A few years ago, Sameer Beydoun looked like an urban pioneer who was rescuing derelict Detroit houses one at a time.
Beydoun and his company, Metro Property Group, claimed to be raising money from investors and using it to rehab the houses and rent them to Detroiters. By his own account, he acquired more than 1,000 houses from banks that had foreclosed on them and from Wayne County's annual tax auction.
It looked like a Detroit success story. But sometimes you get fooled. On Tuesday, U.S. District Judge Paul Borman sentenced Beydoun to 24 months in federal prison for wire fraud. Beydoun pleaded guilty in March to raising money under false pretenses, often advertising houses for sale that he did not in fact own, and otherwise hoodwinking investors.
Court documents show that Beydoun would tell investors that the Detroit houses he advertised for sale would be fully refurbished and occupied, updated with new windows, wood floors, new bathrooms and kitchens, updated boilers and electrical systems. He pitched them as turn-key investments with annual yields as high as 23%.
In reality, more often the idea was to buy cheap and flip a house within a couple of weeks at three to four times what Beydoun paid for the empty structure. The scam began as early as 2011 and, as Borman noted, was something of a Ponzi scheme where money from later investors was used to keep earlier investors happy.
"This was a very serious offense, a sophisticated offense," Borman said in passing sentence, noting that the victims, mostly in Britain, were selected because they would be unable to easily visit the properties in question to see their true state.
The case is yet another example of how the allure of Detroit’s comeback has created fraudsters as well as heroes. In recent years, as word of the city's partial recovery spread, naive investors from around the world have gotten caught up in the hype. And there were plenty of people like Beydoun ready to take their money.
In April, I wrote about Belgian investors who were taken in by a similar pitch to what Beydoun used — that Detroit houses were money-makers, quickly rehabbed and producing sure-thing rental income. Dozens of Belgians lost money.
And in January, the Irish Times reported that Irish lottery winner Dolores McNamara and a property fund called Brendan Investments bought about 600 houses in Detroit between them from 2012 to 2014. Since then, they forfeited scores of units to the Wayne County treasurer for nonpayment of property taxes or sold others at a loss after the investments failed to pan out.
These cases fall in the nether space between Detroit's decline and Detroit's recovery. As word of Detroit's recovery began to spread worldwide, far too many people tried to cash in on dirt-cheap real estate prices in advance of a substantial rise in prices. People like Beydoun began to peddle the myth of a sure thing.
A more savvy real estate investor once told me you should never buy an investment property you couldn't drive by every day just to see how it was doing. Contrary to that advice, far too many people around the world poured money sight unseen into derelict Detroit houses, hoping to make a painless profit.
I don't know whether Beydoun started with honorable intentions and got in over his head, or whether he played fast and loose from the beginning.
"I am painfully aware that I have deeply hurt many people," Beydoun told Borman during the sentencing hearing. "I accept full responsibility for my conduct. ... I should have been honest with the investors from the beginning."
Both Borman and Assistant U.S. Attorney Frances Lee Carlson agreed that Beydoun, once caught, tried to do right by paying his victims what he could.
Born in Dearborn of Lebanese immigrant parents, Beydoun played football at Fordson High School and later at the University of Toledo. After school, he played arena football for a year before buying a Subway franchise. He told me in a 2013 interview that he "didn't want to be asking people if they wanted extra mayo on their subs for the rest of my life." He sold the store and got into real estate.
In that interview, he cited his football training for his success. "It's the details which make the champion," he said.
Not so much, it seems. And investors who lost their life savings in this scam aren't the only ones who suffered. Detroit at large suffers from the bad press that cases like this give us around the world.
Contact John Gallagher: 313-222-5173 or email@example.com. Follow him on Twitter @jgallagherfreep.
Read or Share this story: http://on.freep.com/2wMV8Ug...Read more