Tag Archives: Haitham Hijazi

Current director of Permitting, Inspections and Enforcement previously sold Microsoft counterfeits

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Who vets hiring and recruitment in the Prince George’s County government?

Long before he became director of the Prince George’s County Department of Permitting, Inspections and Enforcement (DPIE), but while working for the county, Haitham Hijazi and his relatives were in business selling counterfeit Microsoft products.

Hijazi had already become chief of the county’s engineering services. In 1994, he was promoted to associate director of the Department of Public Works and Transportation’s office of engineering. In 1995, in federal court, Microsoft sued Hijazi, his wife, other relatives, and their companies engaged in selling Microsoft knock-offs, and won. See case linked here and here.

The lawsuit, titled Microsoft Corp. v. Grey Computer, et al., was filed December 21, 1995, in Baltimore (United States District Court, Southern District of Maryland). The published ruling can be found in LexisNexis. (910 F. Supp. 1077, Civ. A. No. AW 94-221.)

Plaintiff’s attorneys were Preston, Gates, now after mergers named K & L Gates.

The defendants were Grey Computer, Inc., owned and controlled by the Hijazis; Haitham Hijazi; his wife, Adieba Hijazi; Bilal Hijazi; Husim Hijazi; and Integrated Computers Electronic, Inc., another Maryland corporation owned and controlled by the Hijazi family.

The memorandum opinion by Judge Alexander Williams, Jr., lays out the case with laudable clarity:

Microsoft Corporation (“Microsoft”) instituted this civil action against Grey Computer, Inc. (“Grey”), Integrated Computer Electronic, Inc. (“ICE”), Intelligent Data Systems (“IDS”) and their respective principals.[1] Microsoft claims that Defendants infringed upon their copyrights and trademarks by selling or distributing counterfeit copies of Microsoft’s software products.

Before his appointment to the bench, Judge Williams had served as a States Attorney, a public defender, and a Juvenile Master in P. G. He became a federal judge the same year Haitham Hijazi became a public official in the P. G. County Office of Engineering.

Opening of DPIE

From the county press release announcing Hijazi’s appointment as director of the newly created DPIE:

Earlier in his government career, Dr. Hijazi served as the Associate Director of DPW&T’s Office of Engineering from July 1994 – October 2004; and, prior to that, he was the Chief of the Engineering Services Division within the Office of Engineering.  Before joining Prince George’s County Government, Dr. Hijazi was the Chief Engineer and Operations Manager for Light, Elliot and Associates, a private engineering consulting firm located in Adelphi, Maryland.

Microsoft discovered the counterfeits:

On 31 January 1994, Microsoft commenced this action by filing its Complaint against Grey Computer, ICE and their respective principals, among others. In its original complaint Microsoft alleged copyright infringement, trademark infringement, false designation of origin and unfair competition arising out of the Defendants’ purported sale of counterfeit copies of Microsoft’s software products. On 1 February 1994, Microsoft personnel accompanied the U.S. Marshal Service as it executed a Writ of Seizure and Impound issued by this Court against Grey and ICE. Consequently, Microsoft obtained information indicating that Grey and ICE were involved in unauthorized distribution of counterfeit versions of Microsoft MS-DOS and Windows software products. Such information included a recently arrived shipment of approximately 1,000 units of alleged counterfeit Microsoft software products from Direct Wholesale. The information also included business records of Grey and ICE which confirmed that Direct Wholesale was the source of supply for the seized units of unauthorized Microsoft software products.

Microsoft then went farther back up the distribution pipeline:

On 2 February 1994, Microsoft filed its First Amended Complaint adding Direct Wholesale as a party defendant and obtained a Supplemental Writ of Seizure and Impound against Direct Wholesale. On 4 February 1994, the U.S. Marshal, accompanied by Microsoft’s attorneys, seized a box of eighteen diskettes containing Microsoft Windows software and along with various business records from Direct Wholesale. The records suggested that Direct Wholesale distributed counterfeit Microsoft software products nationally, as well as to Grey and ICE. The records, some of which were cryptically coded, also indicated that Direct Wholesale purchased and distributed unauthorized Microsoft software products in an unusual and suspicious manner. The seizures eventually revealed that Direct Wholesale purchased and distributed approximately 45,848 units of counterfeit Microsoft software products. Thereafter Microsoft filed another amended complaint adding Direct Wholesale’s sole shareholders and officers, Dewitt Williams and Timothy Mazoch, as party defendants.

Microsoft also won its amended case against the other individuals and another company involved in the production and sale of Microsoft knock-offs, moving for

summary judgment on issues of liability and damages against Direct Wholesale, Dewitt Williams and Timothy Mazoch (collectively “Defendants”). It also seeks a permanent injunction to prevent Defendants from further distributing, offering for sale or selling counterfeit computer software bearing Microsoft’s marks.

As Judge Williams summarized the two opposing positions in our adversarial court system,

Microsoft urges that this is a clear cut case of copyright and trademark infringement. Microsoft alleges Defendants distributed counterfeit goods, bearing Microsoft’s marks. Microsoft asserts that Defendants distributed poor quality copies of its copyrighted works and deceived consumers.

