America's best-known economic commentators, the TV actor, media personality and former Nixon Administration member Ben Stein. 

Let me note that Ben Stein was not named in the lawsuit and has not been accused of any wrongdoing. 

It was not immediately clear when next steps will occur in the case but we will update as it advances. 

(Sara Corcoran is publisher of the National Courts Monitor and writes for CityWatch, Daily Koz, and other news outlets.)