Condo deal taints Greene's bystander claim

RIDGECREST, Calif. -- Democratic U.S. Senate candidate Jeff Greene says he had nothing to do with creating the subprime mortgage mess that made him fabulously wealthy.

He was simply a savvy investor who ``could see that the housing market was imploding'' and lucky enough to make more than $500 million by betting against it.

But he wasn't just a spectator to the housing collapse. Four years ago, Greene was party to precisely the kind of deal that decimated the market.

Greene insists he did nothing wrong. Yet the way he handled the deal left an opening for massive fraud and put him uncomfortably close to a man now under federal indictment.

The setting: this remote desert town at the edge of Death Valley. At a project called La Mirage, Greene converted 1950s-era military housing from apartments to 300 condos. In the summer of 2006, just as he was starting to make his bets against the subprime housing market, official records show that Greene's company unloaded the units, some for as much as $165,000. The buyers turned out to be people who never intended to own the properties or pay back the loans.

Local residents, who referred to the complex of single-story duplexes and triplexes as ``Criminal Gardens,'' were stunned at the sale prices. Even in the midst of real estate hysteria, they seemed over the top.

Within 18 months, all of the La Mirage buyers defaulted on their loans and every condo was in foreclosure. Low-income tenants, still paying rent and unaware their apartments had been sold, found themselves on the street. Lenders recouped about $25,000 per unit when the properties went up for auction.

Banks -- and ultimately U.S. taxpayers who bailed out the banks -- were left holding the bag on nearly $34 million of worthless paper.

Now James Delbert McConville, Greene's counterpart in the transaction, is in jail facing criminal charges of conspiracy and money laundering stemming in part from the La Mirage transaction. The assistant U.S. attorney says the FBI is still trying to put a dollar figure on McConville's alleged fraud, and is ramping up its investigation of the La Mirage deal.

Greene, 55, is in a tight race with U.S. Rep. Kendrick Meek in the Democratic U.S. Senate primary. The election is Aug. 24.

In an interview Friday with the Times, Greene strenuously denied any responsibility for the failed loans at La Mirage.

He said his broker simply brought him a buyer, McConville, who wanted to buy all 300 condos for about $21 million, or $70,000 a unit.

Greene said he never met McConville. He said his only direct involvement was signing blank deeds and sending them to his escrow company -- a practice he calls common but which one expert says is risky at best. By signing blank deeds, longtime appraiser Richard Hagar said, Greene effectively enabled the fraud.

BLANK DEEDS

Greene said he was unaware that the blank deeds were recorded showing him getting as much as $165,000 a unit from individual investors who turned out to be straw buyers.

``I'm always signing blank deeds. That's how an escrow company works,'' Greene said. ``If [McConville] put the deeds in other people's names, that's his business. All I care about is that I get my money.''

While he thinks it's terrible that all the La Mirage loans defaulted, Greene insisted that he couldn't be expected to know his buyer or keep track of what happened after he signed the deeds.

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