Despite Florida’s struggles with Medicare fraud, foreclosure “robo-signing” and prescription drug “pill mills,” the attorney general’s top legislative priority is to clean up timeshare resale fraud.
Attorney General Pam Bondi says timeshare resale fraud is by far the top consumer complaint her office has received in the past two years. With more than 19,000 complaints since 2009, timeshare resales fraud outnumbers the next four categories combined. To tackle the growing problem, Bondi teamed up this month with two Republican lawmakers to sponsor the Timeshare Resale Accountability Act.
At the same time, one of the Republican party’s top donors during the third quarter is the American Resort Development Association (ARDA), a Washington-based timeshare trade group that has more than doubled its giving this year to $281,787 (up from $135,000 in the first three quarters of 2010). That group has explicitly stated that its legislative priority this year is to see that bill passed.
“That’s probably turned into our No. 1 issue,” said Jason Gamel, vice president of state government affairs for ARDA’s Florida office. “It was pleasant to see the attorney general look at those issues and try to clean things up.”
While timeshare groups have come out in support of the attorney general’s move to clean up their industry, critics are questioning the role of campaign dollars in setting the attorney general’s priorities for the upcoming legislative session.
Barry Ritholtz, CEO of the investment research firm Fusion IQ and author of Bailout Nation, said he has been tracking Bondi’s campaign contributions to see why she would be going after timeshare fraud rather than more high-profile consumer issues.
“If she thinks that timeshare fraud is where they should be directing their attention, that reflects poorly on the people of Florida,” he said.
But timeshare-related fraud has indeed surged in Florida over the past three years, with a growing number of companies promising to sell owners’ unit — for a large upfront fee— and then failing to follow through, law enforcement officials say.
Florida has the nation’s largest timeshare industry, with more than 400 resorts and about $2.2 billion in annual sales, according to ARDA’s research arm. Timeshare buyers purchase the right to use a property, usually a resort condo, for a portion of each year (usually a week). Those interests can be traded or sold and, with the economy and real estate market sagging, more owners have been looking to sell.
Law enforcement officials say fraudsters have capitalized on the down market by launching a bevy of timeshare resale scams, most of which involve unsolicited calls from telemarketers and require upfront payments.
Earlier this month, federal prosecutors charged 13 South Florida telemarketers with running what has become a classic timeshare fraud scheme. The group, made up of employees at Fort Lauderdale-based Timeshare Mega Media and Marketing Group, Inc., would allegedly call timeshare owners and tell them that they had a buyer lined up for their units. In order to complete the sale however, the owners would have to pay upfront fees of about $2,000. After collecting the payment, the TMMMG employees would fail to follow through with the sale, and refuse to refund the fees to the unit owners, according to a federal indictment.
The new bill, sponsored by Republican Senate Majority Leader Andy Gardiner and state representative Eric Eisnaugle, both from timeshare-heavy Orlando, would prohibit timeshare advertisers from lying about having a buyer on standby, and would force them to have a written agreement before collecting a payment. It would also allow timeshare owners to cancel those agreements within seven days for a full refund.
According to third quarter campaign finance reports released this month, ARDA became one of the top donors to the Republican Party of Florida during the third quarter, when it gave $171,671. The Republican Party of Florida was the top contributor to Bondi’s election campaign in 2010, sending her $893,011, about a third of her $2.6 million in total contributions, campaign finance reports show.
The attorney general’s office has denied claims that campaign contributions influence the state’s legal agenda.
Gamel brushed off the idea that the attorney general is prioritizing the timeshare issue because of the trade group’s increased campaign contributions to her party.
“The attorney general laid it out pretty clearly during her press conference,” he said. “Last year there were more than 11,000 timeshare resale fraud complaints. I think this is purely a reaction to this being their number one complaint over the last few years.”
ARDA has also donated $70,000 this year to the Florida Democratic Party, up from $60,000 in the first nine months of 2010. It ranked as one of FDP’s top donors during the third quarter.
Some of the attorney general’s critics cite her decision to prioritize timeshare fraud as evidence she is paying less attention more high-profile and wide-reaching issues in the state, like mortgage fraud, foreclosure mills, pill mills and Medicare fraud.
“I cannot believe that there are more complaints for timeshare fraud than there are for the next four categories combined,” said Lisa Epstein, founder of foreclosurehamlet.org.For the past year, the 50 state attorneys general have been trying to hammer out a multi-billion dollar settlement with major banks over illegal foreclosure practices. Despite Florida’s nation-leading foreclosure problems — and the fact that the largest so-called “foreclosure mills” are located in the state — Bondi’s public role in the talks has been relatively subdued.
In what critics describe as anti-consumer moves, Bondi has publicly come out against including principal writedowns for struggling homeowners a part of the settlement, and her office forced out its two most vocal foreclosure fraud investigators earlier this year.
Those forced resignations sparked criticism from consumer advocates, and have since put a spotlight on a number of links between the attorney general’s office and the various firms it is investigating for foreclosure fraud. At least two former employees left the attorney general’s office for jobs with foreclosure firms under investigation this year, and a portion of Bondi’s campaign treasure chest came from firms that are being investigated for using faulty documents to foreclose
Lender Processing Services, a Jacksonville-based mortgage software firm under investigation for foreclosure fraud, and its parent company Fidelity National Financial contributed more than $2,000 to Bondi’s election, according to campaign finance records. Three executives of Tampa-based process server ProVest donated a total of $1,500 to Bondi last year even as their company was being investigated by the attorney general’s office. ARDA-ROC, an affiliate of the timeshare trade group, sent the attorney general a $500 donation last year as the election neared.
“Lobbying pays,” said Epstein, referencing a 2008 study by Frank Yu of Barclays Global Investors that found a direct link between corporate campaign contributions and a reduction in fraud investigations. “Money and politics is a good mix for the corporations and the financial sector and really bad for the consumers that elect legislators to represent them.”
Bondi’s office has denied claims that its fraud investigations have been influenced by political donations. Her office has pointed out that it has expanded its staff dedicated to investigating fraudulent foreclosures. The decision to pursue timeshare resale fraud as its first legislative priority is solely based on the high and rising number of complaints, said Jennifer Meale, a spokesperson for the attorney general’s office.
“The sheer volume of complaints that we receive is a clear reason why we would make stopping timeshare resale fraud one of our priorities,” she said.