 Defendants urge that they were innocent infringers. Williams and Mazoch posit that they conducted Direct Wholesale’s business according to the practices and procedures they learned while working as salesmen/brokers in the computer software field.

The Hijazis and their companies then sued their suppliers. They were able to settle out of court with Microsoft, but the unambiguous court’s ruling enjoined them from selling any more of the pseudo-Microsoft products.

Microsoft subsequently examined about 1,000 units of the seized software. The examination confirmed Microsoft’s suspicions that the software products were unauthorized and counterfeit reproductions of Microsoft software products. ICE and Grey, among others, filed crossclaims and a third-party complaint against Direct Wholesale. Microsoft settled its dispute with ICE, Grey, Adieba Hijazi, Bilal Hijazi, Hiatham Hijazi, Husim Hijazi, Intelligent Data Systems, Inc. and Nasser Faraj. Accordingly, the Court entered separate stipulated permanent injunctions against each of these defendants.

The recovered counterfeits were ordered turned over to Microsoft for destruction.

Based on information it gathered during the seizures and other relevant information, Microsoft moved for summary judgment against Direct Wholesale, Williams and Mazoch on its claims of copyright and trademark infringement, unauthorized distribution, false designation of origin and unfair competition. On 25 September 1995, the Court heard oral argument regarding Microsoft’s and ICE’s motions for summary judgment. Despite notice, Defendants chose not to attend the hearing. For the reasons set forth more fully below the Court will issue a written order granting Microsoft’s and ICE’s motions for summary judgment as to their third-party complaint. The Court will also grant Microsoft’s request for a permanent injunction and will order the impounded counterfeit software products delivered to Microsoft for destruction.

The case seems to have been relatively clear. The defendants did not dispute Microsoft’s ownership “of all of the software products at issue.”

Microsoft has provided the Court with evidence showing that the copyrights in all of the Microsoft products involved were registered with the United States Copyright Office in compliance with the Copyright Revision Act of 1976 and regulations flowing therefrom. See 17 U.S.C. § 101, et seq. Microsoft has valid Certificates of Registration for all of its software products. Moreover, it has been and still is the sole owner of all right, title and interest in, and to, the relevant copyrights and Certificates of Registration.

The defendants also did not dispute that “they were involved in copying Microsoft’s software products.”

Defendants Williams and Mazoch admit that from November 1993 through January 1994, ninety to ninety-five percent of their business involved the distribution of software products. While Williams and Mazoch claim that only eighty-five to ninety percent of their software sales involved the distribution of Microsoft software products, the invoices seized from Direct Wholesale indicate that nearly all of its business involved the distribution of counterfeit Microsoft software products during that time period.

Such arguments as the defendants did present were rejected by the court. For example,

Defendants argue that they did not intentionally copy Microsoft’s products. They posit that they had never seen and had no knowledge of Microsoft’s prerequisite licensing practices or of any of the limitations Microsoft imposed upon product distribution.

As the court wrote,

There is no dispute that Williams and Mazoch received the news releases regarding the sale of Microsoft’s software products and the restrictions. Williams and Mazoch are experienced computer software professionals with experience in the software industry dating back to 1989. They both had enough business savvy to engage in a successful, albeit, illegal business venture.

Regarding the thousands of computer products being distributed through ICE, the Hijazis’ company,

Finally, Defendants urge that Microsoft has only presented circumstantial evidence of copying. Defendants contend that there is no factual basis for Microsoft’s conclusion that the various units of software it examined “appeared identical” to Microsoft’s software products. They further contend that when Microsoft seized the software shipment from ICE, it had no way of knowing if the boxes had been previously opened or unsealed. Thus, according to Defendants, Microsoft had no way of knowing if the boxes had been tampered with after leaving Direct Wholesale.

This argument was also rebuffed by the court:

Microsoft counters that the facts of this case coupled with Defendants’ admissions clearly establish that the units shipped by Direct Wholesale and seized at ICE on 1 February 1994 were from Direct Wholesale and were counterfeit. Microsoft directs the Court’s attention to Williams’ statements that Direct Wholesale regularly shipped software products to ICE; that the products were normally shipped out of California; and, that prior to the seized shipment, Direct Wholesale had very little difficulty with ICE in terms of payment. (Williams Dep., p. 48-49).

The Court is satisfied that Microsoft has demonstrated that Defendants were engaged in copying Microsoft’s software products. “Copying can be shown by circumstantial evidence of access to the copyrighted work, and substantial similarity between the copyrighted work and the infringer’s work.” Johnson Controls, 886 F.2d at 1176) (citations omitted). Defendants do not dispute that they had access to Microsoft’s copyrighted work. Nor do they deny the substantial similarity between the seized software and Microsoft’s copyrighted work.

Moreover, nothing in the facts support Defendants’ conspiracy theory that some unidentified person or persons removed the units shipped from Direct Wholesale and replaced them with the seized units. The counterfeit software from Direct Wholesale was seized upon delivery. At no time did anyone other than the United States Marshal’s Service or the court-appointed custodian have possession, custody or control over the counterfeit Microsoft Software Products once they were delivered to ICE. This is self-serving conjecture on the part of Defendants and mere conjecture is not enough to create a genuine issue of material fact sufficient to withstand summary judgment. See Thompson Everett, Inc. v. National Cable Advertising, L.P.,57 F.3d 1317, 1323 (4th Cir.1995).

