CINCINNATI — A judge granted class action status to a federal racketeering lawsuit against Blue Ash-based Build Realty in an alleged house-flipping scam, opening the case up to hundreds of potential plaintiffs in Kentucky and Ohio.
U.S. District Court Judge Douglas Cole certified the suit as class action on Feb. 21, a milestone ruling that could expose Build Realty and several local companies to millions in damages if they lose at trial.
“It’s in the tens of thousands of dollars for each plaintiff, so it ends up being a significant amount of damage,” said attorney Bill Markovits, who is representing the alleged victims with the Finney Law Firm. “If there’s a racketeering verdict, those damages are tripled.”
Build Realty, which also operated as Greenleaf Funding, advertised itself as a one-stop shop for home flippers. It advertised through websites, social media, direct mail and free seminars, offering to show people how to profit by flipping homes with little money and no credit checks.
But rehabbers were duped by deceptive marketing, ambiguous contract terms, and illegal trusts, and through a complex racketeering scheme that was based on mail fraud, according to the lawsuit.
The alleged scheme lasted from 2013 to 2019, Markovits said, with the company hiring workers to plant more than 5,000 road signs advertising Build Realty around the Greater Cincinnati, Dayton, Columbus and Northern Kentucky.
“In many, many respects, it was a scam,” Markovits said. “They said, ‘We buy in bulk and pass the savings onto you.’ They didn’t. They bought from the market, they marked up the property, and then you paid at a marked-up price.”
Alleged victims believed they had signed a contract for purchase, but they never actually owned the property, Markovits said, instead, “You became the beneficiary of a trust.”
Attorneys for Build Realty and the other companies named in the lawsuit did not respond to several requests for comment. In court filings, they insist they operated a legitimate business with many satisfied investors.
Defense attorneys asked the Sixth U.S. Circuit Court of Appeals for permission to appeal Cole’s ruling on the class certification. They also filed a motion to stay the lawsuit from moving forward in the meantime.
“This case 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 attorneys wrote in a 2021 court filing.
Roughly 200 to 300 people could be eligible to join the class, which is anyone who paid $10,000 to Build Realty to become investors. The judge also named a smaller sub-class of plaintiffs, estimated to be 30 to 40 people, who lost their properties when Build Realty reclaimed them or resold them due to default, according to Markovits and court filings.
That’s what brothers Dwight Price and Darryll Smith said happened to them after they wrote a $10,000 check to remodel a North Avondale home with Build Realty. They said they ultimately lost $30,000 and hundreds of hours of sweat equity, before they walked away from the project after unexpected repair costs ballooned and they couldn’t afford to make $1,800-interest only loan payments any longer.
“We thought it was a good deal, that we could find a house that we would be able to flip and make a lot of money off it,” Price said in a 2019 interview.
When contacted by WCPO on Tuesday, Smith said he and his brother are interested in joining the lawsuit as class members.
“I think there are portions that may be legitimate, but overall, the way that they sell it could be close to a scam,” said Hicks, who said she lost $70,000 on two houses in Deer Park after partnering with Build Realty.
The very thing that attracted Hicks to Build Realty — that it could provide everything from a list of properties to a contractor and a lender — is what Markovits says makes it a racketeering case.
The case started when the local residents behind three small companies — Compound Property Management, Leone1 and R&G Cincy Investments — filed a lawsuit after a business dispute with Build Realty. The suit was filed in the Hamilton County Court of Common Pleas in February 2017.
“A year and a half after the case was filed, and after the state court judge sanctioned Build $10,000 for delaying discovery, plaintiffs were able to obtain documents that showed the depth and breadth to which the federal RICO Act was implicated,” Markovits said. “When it became clear that this case was centrally a federal RICO case, plaintiffs voluntarily dismissed the state-court action and filed in federal court.”
The RICO Act allows a variety of defendants to be sued by claiming they acted together.
Markovits filed the suit in federal court in February 2019 but it was delayed for years due to the pandemic and several judge reassignments.
“Class litigation is incredibly expensive for any defendant, but it is especially oppressive here, where the defendants are mostly comprised of small companies and individuals. This litigation has already significantly affected their businesses, and, after the certification of the class, their prospects are even dimmer,” defense attorneys wrote in a motion to stay the lawsuit.
The list of defendants named in the lawsuit is long, including Gary Bailey, who taught monthly investment seminars; GT Financial, LLC, which allegedly provided a revolving line of credit to buy homes from third parties; First Title Agency, Inc., which is accused of inflating settlement costs, creating fraudulent paperwork, and misrepresentation; plus several limited liability companies and other individuals.
“(They) share profits, commingle funds, have the same business address, have the same employees and independent contractors, provide loans to one another … they are all alter egos of one another,” according to the lawsuit.
Olga Ferree said she lost her life savings — everything that she had saved from the four years she served in the U.S. Navy — when she invested with Build Realty to renovate a two-family house in the Walnut Hills area.
“They would always feed me all of this nonsense and lead me on and say, 'Oh, it's a great investment,'” said Ferree, who is now a real estate agent in California. “They are sneaky, they create corporation on top of corporation and there's nothing you can do.”
Ferree estimates her total loss at $160,000 plus two and a half years of sweat equity. She wants to join the class action lawsuit but isn’t optimistic about getting her money back.
“I want justice for these people,” she said.
The key question of whether Build Realty is a legitimate business or a fraud scheme, may ultimately be decided by Cole or a jury.
“The core inquiry is the legality of Build Realty’s business practices and the legal meanings of certain agreements. These central questions are subject to class wide resolution with one opinion by this court, or one verdict by a jury,” Cole wrote.
