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Hagens Berman: Homeowner Claims KB Home, Countrywide and LandSafe Rigged Appraisals

Posted on: Thursday, 7 May 2009, 14:17 CDT

An alleged scheme to inflate home values pushes homeowners out the door.

SEATTLE, May 7 /PRNewswire/ -- A group of homeowners today filed a class-action lawsuit against KB Home (NYSE: KBH), Countrywide Financial and LandSafe Appraisal Services, claiming the three conspired to systematically, artificially and illegally rig home appraisals in KB developments in an effort to boost home values and sales prices.

(Logo: http://www.newscom.com/cgi-bin/prnh/20080317/AQM144LOGO)

The suit, filed in U.S. District Court in Arizona, claims KB and the other defendants inflated home prices by as much as $2.8 billion in Arizona and Nevada alone during a three-year period.

According to Rob Carey, the attorney representing the plaintiffs, KB routed purchasers to Countrywide for loan services, often claiming they would act as a loan broker, representing the purchasers' interests in finding the best loan package available.

"In reality, Countrywide and KB were in cahoots, intent on sticking the homeowner with an inflated home appraisal to justify the purchase price," Carey said.

According to the 50-page complaint, Countrywide funneled all its KB customers' home appraisals to one person at LandSafe, an appraisal subsidiary of Countrywide who, in turn, would deliver an appraisal value at whatever KB and Countrywide ordered.

In two KB Home developments cited in the complaint, sampled appraisals were inflated by $82,169 per property on average.

"Even if we used a more conservative $20,000 per property, this alleged scheme would add $2.8 billion in ill-gotten profits in KB's pockets," Carey said. "Those profits come at the expense of the homeowner, who moves into a house already upside-down, and the secondary market, buying tainted investments."

The complaint sites instances of appraisals that used pending sales within the same development as comparable properties substantiating appraisal values.

"This boils down to nothing more than a Madoff-like Ponzi scheme," Steve Berman noted, managing partner at HBSS. "KB relied on the initial use of false appraisals to push early sales in KB Home developments - these inflated purchase figures were then used to continue propping up the value and selling activity of KB homes across entire communities and states."

Berman noted that appraisers would not have access to pending-sales numbers unless KB Home supplied those values.

According to the suit, homeowners learned they had been duped when they attempted to sell their homes and hired independent appraisers.

The suit details a litany of tactics LandSafe appraisers used to deliver the predetermined value, including blatantly falsifying sale prices for comparable properties; using comparable properties that were as much as 10 miles away, and citing comparable properties that were in other planned communities.

According to Berman, his firm filed a proposed class-action suit against Countrywide and KB earlier in the year. That suit has been recast as an individual action against the defendants.

"Since we filed our first suit, we've learned a great deal about KB and Countrywide's actions," Berman added. "We believe it will help us illustrate what we see as a cynical scheme condoned and encouraged by the organization's leadership,"

The HBSS lawsuit claims violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and violation of California unfair competition law.

The lawsuit represents anyone in Arizona and Nevada who purchased a home from KB Home and financed through Countrywide. To join this case, homeowners can contact attorneys by visiting www.hbsslaw.com/kbhomes, e-mailing kbhomes@hbsslaw.com or calling (206) 623-7292.

About Hagens Berman Sobol Shapiro

Hagens Berman Sobol Shapiro is based in Seattle with offices in Chicago, Boston, Los Angeles, Phoenix, San Francisco and New York. Since the firm's founding in 1993, it has developed a nationally recognized practice in class action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit www.hbsslaw.com.

CONTACTS: Steve Berman (206)623-7292 Mark Firmani (206)443-9357 Hagens Berman Sobol Shapiro Firmani + Associates, Inc. Steve@hbsslaw.com Mark@firmani.com

SOURCE Hagens Berman Sobol Shapiro

Source: PR Newswire

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