Indeed, the court found that the companies’ copyright infringement was extensive:

Moreover, Microsoft conducted a thorough examination of the business records seized from Direct Wholesale. See Agranov Declaration. Using sales invoices seized from Direct Wholesale on 4 February 1994, Microsoft was able to determine that Direct Wholesale distributed counterfeit versions of Microsoft’s software products. Based on Microsoft’s depositions of Mazoch and Williams, Microsoft further determined that Direct Wholesale used Allstates Air Cargo for shipping software. The evidence Microsoft provided to the Court is clear and overwhelming that Direct Wholesale distributed tens of thousands of the counterfeit software products.

Commenting that “‘The hallmark of any trademark infringement claim’ is consumer confusion,” the court found that

Defendants’ infringing activities caused consumer confusion. Microsoft’s marks are world renowned and Defendants do not dispute the strength or the distinctiveness of the marks. Defendants also do not, as they cannot, dispute that the marks they used in distributing the counterfeit software products were virtually identical to Microsoft’s marks. Based upon a review of the evidence, including deposition testimony and seized business records, Defendants clearly intended for the consuming public to believe that the marks they used were the valid and incontestable Microsoft marks. Based upon Direct Wholesale’s sales invoices, Defendants achieved their purpose.

In addition to the likelihood of confusion, moreover, the court found that “Microsoft has demonstrated actual confusion.” Prince George’s County’s future director of permitting and inspections was one customer who expressed that he was confused:

According to one consumer, ICE, it believed that it was purchasing bona fide Microsoft computer software from Defendants. Recognizing the deception, ICE has also filed a motion for summary judgment regarding issues of liability and damages. Upon all the evidence, Microsoft is entitled to summary judgment for unfair competition.

Thus during the litigation, ICE (Intelligrated Computers Electronic, Inc.), the Hijazis’ company, basically joined Microsoft’s side. The Direct Wholesale defendants continued to claim that they were innocent infringers. This part of the case, with the court’s opinion, is juicy enough to warrant extended quotation:

The Court disagrees.

The facts indicate that Defendants Williams and Mazoch were very familiar with the software industry at the time they opened Direct Wholesale. Defendants were also familiar with licensing and distribution practices among the industry. They knew Microsoft had specific guidelines regarding licensing and distribution for its software products and they do not deny that they received news releases which outlined Microsoft’s licensing practices.

Defendants knew that Microsoft did not distribute its software without an accompanying personal computer. Indeed, each unit of the purported Microsoft software bore the legend that the software was “for sale only with a new PC”. Yet, Defendants never questioned any of their suppliers. Instead, they turned a blind eye to the business practices of their suppliers and other software manufacturers. This alone is enough to defeat Defendants’ claims that they were innocent infringers. See Microsoft Corp.,872 F.Supp. 1329, 1340-1341 (D.N.J.1994); Little Mole Music v. Spike Investment, Inc.,720 F.Supp. 751, 755 (W.D.Mo.1989).

Yet, even more damaging is Defendants’ very own business records and practices. Direct Wholesale used a cryptic coding system to hide what brand of software product they were selling. When compared with the sales invoices the coding system was easily decipherable, and what Direct Wholesale was masking was counterfeit Microsoft software products.

Williams and Mazoch testified that while A-Tech, Hypertec and Fantasy Unlimited were three suppliers from whom they purchased the counterfeit Microsoft software products, they regularly called their contacts from the different companies using a single company phone number, A-Tech’s. Williams Dep., pp. 20-21. They knew that A-Tech, Fantasy Unlimited and Hypertec were really one operation. Id.; Mazoch Dep., pp. 45, 77-78. In at least one transaction, Direct Wholesale purchased counterfeit Microsoft products from Hypertec and was first instructed to make a certified check payable to Hypertec, then to A-Tech and then to Fantasy Unlimited. Williams Dep., pp. 20-21. Mazoch also testified that he knew that Microsoft had cancelled the licenses of several original equipment manufacturers.

A typical Direct Wholesale transaction involving counterfeit Microsoft products involved a shipping scheme specifically designed to disguise the true nature of the goods that were being purchased and distributed by Direct Wholesale. On every shipping order, Direct Wholesale described the boxes containing the counterfeit software as containing “manuals.” Direct Wholesale also typically paid its California suppliers by wiring cash to the personal bank account of Willie Banks, an Allstates Air Cargo truck driver. Banks then converted the wire transfer to cash or check and paid for the goods when picked up. The pick-up locations was rarely the same for the supplier and Allstates usually called the California supplier to ascertain the exact location. Williams Dep., pp. 17-18. Once he picked up the counterfeit software, Banks placed a Direct Wholesale shipping label on the boxes of “manuals” in order to hide the true origination of the boxes. Mazoch Dep., p. 49. Indeed, according to Williams, during the entire time in which Direct Wholesale sold the counterfeit Microsoft products, it never stored, or even saw, a single unit of the 45,848 units of counterfeit products it distributed. Williams Dep., p. 36.

