Friday of last week, the Federal Elections Commission issued a series of decisions on Complaints we prepared and filed for our client David Krikorian five years ago.

Those decisions found that former Congressman Jean Schmidt, and the Turkish Coalition of America violated federal campaign finance laws in accepting payment of her legal fees in legal proceedings against our client, and fined then respectively $2,500 and $25,000 for those violations.

You may read those decisions here, here, here and here.

Making a Difference

These decisions — which sat on the desks of bureaucrats in Washington, D.C. for an inexcusable years and years — capped a tremendous and frequently disappointing journey through the halls of power of Washington and the highest Court in the land.

In the end, we overcame a system of justice that is carefully designed to protect the wealthy, the powerful, and the well-connected, veiled in secrecy, and hidebound by bureaucratic inaction– although not in the manner that the proper administration of justice would provide.

Our firm — through the fine research and writing, and tremendous patience and persistence — saw through to a successful end a complex, tortured and unfair series of legal processes to the advantage of our client.

This journey, perhaps better than any story we can tell, describes the commitment we hold to “making a difference” for our client in each and every assignment.

Ohio Elections Commission action and more

We originally were retained to represent former and future Congressional candidate David Krikorian in the defense of several “false claims” allegations brought by Congressman Jean Schmidt before the Ohio Elections Commission (“OEC”).  She claimed that in the course of the 2010 Congressional campaign, David Krikorian made certain false statements about her, essentially that she was on the payroll of the Turkish lobby in America.

Ironically, through the course of these proceedings and otherwise, she herself proved the basic premise of these allegations.

But tangential to those proceedings, we became curious that Jean Schmidt appears to have unlimited access to “free” legal services from two expensive attorneys from Washington, D.C. and a second in Columbus, Ohio.

Our lead counsel in representing Krikorian was famous Los Angeles attorney Mark Garagos, who was simply fun to work with, and inspired in his legal strategy.

That original OEC action then led to an appeal, a First Amendment challenge to the jurisdiction of the Ohio Elections Commission, and then a defamation case brought by Schmidt.  These were incredibly expensive proceedings that came at us in waves from the Schmidt camp.

The legal actions were unprecedented in that they made no economic sense, and were outside the scope of our experience with clients who have to make practical decisions about proceeding with litigation in the face of daunting obstacles of time, expense, and the difficulty of legal recovery.

Who was paying our Congressman’s legal fees?

As the matter progressed over a period of years — with depositions across the country, two days of trial before the Ohio Elections Commission and endless motions — it dawned on us that something was terribly wrong here, that Jean Schmidt was pursuing this matter because she was accepting an illegal gratuity as a Congressman and as a candidate.

Garagos had the ground-breaking idea to take the deposition of Jean Schmidt’s attorney, Bruce Fein.  In all our years of litigation, it never occurred to us to take the deposition of the opposing attorney.  Schmidt’s attorneys opposed the motion, but the OEC ruled that it would proceed.

In that deposition, we asked Schmidt’s attorney “who was paying all these legal fees?” and he admitted that at the commencement of the relationship he met personally with her and her Chief of Staff and told them both that the Turkish Coalition of America (“TCA”) would foot the whole legal bill for the proceedings.

[This sworn testimony would prove key thereafter, as Schmidt steadfastly denied through multiple proceedings thereafter that she had no idea how her legal bills were being paid, over a period of years, but only that she was never invoiced for the work.]

We estimated — correctly as it turns out — that Schmidt had received more than $500,000 in legal fees from the TCA.

A thicket of confusing rules and multiple whitewashes

Our firm then began to research whether it was legal and appropriate for a sitting member of Congress to accept the payment of her legal fees, to the tune of hundreds of thousands of dollars, from a lobbying group in D.C., dedicated to influencing legislation  before Congress and policy in the administration.

The rules were complex, but the answer was pretty clearly “no” for a host of reasons:

  1.  It violated House Ethics rules to accept the gift.
  2. It was a felony to fail to report the gift on federal financial disclosure forms.
  3. It violated federal elections law to accept the gift.
  4. The gift constituted taxable income to the Congressman, which must be reported to the IRS and on which income taxes must be paid.

Thus, following the key depositions, we waited for the Congressman to file her federal financial disclosure forms for 2011, and then filed Complaints with the Office of Congressional Ethics and the Public Integrity section of the U.S. Attorney’s office.

After waiting more than a year, we learned that the Office of Congressional Ethics had properly examined the gift and referred the matter for further action to the House Ethics Committee.

But in a curious move, the House Ethics Committee ruled that the gift was illegal, and had to be paid back, but found that because Schmidt did not know who was paying her fees (in direct conflict with her own lawyer’s sworn testimony) that she would not be disciplined by the House.  It was, very simply a whitewash.

