Before Metro Dream, A 2001 Ponzi Accusation

By Elizabeth Razzi
Sunday, August 12, 2007; F01

People who are trusting Andrew H. Williams to profitably invest tens of thousands of dollars of home equity through his Metro Dream Homes program may be interested in knowing a bit more about the history of their business partner.
In 2001, at a previous business venture, he consented to a permanent shutdown order. At the time, the Maryland attorney general's office said the business had violated securities laws and "had the indications" of an illegal Ponzi scheme.
Metro Dream Homes recruits home buyers to pay a premium above asking price and sign over the extra funds to the company. In return, the local company promises to invest the money in businesses so profitable that it can donate large sums to charities while paying off participants' mortgages in five to seven years.
Last Sunday's column about Metro Dream Homes drew dozens of e-mails from readers expressing incredulity at the way the program operates and relaying their own experiences with the unusual home-sale transactions.
In 2001, J. Joseph Curran Jr., then Maryland's attorney general, obtained a permanent injunction shutting down Bankcard Group Inc., a Prince George's County-based ATM and bank card business that Williams ran. The company and two of its executives, one of them Williams, were accused of violating Maryland securities laws by operating an unregistered and fraudulent automated teller machine investment program.
According to the press release the attorney general's office put out six years ago, BGI raised as much as $3 million from at least 200 investors. The company purported to sell investors interests in ATMs, the fees generated by the machines, and shares in BGI itself, the attorney general's office said.
According to the attorney general's statement: "The Securities Division brought the action not only to halt the registration violations, but also because the BGI investment program had the indications of a 'Ponzi scheme'; there was no business or investment to generate the profits promised to investors, but rather the money invested was used to repay previous investors, and so on."
Williams consented to the 2001 permanent injunction order without admitting or denying violation of the Securities Act.
Today, Williams is chief executive of Metropolitan Grapevine LLC, a Prince George's County-based ATM and bank card business that is being relied upon to pay off hundreds of participants' mortgages. It is the parent company of Metro Dream Homes and a number of related businesses.
This time, Williams says, it's different.
In an interview last week at Metropolitan Grapevine's downtown D.C. office, I asked Williams whether the 2001 legal action is hindering his business today.
"No, as a matter of fact, I think we've made total awareness to all of our current partners and business associates," he said. ". . . While we had to settle with the state, that particular business model has been terminated at this time. And I think all parties agreed on this settlement of that business, and we've been able to, basically, look at our formal partners of that business and come up with some satisfaction for them.
"That situation just didn't turn out the way we'd like, but it was a very, very good situation that turned us to a point that we feel it strengthened us instead of weakened [us] in the long haul," he said.
When a Dream Homes participant buys a house, the deal calls for 10 to 15 percent of the sales price to be given back by the seller at closing. That money, in turn, is invested in various businesses run by Metropolitan Grapevine, based in Laurel. Metropolitan Grapevine says its businesses include sales of automated teller machines, sales of prepaid debit cards, Internet communications services and video ad sales.
No one involved with the organization has been able to explain to me how the home-sale transactions, made for more than the asking price and with 10 to 15 percent cash givebacks, get through the appraisal and loan-underwriting process. Some of that information is proprietary, Dream Homes executives told me.
The program is very active in Prince George's County, and its leaders say they have made recent presentations in Fredericksburg, Charlotte, and Los Angeles. However, officials told me they are trying to manage its rapid growth. "If everybody knew about our program, everybody in the world would be running in to get this great deal," Williams said.
The big draw to participants in the program is that Dream Homes pays their monthly mortgage principal and interest at an accelerated pace that's supposed to pay off the loan balance in five to seven years. Because it has only been in business since 2006, it has not yet paid off any of its participants' homes, according to Metropolitan Grapevine Chief Financial Officer Michael Hickson. "But we are going to be paying off several homes over the next several months," he said.
Metropolitan Grapevine is a private company, so it is not required to hold annual stockholder meetings or publish detailed financial reports. The public cannot examine its books, so there is no way for an outsider to verify its assets. But exploration of the materials published on the Web sites for its various businesses, and the comments Williams made to a group of participants in June, suggest that this business model may be encountering some problems.
In addition to Dream Homes, the Metropolitan Grapevine network covers a number of businesses, including:
· HelloWorld, a video e-mail and webcast service, which has a multilevel marketing component that allows participants to earn residual commissions based on the earnings brought in by the newcomers they recruit.
· CIPCARD, a prepaid debit card program. CIP stands for Communities in Partnership, and according to the Web site, the organization will give back 75 percent of its net operating revenue to charity. The Web site does not disclose the fees associated with use of the card. Clicking on the "Fee Disclosure" link shows only an unrelated Internet privacy disclaimer. The site includes the statement "FDIC Insured," even though it is not a bank.
· POScafe, a business that involves processing credit and debit transactions for businesses that accept those cards as payment, earning fees from both the consumer and the merchant. POS stands for Point of Sale; it markets to small businesses willing to give floor space to its multi-function ATMs, which, in addition to dispensing cash, sell prepaid telephone cards. The machines also can carry video advertising.
I clicked on POScafe's Web site link to get directions to nearby ATMs but did not get directions to any POScafe facilities. Instead I was directed to an ATM locator for the Internet banking firm NetBank Inc., headquartered in Alpharetta, Ga. Jimmy Locklear, public relations director for NetBank, said the company has no record of contracts or agreements with Metropolitan Grapevine. "We will likely ask them to remove our logo from their Web site," Locklear said.
Williams told me last week that the organization's finances are discussed openly with its partners, who are welcome to attend monthly meetings. Partners include the people who have bought homes through the program.
When I attended one of those meetings in June, I saw none of the trappings of a typical board meeting. There was no written agenda, no financial report, no PowerPoint presentation, no numbers on paper whatsoever.
At that meeting, Williams told participants that ad sales for the company's ATMs were not going as well as planned.
Williams addressed what he called "challenges" facing the company. "You, my partners, I haven't given you guys the kind of attention that perhaps you've deserved," he said. Williams said that, locally, nearly 250 ATMs were already in place but that a company Metropolitan Grapevine had a deal with to sell advertising on those machines (at a minimum of $350 per ad) hadn't "stepped up to the plate" to sell ads.
"Who's mad at us? You are," Williams said. "You should be getting income off these machines." Others were upset, he said, including, "the merchants where we placed these machines, because just like we promised you income, we promised them income as well. We promised them income, and they're not getting it."
Williams asked those present to help sell advertising on the machines and to recruit friends and family members to help sell ads. "This is not just my company," he said. "I shouldn't have to make all the decisions. I shouldn't have to do all the work. After all, we're paying you. When your company needs help, you help your company."
One participant asked Williams if the absence of advertising on those 250 or so ATMs meant their mortgages would stop being paid. Williams replied that $2.4 million of revenue per month was paying their mortgages but didn't identify the source of that revenue.
Williams told the group he had called the meeting to ask them for two things: "Just a little more time, that's the first thing," he said. "And a little more patience, that's the second thing. But most of all, I'm going to need your cooperation in helping us get this operation off the ground."