The Court finds that Defendants intentionally distributed 45,848 units of counterfeit Microsoft software products.

The numbers became rather impressive. The court awarded Microsoft “equitable damages,” a calculation of profits lost based on number of counterfeit products sold.

Per unit profits is “what a willing buyer would have been reasonably required to pay to a willing seller for” the infringing works.

“Direct Wholesale distributed the infringing software products from February 1993 through January 1994.”

The evidence, including Williams’ and Mazoch’s admissions, clearly establishes that Direct Wholesale distributed 660 units of MS-DOS in the period covering the third quarter of the 1993 fiscal year; 2,302 units in the fourth quarter of fiscal year 1993; 4,972 units in the first quarter of fiscal year 1994; 7,822 units in the second quarter of fiscal year 1994; and 1,748 units in the third quarter of fiscal year 1994.

Microsoft also seeks damages for lost profits due to Direct Wholesale’s distribution of infringing Windows products. The evidence clearly establishes that, at a minimum, Direct Wholesale distributed 258 units of Windows during the period covering the third quarter of fiscal year 1993; 1,709 units in the fourth quarter of fiscal year 1993; 8,962 in the first quarter of fiscal year 1994; 9,235 units in the second quarter of fiscal year 1994; and, 8,170 units in the third quarter of fiscal year 1994. Direct Wholesale also distributed eight units during the period from February 1993 through January 1994.

Based on the documentation Microsoft submitted to the Court, it suffered $458,454.26 and $838,067.46 in lost profits due to Direct Wholesale’s distribution of counterfeit MS-DOS and Windows, respectively. Microsoft’s total loss for both products is $1,296,521.72. Microsoft sustained this loss due to Defendants’ willful violation of the Lanham Act.

As noted, the Hijazis’ company was a regular paying customer for these products: “From 23 July 1993 through 27 December 1993, ICE paid Direct Wholesale $195,773.63 for the purported Microsoft software to use in its PC sales.” Again,

Microsoft directs the Court’s attention to Williams’ statements that Direct Wholesale regularly shipped software products to ICE; that the products were normally shipped out of California; and, that prior to the seized shipment, Direct Wholesale had very little difficulty with ICE in terms of payment. (Williams Dep., p. 48-49).

Integrated Computer Electronics, Inc., thus paid almost $200,000 for the Microsoft knock-offs in one six-month period.

Integrated Computer Electronics was incorporated in the state of Maryland in 1992. It is now listed as “Not in Good Standing” in the state corporations database (under “Integrated Computers Electronics”). The name changed in 2002 to Stallion Technology, Inc., with Adieba Hijazi, Haitham Hijazi’s wife, as president. It has forfeited its registry in the state corporations database at least three times for not filing required documents. The company with the very similar name and sharing one of the Hijazis’ business addresses is also listed as “Forfeited” in the Maryland database, INTEGRATED COMPUTER CONCEPTS, INC., formed in 1987. “Grey Computer” is not listed in the Maryland state database.

Emailed and telephoned requests for comment to Hijazi’s office have not been returned. There is no indication in county records that Hijazi as a public servant was questioned about his side businesses, even after Microsoft sued him individually and through his family’s companies in federal court. Nor were questions raised about Hijazi’s expertise in inspecting and permitting, following his six-figure purchases of counterfeit products from fellow defendants Timothy Mazoch and DeWitt Williams. Questions for Prince George’s County Executive Rushern Baker’s office have also not been returned.

More to come.

 

 

Foreclosures and other dead ends

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In case you ever fantasized about making a million or few by house flipping —

There are two avowed official registries of foreclosures that take place in Prince George’s County, Maryland. One is included in the statewide registry maintained by the State of Maryland. The other is maintained by the Department of Permitting, Inspections and Enforcement (DPIE, pronounced “D-Pie,” as in “cherry pie”).

Neither registry is open to the general public. The Maryland Foreclosed Property Registry is, as stated on its website,

an online, password-protected system managed by the Office of the Commissioner of Financial Regulation in the Maryland Department of Labor, Licensing and Regulation (“DLLR”).

By law,

DLLR may grant access to the Registry only to State agencies and local jurisdictions, including counties and municipal corporations

to facilitate code enforcement, etc. The DLLR’s registry is not a before-the-fact research tool in any case; it is not a list of properties coming on the market.

Effective October 2012, in accordance with Maryland Code, Real Property Article § 14-126.1, every residential property purchased at a foreclosure sale must be registered in this system.

Purchasers are required to submit an initial registration of the property within 30 days after the foreclosure sale.

The purpose of the Maryland registry is to close the chronological records gap between the date of the foreclosure sale and the date the deed is recorded,

when unoccupied homes may fall into disrepair and it can be difficult to identify or contact the new owner.

The purchaser still has that 30-day grace period between buying a foreclosed property and submitting the registration. And again, the registry is not publicly accessible.

The information contained in the Registry is by law not a public record, and DLLR cannot grant access to the general public.

