Hector Cardenas, Nahui, Hector Cardenas Curiel, C&C Capital, CCIP, Punta Raza, Country Towers A real estate scam. Investors and buyers beware. These half-built insolvent residential and tourism projects are a gigantic fraud with dozens of lawsuits Riviera Nayarit, Guadalajara Mexico

Hector Cardenas' real estate scam looks to use new loans to fund previous developments that failed, and hope new projects keep coming in. Hector started off well in 2003-2005 but went spectacularly bust after 2009. Rather than declare failure and give up his lifestyle, new investors and lenders were sought. His problem was that there were never enough good investments to fill the deepening pocket of debt. The objective then became keeping victims from knowing they’ve been cheated so that other suckers could be lured in as long as possible. His basic aim was to obscure bad investments with Ponzi-scheme type payments from subsequent loans. That’s how I ended up burned in his Riviera Nayarit project. I don’t figure I’ll ever see a dime back from my investment. And none of the residential units he promised will ever be completed if he lands in jail again. I hope others will be more lucky.

Hector does not mind that his investors, buyers and partners, some of them his friends, take the fall for his blunders, even drawing others into the scheme. Forged statements, cooked books and misrepresentations began as early as November 2008. A vast cover-up effort ensued and is still going, even though Hector spent from September 2013 until March 2014 in jail for forging a deed to lift a 32 million USD mortgage on a property. He was able to avoid further jailtime by paying off Jalisco's general secretary.

Real estate in Mexico provides a perfect setting for this type of scam. The market is unregulated so Hector can get away with otherwise questionable practices, including pre-selling without permits and funding. The possibilities are endless. People think real estate is safe, but ownership and loans can be hidden and manipulated in a hundred different ways, from pledging sold yet undelivered product as loan collateral, to misappropriating funds using powers of attorney and covering up with forged statements. Without a thorough scrutiny, scams are easy to hide.

2013 has come and gone and things just keep getting worse for Hector Cardenas, Nahui and C&C Capital. All of the company’s project managers and directors with development experience have left, or were fired and are suing for damages; all qualified and experienced corporate advisors have also left. And worse of all, several of them and other employees are taking legal action against the specific entities whose sales prospects they can affect. The flurry of lawsuits has been going on for 4 years, both locally and internationally, with the corresponding mad dash to set claims on any remaining unencumbered assets. This will get interesting by the week, as news continue to surface about the real situation at hand. Nahui is abandoned since 2012 and broke. Country Towers are abandoned since 2013 and broke. Neither is at 50% completion for even the first units. Hector is betting on pre-selling expensive product without any real termination guarantees. Country Towers will have a hard time getting going again as most of the lawsuits faced by Hector and his firms were filed (and those forthcoming will also be filed) in Guadalajara. Criminal charges are being pressed by at least two financial institutions and many buyers for posting property as collateral that had been previously sold through private purchase-sale agreements. Hector’s paranoia is boiling over, as only three other people inside the firm retain security clearance. No entity of that size can expect to function with such a limited number of people having access to operating information, while at the same time shutting or misleading all other workers, partners, buyers, and suppliers. Employees at one division have not been paid in over 20 weeks (and neither have social security payments been made). Word is out and there’s not much else to do. Besides, the market is flooded with vacant time shares and luxury apartment buildings, and those were completed.

Nahui has it much tougher. Attempting to pre-sell mediocre and abandoned half-built timeshare product is right now an uphill battle, even for the best qualified and capitalized developers. That fact coupled with the need for substantial infrastructure at this 2,100-acre resort (access roads, utilities, amenities, the movement of a federal road, etc.) that is not forthcoming (since the money for it was spent elsewhere years ago) results in a real quagmire. Furthermore, the project is quite far from obtaining all required entitlements, permits and approvals to complete what is being sold. In particular, land-use densities, the movement of a road and environmental issues will prove formidable obstacles if past commitments to government agencies remain unfulfilled. Nevertheless, the project presses on trying to sell what it can, with its second-rate marketing effort and its second-rate development team. Defections at every level are led by managers, employees, design consultants, contractors and suppliers, all bailing out as their bills top out without foreseeable payment. The company’s recent policy of commissioning work without a contract, so as to be covered if unable to pay, has begun to backfire. Few appreciate getting paid with bad checks. Unfortunately, a few of those willing to enter such agreements are not the kind to settle disputes through formal means. Selling real estate product without permits and proper paperwork is also a felony offence, but that never bothered Mr. Cardenas. He has other matters to worry about, such as loan payments on the 700-million Nahui loan, which endangers his father-in-law’s entire investment. It is no coincidence the man suffered a severe stroke and nearly perished in December 2010. With any remaining backing about to expire and fictitious sales to depend on, default is all but certain. I hope this investigation will deter others from falling into Hector Cardenas’ real estate scams: Nahui, Country Towers and any new ones he tries to peddle.