We then filed a Complaint with the IRS over the unclaimed income.  They also saw nothing untoward.  Another whitewash.

A challenge to the OEC False Claims statute and a trip to the U.S. Supreme Court

As a result of the tortured and unconstitutional proceeding before the Ohio Elections Commission, Finney Law Firm attorneys then decided to challenge the false claims statute in Federal Court.  That commenced in two other actions in 2011 and 2012,

We lost those twin law suits in the U.S. District Court, in the U.S. Court of Appeals for the Sixth Circuit, and en banc before the Sixth Circuit.  Ultimately, not a single trial or appellate Judge saw any merit to our arguments.

But then in January of 2014, the U.S. Supreme Court accepted our case for review, and the tide quickly turned.  We had oral argument in April of 2014  and a decision by June of that year.

In a Clarence Thomas-authored opinion, we won 9-0, sending the cases back to the trial Courts in Cincinnati.  It then took two more yeas of hearing and appeals, but we have prevailed in those actions and the OEC False Claims statute has been struck down as unconstitutional, a tremendous victory for justice against an entrenched bureaucracy in Columbus.

Waiting for the Federal Elections Commission

That left one more decision, a decision that curiously sat for years, and years and years in Washington.  For normal people, what in God’s name takes five years — five years — to decide.  Month after month and year after year, the FEC, shrouded in secrecy, sat and sat and sat on the Complaint that alleged that the $650,000 gift violated federal campaign finance laws.

Last week’s letter to our client from the FEC ended that waiting.  They concluded that Schmidt deserved more than a $2,500 penalty but because her campaign committee had no money and she was no longer a candidate for federal office the pithy sanctions was appropriate.  They fined the TCA more, but not nearly enough.

A Congressman loses her seat

To understand the hubris that would lead to this type of abusive conduct by a member of Congress, one needs to understand two things: (i) members of Congress simply never (almost never) lose their seats, with reelection rates reliably above 95% (read here) and (ii) they know that the House Ethics Committee and federal prosecutors won’t lay a glove on them.

Thus, it was sweet justice in May of 2012 when the voters resoundingly turned Schmidt out of office, in part because of her record of corruption as revealed by the House Ethics Committee and media reports of her mendacity.  Chris Finney even gave a series of speeches to expose the incredible tale.  (see here, here, here and here).

Making a difference

We would have preferred that the path of justice in this matter had taken several different turns — that prosecutors would have recognized the multiple felonies committed by these actors in giving and receiving the illegal gift.  The House Ethics Committee, the U.S. Attorneys’ office, the IRS, and ultimately the FEC failed in discharging their duties to punish these overt and incontrovertible misdeeds.

But the voters had the final say, and the slow, weak and intellectually dishonest bureaucrats, in a strange way, both exposed Jean Schmidt’s corruption, and their own inability to administer justice.

Read more here>> Enquirer: FEC settles Jean Schmidt ethics case

 

Former President of the Greater Cincinnati Home Builders Association and Cincinnati Home Builder Mike Hoffmaster, Realtor Jeff Rosa of Sibcy Cline. and  Finney Law Firm’s Christopher Finney will present a panel discussion before the Cincinnati Area Board of Realtors entitled “Working together in New Construction” on Thursday, July 7, 2016 at 1 PM at the offices of the Cincinnati Area Board of Realtors.

Please join us!

Information on the panel and sign-up information is here.

Now updated to include more links:

Our firm is pleased to serve as local counsel in the class action against the Internal Revenue Service for the targeting of Tea Party and other liberty groups for extra scrutiny and delayed 501-C-3 and C-4 tax exemption applications.

Last week, the IRS finally provided the list of groups it targeted.  That development is featured in today’s Washington Times.  You may read that here.  You may recall that the production of that list was hotly contested by the IRS, and produced only

The list has grown considerably from the groups the IRS Inspector General originally claimed were targeted of 298 to 426 in the latest IRS filing, that that fails to include some 40 groups who opted out of the litigation.  In all, that means more than 462 groups nationwide were subject to enhanced IRS scrutiny and prolonged delays in processing their tax exemption applications.

That litigation is ably led by Eddie Greim of Graves Garrett  from Kansas City.

Fox News Channel has a great story as well here.

The Hill has it here.

Newsmax has it here.

That case is pending before U.S. District Court Judge Michael Barrett of the Southern District of Ohio.  District Court Judge Susan Dlott recently recused herself after more than two years presiding over the case.

The US EPA uses its broad powers under the Clean Water Act to designate, essentially, any soil that is merely wet as “waters of the United States” and thus subject to its regulatory reach.