Prince George’s County

The registry maintained by the Prince George’s County Department of Permitting, Inspections and Enforcement (DPIE) is also closely held, though apparently in a different sense. DPIE’s public notice, on the agency website, explicitly tells mortgage holders to register foreclosures:

Foreclosure Property Registration Form

Attention Lenders
Please register a property (residential or commercial) that is in the process of foreclosure. After the information is completed, it will be added to Prince George’s County’s Foreclosure Property Registry.

The form itself tells lenders to deliver it in person or mail it to the DPIE “Foreclosure Registration Unit” in an office condo at 1220 Caraway Court, Largo, Maryland. The form includes spaces for the name, address and contact information of the property owner; it does not include any statement or certification that the property owner has been contacted about the foreclosure.

P. G. County DPIE Foreclosed Property Registration Form

Questions have now arisen as to how the Prince George’s County foreclosure registry is used. Like the State of Maryland registry, it is not open to public view. According to a person with close knowledge of the process, “Historically,” the registry kept by DPIE has been “highly restricted.” The County foreclosure list is announced via DPIE website for the purpose of registration, but the list itself is “held very close to the vest.” Access to the registry is applied for through a Maryland Public Information Act request; form linked here. To find out about the foreclosures, you fill out the form and submit it, asking for records. The form then goes up the managerial pipeline through “appropriate channels.” Indications are that even people involved in the MPIA process are not necessarily involved in the resolution of MPIA requests, nor are they necessarily informed about requests granted or denied. The hole in the channels leaves open a realistic possibility that access to the registry may be secretive but may not always be protected. This possibility has been confirmed in interviews and conversations with County officials.

The stated rationale for holding the P. G. County foreclosure registry so closely is the danger of squatting in vacant properties. The County does not release the information on upcoming foreclosures because officials do not want to give advance notice to squatters. “You can read between the lines” as to this claim, this writer was told. I asked whether the list breaks down into foreclosures on abandoned properties and foreclosures on occupied homes. Answer: no.

Where to file if you’re foreclosing in P. G. County

Asking whether interested parties such as house flippers could access the registry, I was told, “You’re on the right track.” There is no in-house mechanism to prevent exchange of friendly influence or sharing information with flippers. Indeed, the Director of DPIE himself, Haitham Hijazi, is closely connected to more than one house-flipping company through immediate family members as well as through his ownership of property on which his relatives operate their businesses. (Previous blogs on this topic linked here and here, among others.) Dr. Hijazi has not returned messages requesting comment or information. His son Abdullah Hijazi, principal of a house-flipping company who has appeared as party and as attorney in numerous foreclosure cases, has also not replied to request for comment.

The foreclosure registry may be somewhat arcane to the general public. However, as someone with knowledge of the operating structure and the registry has said,  “your information is known by a variety of people here”–meaning in the county and in county government. But–“they also know nobody’s doing anything about it.” The problems with foreclosures, the genuine phenomenon of troubled homeowners being pushed out of their homes by people with a vested interest in the houses is “Probably pretty well known among key people in the county,” I was told, but county officials cognizant of the issues seem to be covered by “teflon.”

As previously noted, Hijazi as head of the Department of Permitting, Inspections and Enforcement is one of County Executive Rushern Baker’s few holdovers from the previous county administration. Baker’s office has not yet had time to return a call requesting comment.

More to come

 

The other side of house flipping: pushing out the homeowners

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Ironically, the Director of the Prince George’s County Department of Permitting, Inspections and Enforcement (DPIE) acquired his own residential property in the aftermath of the 2008-2009 mortgage derivatives debacle.

The real property on Willes Vision Drive in Bowie, Maryland, owned by DPIE Director Haitham Hijazi, sold in October 2004 for $600,728. Real estate near Bowie and Upper Marlboro was looking up back then. Sadly, Maryland public records show that the couple who owned the house sold it to a family member of Hijazi’s in October 2009 for about half what they had paid–$332,000. The purchaser, Fawaz Hijazi, then sold the house to Haitham Hijazi in July 2012 for $480,000–an apparent profit of $148,000, which might not be enough to retire on but was not a bad sale for the still-difficult market of 2012. Hijazi also got a reasonably good buying price on a house now valued by Zillow at an estimated half-million dollars. Hijazi’s office has not yet returned a call with questions.

Members of Hijazi’s family live in the house. The residential address is also listed in Maryland’s state Department of Assessments and Taxation as the office address of Integrity Professional Contracting, one of the Hijazi family members’ real estate businesses.