There is a Mortgage Scam that is trying to sweep the nation. Check out the information on this Below. There are been two articles in the Washington Post regarding this "Ponzi" Scheme. Everyone should be aware of this so they don't fall prey. It could affect all of us.

The two articles from Post are below.

Also, go here to see some interesting discussion on this topic.
D.C. Metro Area - Has anyone heard of Metro Dream Homes?

Something For Nothing Home Deals

By Elizabeth Razzi
Sunday, August 5, 2007; F01

There's a home-buying deal out there that's more than too good to be true. It's too good to talk about in public.
At least the people running the deal don't want to talk about it, certainly not for publication in the newspaper.
Here's the pitch: There is an invitation-only group of homeowners who have signed up as partners with an organization called Metro Dream Homes, which has offices in the District. Members buy a house, sometimes for more than the asking price and without a down payment. A condition of the sale is that the seller agree to give back 10 to 15 percent of the sales price to the buyer, who in turn pays it into the coffers of Metro Dream Homes. (What does the seller get? A sale, which can be hard to come by these days.)
Metro Dream Homes says it will invest that cash in various businesses, including automated teller machines, video advertising and other Web-based ventures that are under the umbrella of its parent group, Metropolitan Grapevine, headquartered in Laurel. Then, according to Metro Dream Homes, the profit from these businesses goes to fund the monthly mortgage payments for the homeowners, on an accelerated schedule that pays off the house in five to seven years. The company also says it will make sizable contributions to charity. After five to seven years of payment-free living, the homeowner is supposed to sell or refinance the house, with the homeowner and Metro Dream Homes sharing the equity.
What a deal! You buy a house, maybe with nothing down, take out a mortgage big enough to cover your $50,000 to $70,000 payment to Metro Dream Homes and then live payment-free for five to seven years. You've paid nothing. And after a few years, you and Metro Dream Homes split the equity and you live happily ever after.
Hundreds of people locally, with a heavy concentration in Prince George's County, are already having their mortgages paid through this setup, according to a June solicitation letter from the Dream Homes organization that said there are more than 700 homes in the program. One participant I spoke with after a meeting said he was having his mortgage payments paid on three investment properties. Some people who already own their homes are refinancing to get the 10 to 15 percent of home value that's needed to enroll and to get their mortgages paid on their behalf every month.
Judging from the inquiries I have received from readers, plenty more people are considering getting involved in this deal, despite deep concern that it could be too good to be true, or perhaps in some way illegal. Among the skeptical but tempted is a group of builders in the Fredericksburg area looking at the program as a way to get rid of unsold houses.
It's only logical to question how these mortgages get a green light from appraisers and loan underwriters.
The large infusions of cash up front raise the question of whether the Metro Dream Homes/Metropolitan Grapevine setup could turn out to be a version of the old Ponzi scheme, in which the payoffs to current insiders depend on the recruitment of ever more participants, each with cash. When recruiting fails to grow fast enough to pay earlier participants, a Ponzi scheme collapses, with the most-recent recruits losing their shirts. Is that $70,000 in cash from a new partner really invested in ATMs, or is it being used to pay off the mortgages of partners who got in on the deal earlier? And if it all should collapse, will there be a torrent of homes, bought with oversize mortgages, unleashed on the market? Executives of Metropolitan Grapevine did not return multiple phone calls over several weeks.
Kathie Connelly, executive director for the Maryland Real Estate Commission, said she has received a lot of inquiries from real estate agents asking if it's okay for them to represent sellers who get an offer from Dream Homes. "I tell them to recommend to clients that they seek legal counsel and have the documents reviewed before signing anything."
I went to a regularly scheduled Dream Homes presentation at a downtown District hotel, hoping to learn more about "an opportunity that you do not want to walk away from!!!" as company executives state on their business cards.
