Flipped Out

Troubling questions about real estate transactions dog a former Cowboy's business

After retiring from pro football in 1992, former Dallas Cowboy Eugene Lockhart has tried his hand at running a swimming pool installation business and a one-hour photo shop. A more recent foray into home mortgages and real estate--in which Lockhart partnered with former Cowboy Kevin Smith and a man named William Tisdale--may generate a bit more attention for the former All-Pro linebacker, at least for the company he's been keeping.

His partner Tisdale was indicted this summer on federal fraud and conspiracy charges and is accused of leading a ring that stole millions using the stolen identities of the recently deceased. (See "Grave Robbers," by Thomas Korosec, November 6.)

One of his former key employees, a Dallas mortgage broker named Kurt Davis, is being sued by a Houston lender for allegedly carrying out "quick flip" real estate transactions designed to rip off lenders.

Those matters are not tied directly to Lockhart, but the Houston lender is curious about a flip sale of an East Dallas house in which Lockhart, Tisdale and Smith profited directly and in which Davis was involved with the mortgage.

The story of Lockhart's new venture begins last fall, when he formed two partnerships with Tisdale and Smith. One, KLT Properties, is involved in buying and selling houses. The other, America's Team Mortgage, was formed to broker mortgages. A mortgage broker typically lines up a homebuyer with a lender and can handle matters such as hiring appraisers and inspectors.

Davis, the mortgage broker, says he wanted to become the fourth owner/partner in America's Team, but when that didn't happen, he signed on as a contract employee working on commission.

"The idea was to capitalize on their names and get a mortgage business going," says Davis of his former employers, who set up shop on Preston Road in North Dallas.

But in an October 2002 memo to Lockhart, Smith and Tisdale that is included in a court filing, Davis complained that several lenders suspected America's Team Mortgage was a "flip shop" and that the loans it generated contained "fraudulent information or are merely loans to facilitate flip profits instead of arm's length transactions." In a flip sale, someone buys a property and immediately sells it at an inflated price.

Davis' relationship with Lockhart's company quickly soured, and they parted company earlier this year. They are currently suing each other over money owed.

Despite the tone of his memo, Davis was no stranger to flipping properties. Separate from his work with the ex-Cowboys, he engaged in a number of transactions in which he was both the flip seller and the mortgage broker, according to a civil suit filed in July by Home Loan Corp., a Houston home-lending company that did a lot of business with him.

In some cases, the lawsuit alleges, the homebuyers in Davis' deals were "straw buyers" who for a fee were paid to buy houses, took out large mortgages in their own names using false information and in short order defaulted on their loans.

"These are people who are about to go into bankruptcy, or they have some credit that they're willing to use and ruin," says Cecil Miskin, a Fort Worth lawyer representing Home Loan Corp.

In most cases, the buyers swore--as is required for the loan to be federally insured--that they would use the home as their residence, the suit alleges.

Davis, who talked to the Dallas Observer twice and referred further inquiries to his lawyer, denies the lawsuit's claims.

In general, without talking about specific cases, Miskin says this scheme can be employed to make quick profits at a lender's expense because "it's done in conjunction with a bogus appraisal."

"The person selling the house is the one who makes all the money," he says. It's made at the closing table the second the lender hands the seller the check.

"At some point, of course, this game of musical chairs has to stop," Miskin explains. That comes when the buyer defaults on the note. The lender takes a loss because the true market value of the home is far less than the amount of the loan.

Miskin says his client, which sells its loans to even larger lenders, has been forced to take back a number of loans brokered by Davis. The houses listed in the suit are all over the area, in Dallas, The Colony, Richardson, Rowlett and Plano.

One mortgage loan that has not foreclosed but is likely to soon because the homebuyer declared bankruptcy two weeks ago involves a homely wood-sided house at 5917 Reiger Ave. in the Junius Heights section of East Dallas. Its empty hulking presence has been a curiosity to neighbors for more than a year.

"Something strange has been going on over there, but we haven't known what," says next-door neighbor Robert Ackerman, echoing the sentiments of several other neighbors. "It's been empty now for a year and a half."

The house, which had been owned by a wealthy Southern California man who bought it for his daughter's use while she attended SMU, went up for sale after she graduated in May 2002. The asking price started at $220,000, then dropped to the low $200s. On December 23, 2002, the ex-Cowboys' KLT Properties bought it for $185,000, according to real estate industry records.

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