[caption id="attachment_12827" align="alignleft" width="200" caption="Vito Simone as he appears on Linked-In"][/caption] Debra Donahoo waited two years to hear from a judge what she already knew was true—that her former best friends, Vito and Gail Simone, lied to her in April of 2006 in order to get $50,000 for an ill-fated real estate deal. Now she'll have to wait years more to be paid the $44,500 she's still owed. She may never get anything. "I proved fraud," Donahoo says by phone on March 25. "It was based on fraud." Says Simone, former president of the Greater Baltimore Board of Realtors and still a licensed real estate agent and federal HUD loan consultant: "I would like nothing more than to set the record straight, especially on Ms. Donahoo's case. Right now we have filed an Appeal and are working through the legal system.  With all fairness to Ms. Donahoo and me, I think it is important to respect that process and allow it to play out without trying the case in the press. As a side note, we have been involved in four similar cases and won them all." It's not exactly true to say Simone "won" them. But he didn't lose them either. The state Injured Workers Insurance Fund, for example, dropped its $173,000 suit in 2009. But its attorney told City Paper then that it was not because its claim lacked merit. City Paper wrote about the Simones' bankruptcy shortly after they filed it in February of 2009 ["Boom and Bust," Mobtown Beat, March 18, 2009; Vini Viti Vito, Feature, April 8, 2009]. The couple listed $3.9 million in liabilities and less than half a million in assets. Several creditors filed motions to challenge the dischargeability of their debts, and all but Donahoo gave up or settled. "I expected the case to go this way," says Andre Weitzman, Donahoo's lawyer. "But you never know. Exceptions to [bankruptcy] discharge are extremely difficult. Most people don't attempt it." Even if the case is, as the Simones' lawyer, Russell Karpook contends, just a simple breach of contract, it illustrates the pitfalls awaiting unwary investors and some of the legal trapdoors that real estate professionals can drop through in order to avoid repaying their debts. The story begins on the night of April 28, 2006. Donahoo says Simone called her to his house to discuss an urgent request. Donahoo, who has known Gail Simone since the two were in high school, and at the time worked part time for the Simones' real estate company, went to Simone's home and heard that Vito needed $50,000 to close the biggest deal of his life the next day. An investor had dropped out, and without the money, the Simones stood to lose the deal and their very large deposit. Donahoo tapped her home equity line of credit for what she understood would be a four-month bridge loan, at most—just until the couple and their other partners could refinance the ambitious project on Druid Park Lake Drive in Reservoir Hill, where they planned to build four wrecked houses into a dozen $300,000 condos. Vito and Gail Simone offered her 18 percent interest—$1,000 per month—in the meantime. Though the deal did not close for two months, the Simones made 26 monthly payments before their bankruptcy. They even renegotiated and formalized the terms of the Donahoo loan. They told Federal Bankruptcy Judge Nancy V. Alquist that Donahoo had approached them with the deal and wanted to be a "hard money lender"—a contention the judge found incredible. Donahoo's lawyer introduced as evidence an e-mail from Vito Simone to Donahoo: "I am very sensitive to the situation that I created by asking for your help financially." Weitzman also established that Simone personally invested only $5,000 in the Druid Park Lake project—and that his real estate brokerage earned a $45,000 commission when the property changed hands. On the witness stand, Simone told the court he had no loan applications pending in August of 2008. Weitzman introduced an e-mail to Donahoo, dated August 14, 2008, in which Vito Simone refers to a pending loan application and a "normal 30-60-day approval process." On the Simones' behalf, Karpook argued that even if the Simones had misled their friend in April of 2006, the fact that she signed a renegotiated deal in February of 2007 moots any lies the Simones may have told. "I think that note being executed negates anything that happened in the initiation of the loan that they're saying was induced by fraud," Karpook told the judge in his summation at trial, in December, 2010. "After that occurred, she and they agreed on the terms to a note, it was signed. Payments had been made, and continued to be made." In her ruling 14 months later, the judge didn't buy that or a technical argument Karpook made saying that oral false statements about a debtor's financial condition don't constitute fraud under the controlling law. Donahoo's lawyer says she cleared a high hurdle in winning the judgment. Bankruptcy is about treating all creditors equally, dividing the existing assets so that no creditor gets a greater percentage of their investment repaid than the others, Wietzman says: "It's difficult to get the evidence [of fraud]." Once a judgment is made, it is good for 12 years, and renewable for an additional 12 years, Weitzman says. But collecting can be difficult, even before an appeal is filed. Dominic Marcuccio, for example, got a $69,000 judgment in state court before the Simones' bankruptcy. The claim—and the judgment—was for fraud, according to Marcuccio's lawyer, Amar S. Weisman. But when he tried to garnish Vito Simone's pay from Yerman, Witman, Gaines and Conklin Realty, he got nothing back but a letter—from Yerman's lawyer, Russell Karpook—saying that Simone was not an employee of the firm: "and therefore no wages are due the judgment Debtor from the Garnishee." ["Unjust Enrichment?" Mobtown Beat, August 19, 2009]. When asked on the witness stand in December, 2010, who his employer was, Vito Simone replied, "Yerman, Witman, Gaines and Conklin Realty." According to his Linked-In profile, Simone still works for a subsidiary of the firm, Strata Referral. William Yerman was one of the Simones' larger creditors, claiming a $250,000 stake in the soured Druid Park Lake deal, according to the Simones' bankruptcy filing. Karpook did not return a call from City Paper asking about the case. Weitzman, Donahoo's lawyer, says Simone's answer under oath does not mean Karpook mislead Weisman earlier. Garnishing someone's pay is not easy if they don't get a regular salary. "They could be contractors," Weitzman says. "If someone is an independent contractor you have to issue a garnishment of property other than wages—and you have to serve it at a time when the person is due a commission." Simone is on a list of federally-approved Housing and Urban Development consultants and also operates a business called 230k Services. He advises people how to borrow more money than the house is worth in order to rehab it, with a government-backed loan. "FREE 1-Hour PRE-purchase renovation consulting for your clients!" Simone offers on his Linked-In page, which has more than 30 recommendations and more than 500 connections. "Call or email me. Make better offers in today's market."

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