Yet more ironically, following up on the previous post on this topic, one can further track the family’s house-flipping business generated from this address. As found in state database real estate transaction listings and Washington Post home sales, typical examples are listed below. The list looks like the previous one. All properties are located in Prince George’s County:

  1. In October 2012, Integrity Professional Contracting bought the house at 9805 Walnut Avenue in Lanham, Maryland, for $109,000 (foreclosure). In April 2013, the company sold the house for $240,000.
  2. In August 2012, Integrity Professional Contracting bought the residence at 8516 Potomac Avenue, in College Park, for $148,000 (foreclosure). The company sold the house in April 2013, for $280,000.
  3. In April 2013, the company bought 5701 44th Avenue, in Hyattsville, for $207,000. Sold that July for $340,000–an affordable price considering its current valuation.
  4. In August 2013, Integrity Professional Contracting bought another immigrant-owned house, at 2305 Belleview Avenue in Cheverly, for $136,000. The seller of record was William M. Savage, who has acted as a ‘substitute trustee’ in a number of foreclosures. The Hijazis’ company has also bought other properties from, or through, Savage. The company sold the Belleview house in April 2014 for $250,000.
  5. In October 2013, Integrity Professional Contracting purchased 4814 Snowflower Boulevard, in Oxon Hill, Maryland, from another immigrant householder for $105,500. The homeowner had bought the house in July 2006 for $376,295. The company currently owns this property, according to the state real property database; the owner mailing address is the Hijazis’ residence and company office in Bowie.
  6. In April 2013, the company bought the property at 4815 Heath, in Capitol Heights, for $41,000 (foreclosure). The company sold the house in December 2013 for $190,000.

Further examples follow the same pattern, visible to anyone who checks. Even without delving deep, the effect on neighborhood property values is obvious. A house that the lender could resell within a few months–apparently, since that’s what the flippers are doing–is instead sold to a house flipper at a loss for the lender and at a terrible loss, sometimes, for the unwilling homeowner. Since the house flipper is dignified by terms like “foreclosure attorney” and “substitute trustee,” all this is nominally at the behest of the bank/lender, even when to the lender’s loss. And the next buyer gets a cut-price house, often without knowing much about the previous foreclosure sale, including the fact that the nominal ‘seller’–the flipper–was actually one of the parties in the foreclosure.

The Hijazi family also owns another real estate entity, this one registered in the SDAT database by the name of Secured Improvements, LLC (a limited liability company). Like Integrity Professional Contracting, Secured Improvements LLC has a mailing address at the Bowie property owned by Haitham Hijazi. According to the LexisNexis business database, Secured Improvements LLC was established in April 2004, as was Integrity Professional Contracting. Its Maryland state filings date from 2011. Those for Integrity Professional Contracting date from 2004.

House sold by Secured Improvments LLC

As with Integrity Professional Contracting, the company designation for Secured Improvements in WaPo house sales is “Corp.” rather than the technically accurate LLC.

Again as with Integrity Professional Contracting, Secured Improvements LLC has established a track record as a house-flipping company. Again, its business pace picked up in the years after the elder Hijazi began working in supervisory positions for Prince George’s County. A quick check of WaPo home sales shows seven home sales for the company from 2006 through 2009. For 2011, eight deals. For 2012, nine. For 2013, thirteen. Then seven, six, and seven respectively for the years 2014-2016.

Like Integrity Professional Contracting, the Secured Improvements company has obtained some houses through ‘substitute trustees’ including Mark H. and Gerard W. M. Wittstadt.

Sad to say, there are more ways to game the system even than the intermingled interests sketched above.

More to come.

 

House flippers help pressure homeowners into foreclosure

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Reducing foreclosure ‘backlogs’ is not the same as reducing foreclosures. To reduce foreclosures, best we keep people in their homes. Unfortunately, a different strategy is too often pursued, at least in Prince George’s County–speeding up the foreclosures. The backlog of foreclosures still in the hopper in the county can thus be reduced, on the books. It’s a strategy that benefits real estate investors. House flippers with the capital and connections to snap up a bunch of houses can then turn around and sell the houses at a profit, sometimes quickly.

Take for example the real estate company called Integrity Professional Contracting, in Prince George’s County, Maryland. On September 12, 2013, Integrity Professional Contracting purchased a pleasant home at 7800 Suiter Way, in Landover, for the bargain price of $73,000. Four bedrooms, four baths, nice yard if somewhat bland landscaping. The Washington Post’s real estate report listed Mark H. and Gerard W. Wittstadt as the seller. However, Maryland public records show that the actual homeowner was Olusegun A. Bright. Bright had bought his house in 2005 for $215,000. Forced into foreclosure after the collapse of the real estate market, he sold at enormous loss.

The Wittstadts were what is known as ‘substitute trustees’. In Maryland, these companies help push along the process of foreclosure. When a homeowner falls behind on  mortgage payments, the bank holding the mortgage note can contract with a foreclosure firm–which acts as ‘substitute trustees’, standing in for the lender–rather than dealing directly with the homeowner. Sometimes this arrangement works out well for the bank, which has fewer tearful borrowers to deal with and fewer individual cases to decide justly on the merits. Sometimes the arrangement fails to benefit the bank. 

Signs of the times

Signs of the times

The process can benefit well-financed house flippers, as mentioned. Integrity Professional Contracting sold the 7800 Suiter Way property on October 10, 2013, for $193,000–still a reasonable price for a good-sized condo in good shape, nonetheless a $120K gain in less than a month.

The company has not yet returned a telephone call for inquiry. Its members may or may not be Flip or Flop fans. What is known is that its top executive is Abdullah Haitham Hijazi, son as previously written of P. G. County’s Director of Permitting, Inspections and Enforcement. Mr. Hijazi has gotten sweet press from the Washington Post, partly in support of cutting red tape, partly in sympathy for immigrant families in America.