As a writer for this newspaper, I was asked to leave by the executive marketing director, Renee McIlwain. She threw in a "how did you find out about us?" for good measure. She said the only way to be welcomed at the meetings is to be invited by someone who already belongs to the organization. Numerous phone calls to McIlwain and to Isaac J. Smith, president of Metropolitan Grapevine, and Andy Williams, chief executive of Metropolitan Grapevine, were not returned. Clearly, this is an opportunity they would prefer I walk away from.
But other people in the local real estate business do want to talk about this organization, though they fear their professional reputations could be tainted if they're quoted by name. Some told me they're trying to wave off friends and relatives who have been invited to join. And some expressed concern that, if they're not careful, they could get into legal trouble if they represent sellers who accept an offer from someone involved in Metro Dream Homes.
One real estate agent in Upper Marlboro shared details of a transaction last September in which she represented the sellers of a three-bedroom house in Bowie. The agent representing the buyer in that deal was McIlwain, the publicity-shy marketing director for Metro Dream Homes. At the time of the transaction, McIlwain was an agent with Century 21 AAA Realty, according to multiple-listing-service records. She now is an agent with Re/Max Colonial Homes in Fort Washington.
It was an unusual home sale. The four-year-old house in the Fairwood neighborhood in Bowie was originally listed at $714,000 in April 2006, according to local multiple-listing-service records. The listing agent said that, after one contract fell through, the sellers lowered their asking price to $689,000. They finally sold in September to a Metro Dream Homes buyer, represented by McIlwain, for $750,000, with the sellers giving a subsidy of $71,225 back to the Dream Homes program. Accounting for that subsidy, the sellers walked away with $678,775 (before real estate commissions). But the buyers took out a new mortgage for the full $750,000. And Metro Dream Homes got $71,225. That's right: The buyers paid more than the asking price, with a 100 percent mortgage and with the extra cash going into the Dream Homes program.
Now, if every home buyer could figure out a way to make numbers perform such feats, there would be no slump in the housing market. Pay more than the asking price; get your loan payments taken off your hands, and have the loan paid off in five to seven years, going halfsies on the equity at that time. How does that work?
"Why did I think this was going to come back to bite me?" the listing agent said when I asked her about the transaction. She said that she felt uncomfortable with the deal and that she couldn't get anyone to fully explain it to her. But the sellers needed to get the house sold, and the unusually large cash-back amount is noted on public records. An appraiser and a lender approved the numbers. And, really, what seller is going to turn down an offer these days?
For buyers, however, there are many layers of risk. The idea that they're paying 10 to 15 percent of the home's value (whether out of pocket, through a refinance or by paying extra for the house) into the program is just the start.
To participate, buyers sign a joint-venture agreement with an entity called POS Dream Homes, according to a copy of that agreement I obtained. The buyer indemnifies Dream Homes if any legal action ensues from a mortgage application related to the deal. And if the buyer discloses any terms of the agreement, the contract says that could be considered a breach of the agreement. That should give participants pause, because if the deal is off, they would probably need to refinance a home that they bought at a premium, and possibly inflated, price.
And, not least, the contract requires participants to become involved in unspecified ways in the profit-making businesses that Metropolitan Grapevine says will raise the money that pays all those mortgages. These include the ATMs mentioned earlier, a Web-based video e-mail operation and a prepaid debit card (marketed on a Web site that does not disclose related fees or terms related to that card), among other ventures.
Next Sunday, I'll look a little more closely at the umbrella group, Metropolitan Grapevine.
E-mail Elizabeth Razzi atrazzie@washpost.com.

always make sure your mortgage broker or whomever is licensed by the state.