Brown Announces Arrest of Foreclosure Rescue Scam Artists

Thursday, May 22, 2008
Contact: (916) 210-6000,

SAN DIEGO--California Attorney General Brown today shut down a team of scam artists that acquired deeds to hundreds of homes in foreclosure by convincing desperate consumers to place their property in a “land grant,” a phony and worthless real estate document.

Federal Land Grant Company—a San Diego-based business run by Bill Hutchings, his wife Xiaoke Li and former wife Shawna Landis—tricked desperate homeowners into believing that they could protect their homes from foreclosure by deeding their property to “federal land grants.” Land grant transfers, used hundreds of years ago when the United States was still acquiring land from other countries, are no longer recognized by any court or county assessor.

“There hasn’t been a legitimate use of the land grant since the conclusion of the Mexican-American war,” Attorney General Brown said. “If some fast talking scam artist offers a quick escape from foreclosure using archaic documents, be extremely suspicious.”

Federal Land Grant required homeowners to pay up to $10,000 to put their property in a so-called land grant which the company claimed would prevent foreclosure. Federal Land Grant also tricked homeowners into signing over the deed to their home and paying the company rent.

To make the meaningless grants appear legitimate, the company attached a land survey from when property was transferred to the United States by a foreign entity hundreds of years ago. In San Diego, for example, the company attached a survey from the Spanish Land Grant of 1872 and said that the deed reinstated the land grant and would protect homes from foreclosure.

State investigators confirmed from realty specialists in the Bureau of Land Management that a “federal land grant” transfer is meaningless and there is no mechanism in California for establishing a land grant on privately held land. Homeowners who are conned by the land grant scam are typically evicted from their property at the completion of foreclosure proceedings and retain no legally recognizable title to their property.

At least two Riverside County Superior Court judges, when faced with foreclosure sales involving so-called land grants, did not give any consideration to the deeds and issued eviction orders sought by the lender.

Federal Land Grant often perpetrated their scam by inviting homeowners to attend weekly seminars on the fraudulent land grant program. During these seminars, which had up to 50 participants, the company convinced homeowners to enter a lease back scheme in which the homeowners transfer their property to Federal Land Grant and then make monthly payments, purportedly for rent.

Investigators in the California Attorney General’s Office have discovered more than 280 properties in San Diego and Riverside counties that have been transferred to Federal Land Grant or one of its affiliated companies. An additional 65 properties have been transferred in counties including Los Angeles, Orange and San Bernardino. At least 60 homeowners have had their homes sold through foreclosures.

Attorney General Brown today filed a complaint for an injunction and penalties against Federal Land Grant. In addition to filing a complaint, the attorney general obtained a restraining order to halt the defendants’ illegal activities and an asset freeze so that the company’s money can be used to refund consumers. A hearing for the preliminary injunction is set for June 5, 2008.

As a result of its business practices, Federal Land Grant allegedly violated California’s foreclosure consultant and equity purchaser laws and California’s laws prohibiting deceptive and unfair business practices including:

• Unlawfully acquiring title to property by falsely representing that it is necessary to put property into a “land grant” to stop foreclosure
• Making false statements regarding the existence of a mechanism to transfer property from private ownership to a “federal land grant”
• Making untrue statements that consumers’ private property has been transferred to a “land grant” when this is a legal impossibility.
• Telling homeowners that transferring title to the company will prevent homeowners from having to pay their mortgage when the transfer merely strips homeowners of collateral for their mortgage and does not relieve the debt itself.

A copy of the complaint and application for the restraining order are attached.

Yesterday, investigators from the San Diego District Attorney’s Office and FBI agents served arrest warrants and three search warrants during one of the land grant seminars in San Diego. Arrested were the ringleader William Hutchings, 62, Xiaoke Li, 43, both of Scripps Ranch in San Diego, Edgar Martinez, 30, and Diego Gil, 38, on charges of conspiracy, grand theft, and deceitful practices as foreclosure consultants. An arrest warrant for Shawna Landis, 29, of Sorrento Valley, has been issued. The San Diego District Attorney will prosecute the criminal case.

“The defendants preyed on mostly non-English speaking, Hispanic homeowners who were in foreclosure, claiming to offer assistance in preventing the victims from losing their home,” San Diego District Attorney Dumanis said. “These transactions were illegal and left the victims even worse off than they were before. Some of the victims have been evicted from their own homes when this scheme failed.”

The district attorney and FBI are asking all victims who signed properties over to defendants or the companies to report the incident by calling the following hotline: (619) 531-4475

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PDF icon Application for Restraining Order83.24 KB
PDF icon Complaint25.97 KB