Speaking of immigrant families–

Mr. Hijazi’s company bought another house on Suiter Way on January 30, 2014, paying Tito T. Ladipo $114,500 (foreclosure). The company sold the house on May 8 for $199,000, according to public record. The company bought 3911 Elkhorn Circle from Olushola Adetunji on September 19, 2013, for $162,000 (foreclosure). Sold on December 12 of that year for $270,000.

There seems to be little regulation of ‘substitute trustees’ in Maryland. Or–if you really can’t stand the word “regulation”–there seems to be little public oversight. With the enormous supply of homes in foreclosure in Prince George’s County, there is tremendous market pressure to ease up restraints that would keep properties from coming on the market. ‘Reducing the backlog’, again. (And “reducing regulation” and “cutting the red tape.”) Add to that a large county that includes historically excluded minorities, immigrant families, and first-time home buyers, and you have the ideal population for taking advantage of, historically under-served, with apparently little or no scrutiny from the state Attorney General. (Lack of scrutiny from the courts as an issue will have to wait for another day.)

Add further the recent down and up in real estate–the crash in 2007-2009, and the recovering housing market today. There is interest in buying houses, and there is frustration in waiting for a house to come on the market. Also, sellers leaving their homes voluntarily may choose to hold out for a decent price. And if they’re in a good position to sell, they may also have access to legal protection.

So what’s a sharp house flipper to do? One thing he can do is get in on the ‘substitute trustee’ end of the business. That way, he’s in touch with banks/lenders, with information on houses heading into foreclosure. In fact, he’s put directly in touch with the homeowners struggling with foreclosure. Another thing he can do is keep a sharp eye out for the most recent updates/information on permitting.

Integrity Professional Contracting, for example, the firm mentioned above, became active (registered) in Maryland in April 2011. The company purchased two houses in Prince George’s County in the next two years, and sold two others. Mr. Hijazi became Acting Director of DPIE on June 11, 2013, transferring from his previous county position as Director of the Department of Public Works and Transportation. A quick look at WaPo home sales for P. G. shows that from that date through the end of the year, the Hijazi firm bought six houses, selling the two in foreclosure mentioned above.

The pace picked up further. In 2014, the company bought and/or sold nine houses, including this home at 2715 Judith Avenue bought for $74,000 in October 2013 and sold for $230,000 in July 2014.  In 2015, the company bought or sold ten houses, including 804 Nalley Rd., purchased September 3 for  $100,000 (foreclosure) and sold November 26 for $210,000. In 2016, the company bought/sold eleven houses in Prince George’s County, including 116 Swiss Gap Rd., No. 14-4, sold on February 4 for $159,000 and purchased the previous September for $77,000 (foreclosure).

One cannot assume that all foreclosures are undeserved. Not all homeowners are deserving. But I know for a certainty that some foreclosures are undeserved. The homeowner, or relatives, can offer to make up the payments missed–and the foreclosure will still proceed. In other words, if the substitute trustee wants the house, once a homeowner falls behind on payments–even if because of medical bills or other legitimate issues–the trustee can still push the foreclosure forward.

Legal notice

Legal notice

From the standpoint of public policy, this is not the best strategy for reducing backlogs. The effect in Prince George’s County has been to reduce–directly and drastically–the chief source of wealth for historically excluded groups.

More to come.

Why is a P. G. County official (or his family) buying up foreclosed homes?

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On October 14, 2016, my neighbor received a two-page letter from the bank holding her mortgage note, M&T Bank.

Baltimore's own M&T Bank

Baltimore’s own M&T Bank

As foreclosure letters go, it could have been worse, on paper. M&T told her that it was “reviewing” her “workout package.” “It is possible,” the bankers informed her, that “we may determine that additional information is needed.” “If we determine that additional information is needed,” they assured her, “you will receive a letter identifying any additional documents that you need to provide.” Footnoted at bottom in faint and fine print was an address–a P. O. Box in Baltimore–and an 800 number for “Mortgage account information.”

The decision would be reached within 30 days after the bank received all the required information. That would be–spelling this out–the decision as to whether my neighbor was being kicked out of her house, the home she has lived in for eighteen years.

The bank said that she would receive one of five possible replies. 1) Her mortgage eligible for repayment or forbearance. 2) Mortgage eligible for trial-period modification. 3) Mortgage approved for permanent modification. 4) Mortgage not eligible for modification. Or 5) “More information is needed to make our decision. You will be contacted either by phone or letter to request the additional information.”

In proof of its bona fides, M&T signed off with one of those truly personal touches that make you wonder how a bank with heart like this stays in business:

Sincerely,

Single Point of Contact Team

Homeowner Assistance Center

The bank auctioned her house five days later. No further communication in the interim, from any person, through any medium. The letter was dated October 6; perhaps the bank docked eight days from the thirty, jumping the gun by a mere seventeen days.

The auction did not succeed. But that’s the end of the good news.

My neighbor’s house is still in the toils of the court system. In fact, it is still embroiled in two courts–only one of them legitimately involved under Maryland law.

