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Tehama County real estate license stripped [Red Bluff Daily News, Calif.]
[December 19, 2009]

Tehama County real estate license stripped [Red Bluff Daily News, Calif.]

(Red Bluff Daily News (CA) Via Acquire Media NewsEdge) Dec. 19--A Tehama County real estate salesman has been stripped of his license after a court ruled he had deceived a number of North State residents by representing himself as a broker and failing to document a number of private loans.

A 17-page ruling from the California Department of Real Estate filed Nov. 25 says James Dennis Costa failed to provide loan applications, Lender/Purchaser Disclosure Statements and Mortgage Loan Disclosure Statements while handling private money loans.

only a sampling was investigated for purposes of the trial, none of which were found to include the necessary documentation.

Costa's broker, Karen Matthews, was in Tennessee during these transactions and received no commission for any of the private loans. Nor did her signature, or a representative of her signature, appear on the documents the court considered.

Two of Costa's victims made up the bulk of the court's decision Former Hal's Eat Em Up owners Michael and Tracy Pryor took out loans they could not afford to fix up properties recommended to them by Costa.

Felipe and Linda Oropeza, a pair of Oroville restaurateurs, invested money toward development and wound up with forged Butte County documents.

Pryor loans In 2006, Costa, presenting himself as a broker the Pryors claim, arranged for the Pryors to borrow a combined $1,765,000 through seven loans, each at 12 percent interest, for the purposes of buying Red Bluff property.

Phone calls to the Pryors were not immediately returned.

Michael Pryor told the court that Costa talked him into getting the loans with the idea that Pryor could fix up the properties and obtain conventional loans with better interest rates, as the Pryors could not otherwise afford the loans they took on.

The Pryors were told by Costa that they were investing in a gold mine and would make millions, according to their testimony.

Among the properties the Pryors purchased was 303 Pearl St., a house then in need of significant work, which was 900- square-feet smaller than Costa had represented, according to Michael Pryor's testimony.

Costa told the Pryors, they testified, that the house could sell for as high as $450,000, but at the foreclosure sale, the property went for $165,000.

Another property, 1137 Walnut St., was purchased by the Pryors with the intention of deeding it to Chad and Shonda Carter and Wade and Barbara Carter, who intended to use it as a restaurant.

Phone numbers for the Carters could not be located.

Michael Pryor's testimony regarding the Carters implicated Pryor in a fraudulent transaction, according to court documents.

But that did not stop the Pryors from filing a civil suit in September 2007 against Costa and Tuscan Mortgage, a company that received commissions for Costa's sales.

In a 40-page complaint for damages, the Pryors sought a temporary restraining order against Costa and Tuscan employees and cash for punitive damages from Tuscan employee and Costa.

Costa declared bankruptcy in October 2007 and the case was put on hold.

Tuscan Mortgage has since closed its Red Bluff office, according to city records, and its fictitious business license for its Los Molinos office has not been renewed.

The case remains open in Tehama County Superior court.

Calls to the Pryors' lawyer, Les Hait, were not returned.

Attorneys at Barr and Mudford, the firm hired by Tuscan, were not available for comment Friday afternoon.

Oropeza loans Felipe Oropeza testified against Costa and accused him of representing himself as a loan broker.

Calls to the Oropezas were not returned, but according to court documents, Costa convinced Oropeza to loan $215,000 to a Richard Hysmith with a 12 percent annual interest rate. Hysmith used the money to purchase property in Oroville, with broker and processing fees again going to going to Tuscan. The court found no Lender/Purchaser Disclosure Statement or any other loan disclosure documents on file for the Oropeza loan.

A phone number for Hysmith could not be found.

Hysmith made only two payments to Oropeza, and Costa managed another two interest payments himself, according to court documents.

Oropeza was repeatedly told Hymsmith's project was going well and eventually received a letter, purportedly issued by the Butte County Department of Development Services, indicating a lot division on Hysmith's property had been given tentative approval.

The letter was a forgery. The property, located in a flood zone, could not be legally developed into three parcels, and no letter indicating otherwise had been sent by Butte County.

In September 2008, the Butte County District Attorney's office began an investigation into the forgery.

The case remains open, but both Hysmith and Costa remain suspects, Butte County District Attorney Michael Ramsey said Friday.

If convicted of forgery, either man could face three years in prison, Ramsey said.

Costa defense A phone call to Costa was not returned Friday night.

During the trial, Costa, who represented himself, admitted no wrongdoing, according to court documents.

Costa said he relied on Matthews and a software company called Bytes to provide loan disclosure forms, but the court ruled these were Costa's responsibility.

When Costa failed to produce any private lender mortgage files other than those found in an audit by the court, he said they had been stolen in October 2007, and his hard drive went bad.

A police report of the incident considered by the court, however, revealed only a rock thrown through a business window, and made no mention of stolen files.

Costa told police he suspected Michael Pryor of throwing the rock, but asked police not to contact Pryor, court documents said.

In an interview conducted by a Butte County District Attorney investigator in January, Costa was asked if he was a loan broker and said he was, only to change his status to salesperson when asked to show his real estate license, according to documents.

A number of character witnesses, however, did testify in favor of Costa, including Tehama County Sheriff's Deputy Chad Parker.

All were asked about their dealings with Costa and said they were pleased.

Avoiding fraud Tom Pool, a spokesman for the California Department of Real Estate, said this was the first time Costa had faced any issues with his license, which was issued in 1996.

License revocations are not uncommon, and the department regularly publishes a list of salespeople and brokers who have lost their licenses, he said.

The department's decision does not shield Costa from civil or criminal repercussions, Pool said.

Nor does it prevent Costa from reapplying for a license in two years, although the department maintains certain criteria must be met before any new license would be granted.

There is a pretty arduous process to go through, and each petition is handled on a case-by-case basis, Pool said.

The department offers a number of guides online at to explain what to look for when initiating real estate loans or purchases.

When investors and borrowers did not get disclosure statements from Costa, it should have been a red flag, Pool said.

--- Staff Writer Geoff Johnson can be reached at 527-2153, extension 114, or at To see more of the Red Bluff Daily News, or to subscribe to the newspaper, go to

Copyright (c) 2009, Red Bluff Daily News, Calif.

Distributed by McClatchy-Tribune Information Services.

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