They then enhanced their enormous procedural advantage by preventing property owners from challenging that designation unless (i) the landowner filed for and was denied a permit or (ii) if the owner was sanctioned ($37,500 per day in potential penalties) for proceeding without a permit.  The hurdles the agency erected to challenging its regulatory reach was really shameless.

Of course, both of those obstacles to standing created an impossible choice whereby the owner either exposed himself to crippling fines or waited through an interminably long process.

Fortunately, last week the United States Supreme Court unanimously ruled that the property owner does not need to mount these bureaucratic hurdles in order to challenge an over-reach of a designation of a “water of the United States.”

Chief Justice John Roberts authored the decision that found that Plaintiffs “need not assume such risks while waiting for [the Environmental Protection Agency] to drop the hammer in order to have their day in court.”.

Read more here and here.  Read the decision in Army Corps of Engineers v. Hawkes Co. here and read the Scotusblog.com page on the case here.

Our firm is pleased to “make a difference” for our clients, including in challenging abuse of power by government officials.  Some people fail to understand the pernicious nature of the abuse of power and the impact it can have on our republic.

Thus, we were bolstered in our belief that abuse of power is pervasive, and persistent in this article from today’s Yahoo! News detailing how 41 Secret Service agents — you read that right, 41! — were disciplined for targeting congressman Jason Chaffetz of Utah with illegal searches of their database, and release of damaging information to media.

 

We are seeing the activity with our Realtor and lender clients , we are seeing the activity in our title insurance company, Ivy Pointe Title, LLC, we are seeing the activity with investors making money in development and new construction, and we are seeing the activity in excited families making their first move into a new house or in upgrading their residence.

Now Freddie Mac confirms it: They predict 2016 will be the best housing market in a decade.  Now, candidly, many parts of the past decade have been downright bleak, so it’s not comparing to much, but we are seeing record activity and that’s great news for our Realtor, lender, and investor clients.

The article is here.  Enjoy it while it lasts!

Our firm is proud to have an active but small practice area devoted to public interest law.  People frequently ask “what is public interest law?”

For our firm it is assuring that government actors — legislators, school boards, county commissioners, City Council members, as well as administrators — Mayors, City Managers, zoning officials, the IRS, and others — stay within the bounds of their constitutional and statutory authority.  When they exceed those bounds, many times there is a cause of action and Judge who will stop them in their tracks.  We are glad to represent plaintiffs  in those actions.

There is no better example of this practice area than the U.S. House of Representatives’ suit against the Obama administration for spending $5 billion per year on the Affordable Care Act a/k/a ObamaCare without express authorization from Congress to spend the money.  This is indicative of an administration raging out of control.

The House of Representatives under then-Speaker John Boehner authorized and pursued the suit.  Liberal pundits across the nation argued that the House lacked standing to sue, and that it was a foolish waste of money.  Both turned out to be untrue.

Today, U.S. District Judge Rosemary M. Collier ruled that the administration’s spending of those funds was unconstitutional and that it had to stop.  Read more about that decision here.  Read the whole decision here.

This is an important decision with broad-ranging implications for reining in the Presidency and out-of-control federal agencies.

 

Many times when I teach courses to residential and commercial Realtors, I ask this simple question:

What is the essential bargain going on between a buyer and a seller of real estate?

The reason for the question is that real estate professionals — Realtors, attorneys, investors, and lenders — frequently get caught up in the tall grass of the details of the purchase contract such as personal property, inspection contingencies, representations about property condition, earnest money issues, and on and on.  All these things are important, but shouldn’t we first and foremost focus on the thing that brings everyone to the table to begin with?

But cutting to the quick of the real estate transaction, what is the buyer giving to the seller and what is the seller giving to the buyer?

Cash is exchanged for good title

The answer, very simply, is that the buyer is giving cash to the seller and the seller is giving a certain quality of title to the subject real property to the buyer.

It seems so obvious, that we may overlook this simple and fundamental truth.

Standard Board of Realtors Contract language

Indeed, the Cincinnati Area Board of Realtors/Dayton Area Board of Realtors form of Contract to Purchase buries the clause by which the seller’s obligation is made clear at paragraph 19 on page 6 of a 7-page contract.  Not only that, but the critical clause is in the middle of that paragraph, starting after a semi-colon in the middle of a sentence:

[Seller shall]…convey marketable title (as determined with reference to the Ohio State Bar Association Standards of Title Examination) to the Real Estate by recordable and transferrable deed of general warranty or fiduciary deed, if applicable, in fee simple absolute, with release of dower, on [date]….Title shall be free, clear and unencumbered as of Closing with the exception of the following, if applicable: (i) covenants, conditions and easements of record….”

Goodness, that’s a mouthful, and from an attorneys perspective there is so much meaning in that part-paragraph.