Unfortunately, someone with connections in P. G. County had an interest in acquiring the property. Pshaw on the facts. The homeowner had cared for her mother, who died of cancer in her nineties. She had cared for her father, who died of Alzheimer’s, also in his nineties. The homeowner had lost her County job, quite possibly because of internal politics; fell behind three months on her mortgage; and has been working since 2014 to get her life back. Her house is not even underwater. No matter. The prospective buyer has all the cards–which happen in his case to include a top-tier County job as well as four adult sons and a former wife, mother of the latter, who invest in real estate via the foreclosure stream. Adiebi Hijazi, the former wife, is seen Tuesdays and Thursdays in front of the courthouse at Upper Marlboro, purchasing properties. The family has acquired quite a few houses in P. G.–all of them, as it happens, through the court of Judge Toni Clarke. “No one meets her”: the Honorable Ms. Clarke issues decisions without a hearing, from chambers, homeowner not present. The observation that “no one” meets her is not literal, be it noted. The prospective buyer of the house is present. “He goes in ex parte.”

Why is a P. G. County official pushing through foreclosures on properties he wants to buy as an investor?

The buyer is a son of Mr. Haitham Hijazi, Director of Permitting, Inspections and Enforcement for Prince George’s County, Maryland. Hijazi has gotten favorable ink in The Washington Post for his interest in cutting red tape in permits. The Department (DPIE) itself touts Mr. Hijazi’s activities in its newsletter, published at taxpayer expense. Hijazi is one of County Executive Rushern Baker’s few holdovers from the previous County administration. DPIE’s responsibilities include identifying properties that are vacant, abandoned, foreclosed or blighted. His son, Abdullah Haitham Hijazi, Esq., is the person who appears in court to represent the family interests.

Haitham Hijazi, Director of Permitting for P. G. County

Haitham Hijazi, Director of Permitting for P. G. County

Unstated in the department newsletter is the fact that Hijazi and his family themselves invest in buying up foreclosed properties. Worse yet, he and his family members actively push the foreclosures. And worst of all, they are canny enough to push them through the District Court in Hyattsville rather than through the legally mandated route through Circuit Court.

Here’s where a brutal process, grim at best, not to say heartless to the point of becoming morally repugnant, gets odd. As another Maryland judge states with laudable clearness,

” . . . all of the Judges of the District Court are aware that foreclosure matters fall within the exclusive jurisdiction of the Circuit Court.”

Question from Ms. Average Citizen: If foreclosure is exclusively the jurisdiction of the Circuit Court, then why do homeowners have to go into the District Court in Hyattsville to try to keep from losing their homes?

My neighbor has been represented by an attorney, a couple of times in the process; has received informal assistance from attorneys; and has been in touch with other homeowners in related cases. She and others in danger of losing their houses–and some who have already lost their homes–have had to show up in courtrooms in Hyattsville.

What she/they do is bounce back and forth between the District Court in Hyattsville–which, as mentioned, is not the venue for foreclosure–and the Circuit Court system in Upper Marlboro and Annapolis–which sometimes blesses the District Court foreclosures. It’s an agonizing process or game of shuttlecock, as our British cousins would say, or ping pong, where the hapless homeowner gets batted back and forth between parties with a more moneyed interest in the real property, though none of the sweat equity. First, the courtroom of Judge Crystal Mittlesteadt (Circuit Court), who denies without a hearing the homeowner’s request for a stay of proceedings. Then, the courtroom of Judge Brian Denton (Hyattsville, District Court), who at least listens to the homeowner, in appearance pro se. (In this particular matter, Judge Denton granted a continuance. That gave the prospective buyer more time but arguably gave the homeowner same. More to the point, the Hyattsville court did not have jurisdiction in the first place.) Then, another Hyattsville courtroom, where the homeowner’s continuance is denied. (“People get a continuance for missing a bus.” Again, shouldn’t have been there anyway.) In this case, denying the continuance requesnt meant that the Hyattsville judge “gave him my property.” Again, fortunately, it didn’t stick.

Imagine being in your house, living in your home, where you have lived for years, and facing the constant threat of losing the house any month. Any week. Any day. From a public policy perspective, what is the upside here?

Back to the court system, if ‘system’ is the term–

On a briefly happier note, the homeowner asked the (last) judge to reconsider, and the judge granted the request. The case then went to Hyattsville Judge Clayton Aarons, who ruled that the homeowner had to put up $7,500. A previous employer of the homeowner stepped in and put up the money. One for the good guys.

The case is now back in Circuit Court. The homeowner could not afford the constant legal help necessary to shepherd the matter through five or six courtrooms. Aside from the bank or the eager investor, who can afford such legal help? Pro bono legal work is not available for foreclosures, according to my neighbor. The University of Maryland legal clinic had a good guy available to help, and help he did. But he died in December 2016.

The interested real-estate-investor buyers in these cases have more options. They always have more cash and more financing than a homeowner in arrears, and more ability to hire legal talent.

They also have more legal talent on the bench–their bench–according to the accounts I’m hearing. In Prince George’s County, they have Judge Clarke. She “never decides for the homeowner.”

Questions emailed to County Executive Baker and DPIE Director Hijazi have not been returned.

More to come.