Different standards of title quality

I have seen countless judges and attorneys blow past the issue of what quality of title must be conveyed by the seller at the closing.   Indeed, I had one Judge tell me from the bench, confidently but absolutely incorrectly, that that Marketable Title Act (O.R.C. Section 5301.47-56) defines the quality of title that a seller must convey to a buyer.  That’s hogwash.  The Marketable Title Act simplifies and makes uniform the title examination process, but it does not attempt to tell sellers what quality of title they must covey to buyers.

Three distinctly different contract standards

It is the language of the contract itself that tells sellers what quality of title they must convey to a buyer and there are several different sets of standard language that may be used:

  • The above-noted language from the standard CABOR/DABOR contract contains potential problems for a buyer as it requires a buyer to accept title subject to “covenants, conditions and easements of record.”   Really?  What if there is a highway easement running through the living room?  Or how about a title problem I ran into recently that prevents an owner in Mt. Adams from building a second story on their house?  There are all kinds of “covenants, conditions and easements of record” that could well prevent a buyer from making use of his property the way he plans.  This standard CABOR/DABOR language mandates a buyer — even if they find and object to an easement before closing — to a accept title to the property impaired as it is.  The only way to protect one’s self from this contract language would be to do a full title examination and read and understand the easements and covenants of record before even signing he contact.  This rarely happens.
  • Some “standard” purchase contracts provide that a buyer must accept title subject to all “covenants, conditions and easements of record” that “do not unreasonably interfere with the buyer’s intended use of the property.”  This standard makes a whole lot more sense for the typical purchaser.  Then, if during the title examination process an offending easement or covenant is discovered, the buyer would be excused from performing.
  • Many commercial contracts contain a due diligence period for title, allowing examination and objection for a period of, say 14 days after contract signing.  Thus, the buyer is not forced to accept anything at all of record, and the buyer is constrained to state his objections within a tight timeframe.

Date is important as well

We warn in this blog entry about the contract that doesn’t end, meaning that the buyer has the right to perpetually tie up title to a property while he decides whether or not to buy, and has no closed-ended obligation to actually close on the purchase.  It is a terrible situation for a seller.

So, what happens if the buyer and seller leave blank in the contract the closing date?  Well, since the obligations of both the purchaser and the seller have no contractual deadline, presumably they never have to close.  Does that mean the seller never has to deliver a deed?  That the buyer never has to tender the purchase price?  That the contractual promises are simply illusory and thus unenforceable? Or, finally, that the parties must close within a “reasonable time”?

The cold reality is that in such a circumstance the parties have given lawyers something to argue over, which means time, expense and uncertainty to get a transaction closed, to get rid of a buyer who refuses to timely tender the purchase price, or even to force a dilatory seller to close.

Recordable, transferrable

The above-noted Board of Realtors contract language calls for, among other things, that a deed be “recordable” and “transferrable.”

There can be a host of reasons that a deed is not “recordable” and “transferrable.”  The most common reason is that the there is a new legal description on the deed because since the prior transfer some land has been conveyed away, or the transfer is part of a cut-up of a larger parcel.  In such circumstances, several things could be required, such as sign-off by the local planning commission, recording of a new survey plat and a “closure chart” showing that the legal description in fact “closes” from beginning point to ending point.

It is helpful for a buyer to require the seller to adhere to this standard.

Quality of deed

Finally, the contract will almost always describe the type of deed the by which the seller must convey title to the buyer.  This blog entry thoroughly explores the distinction among a general warranty deed, a limited warranty deed, a fiduciary deed and a quit claim deed.

Conclusion

This one clause is where my eyes first go when I review a contract for a client — whether buyer or seller — for it encapsulates the essential bargain from the seller is to the buyer.  Understanding this provision is fundamental to protecting your client and assuring that he is protected in the transaction.

 

Today’s New York Times has a story, here, on a new initiative of the Consumer Financial Protection Bureau to regulate “Contract for Deed” and what is referred to in Ohio as a “Land Installment Contract.”

Land installment contracts are typically used by individual sellers to provide a financing vehicle for individual buyers to purchase a single family home or investment property.  A typical structure would call for a higher interest rate to be charged under that seller financing than bank financing would provide — precisely because those borrowers do not qualify for bank financing.

The new CFPB has until now limited its scope of regulation to federally-insured lending institutions.  How it intends to increase that scope to include corporate and individual sellers is unclear.

The article also explores other proposed CFPB regulatory initiatives such as (i) prohibiting financing institutions from requiring arbitration of disputes and (ii) new regulation of payday loans.

One thing seems assured: There will be a ramped-up stream of consumer protection regulations coming from the CFPB.