Complaint Review: Paul Gwaz
- Paul Gwaz
1769 Marlborough Avenue
Winston Salem, North Carolina
United States of America
- Phone: 440-391-6064
- Category: Investment Brokers
Con Artist Paul Gwaz Paul Gwazdauskas, Paul Bamm, Paal Wall, Paul Dance Bilked Numerous People out of money in Real Estate Deals Winston Salem, North Carolina
*REBUTTAL Individual responds: False charges dismissed
WAKE COUNTY REAL ESTATE COMMISSION
IN RE: )
PAUL GWAZ ) NOTICE OF HEARING
(a.k.a. Paul R. Gwazdauskas), )
In accordance with the Administrative Procedures Act, N.C.G.S. Chapter 150B, you are hereby notified that the North Carolina Real Estate Commission has received information which, if true, may warrant the suspension or revocation of your real estate broker license or the issuance of a reprimand to you, pursuant to N.C.G.S. §93A-6(a)(1), (2), (3), (4), (7), (8), (10), (12) and (15); and 21 NCAC 58A .0104 and .0107(b), (d), (e), (f), and (j), and .0108.
Information before the Commission tends to show:
(1) At all times material hereto, Paul Gwaz (hereinafter “Respondent”) was licensed as a real estate broker, holding license number 191697. [continued below]....
(2) During 2004, Respondent organized the Central Carolina Real Estate Investment Club or CCRIC, LLC. Respondent represented himself to be president of CCRIC. As president, Respondent did business in the club’s name and directed and controlled the club’s business.
(3) Using the CCRIC name, Respondent induced people to “join” CCRIC by offering them the opportunity to participate as investors in the purchase of real property with the possibility of earning as much as a 100% return on their investments. Respondent charged investors a fee to participate.
(4) Respondent told investors that he had made a special arrangement with Ryland Homes, an area real estate developer and homebuilder, to purchase residential real estate at a special discount in Ryland Homes’s Wolf Run subdivision in Greensboro. Respondent told investors that Ryland Homes was under stockholder pressure to increase home sales. He induced investors to give him money to purchase new homes and lots at the special discounted price he had arranged so that he could then resell the properties at a higher, market price. Respondent promised to distribute the profits from the investments to the investors.
(5) Relying on Respondent’s promises and representations, Elizabeth Henderson, Randy Durso, Bob Smith, Mary Rancer, David Collins, Ron Horton, Michael Garrett, Mike Martin, Dolly White, Scott Kixmiller, Michael and Jean Johnson, and John and Carol Morrison and approximately 30 others paid money to Respondent to become investors in the purchase of properties in Ryland Homes’s Wolf Run subdivision in Greensboro, North Carolina.
(6) When the investors paid money to Respondent, he executed and provided to them a document which asserted that Respondent would establish the “New Build Land Trust” and that Respondent would be the trustee and real estate broker for the trust and its beneficiaries. The document further asserted that the investor beneficiaries might earn up to ten times the amount of the monies they paid Respondent. The document further asserted that the beneficiary’s investment in the trust would be used to purchase real property and that the beneficiaries of the trust would share in the profits of the sale of trust-owned properties in proportion to their investments. The agreement did not establish a definite termination date for Respondent’s brokerage services.
(7) Respondent represented to the investors that Ryland Homes did not wish Respondent’s special discount arrangement to become public information. The document which Respondent required the investors to sign required the investors to keep their transactions with the trust and the builders with whom the trust contracted confidential.
(8) Respondent’s representations to the investors was false. Respondent had made no special arrangement with Ryland Homes to purchase houses as a discount. Ryland Homes did not offer Respondent, the New Build Land Trust, or the CCRIC any special price or purchase arrangements which were not also available to other prospective purchasers. Ryland Homes was under no unique or unusual stockholder pressure to increase home sales.
(9) Respondent’s agreements with investors constituted securities under North Carolina law. Respondent failed to register the securities as he was required to do under the provisions of N.C.G.S. § 78A-24. Respondent was not a registered or licensed securities dealer or salesman and was not lawfully authorized to offer investment interests to the investors.
(10) Respondent prepared and distributed to the investors what he represented to be documents creating revocable trusts. In thosedocuments, Respondent represented that a portion of the corpus of the trust was a certain parcel of real property located in Pittsylvania County, Virginia. The property was not conveyed to the trust and Respondent’s representation to the investors was false.
(11) The investors named in paragraph (5) above and approximately thirty others gave Respondent $137,846.80 to invest in the purchase of houses and lots from Ryland Homes under the New Build Land Trust scheme. Respondent deposited the money into an account designated as a trust account, but did not maintain it in such an account. On or about July 7, 2004, Respondent transferred $90,000 from the trust account into a bank account under his personal control which was not a trust account. On or about July 9, 2004, Respondent used $33,000 from this account to purchase a certificate of deposit, which was not held in a fiduciary capacity. He also disbursed $29,950 to himself in the form of cash.
(12) On July 13, 2004, Respondent purchased the house and lot located at 1108 Blain Street in High Point, North Carolina. The sellers financed Respondent’s purchase with a note and deed of trust for $28,000. At Respondent’s direction, the house was conveyed to “Service Call Trust.” On September 3, 2004, Respondent paid off the debt to the sellers with a certified check for $28,000. The property was not a Ryland Home nor was it located in the Wolf Run subdivision. Although Respondent purchased the property with money given to him by the investors, he did not inform them of the purchase or account to them for the rents he received from the property.
(13) On or about September 3, 2004, Respondent transferred $35,771.60 from the trust account to his operating account. Respondent converted the money to his own use and purchased things for personal consumption such as an automobile and computer equipment.
(14) Respondent refused to make his records of his receipt, handling, and disbursement of the monies entrusted to him available for inspection by the Real Estate Commission’s auditors and investigators. Respondent informed the Commission’s auditor that the had received only $15,000 from the investors. Respondent’s statement was false and was designed to divert the auditor’s attention from Respondent’s trust account records.
(15) Respondent further informed the Commission’s auditor that he had only one bank account. Respondent’s statement was false. Respondent had four accounts at Branch Banking and Trust Company and one account at LSB The Bank. The accounts were set up under different names, but Respondent had control over each account. Only one of the accounts was designated as a trust or escrow account. At different times, Respondent used each of the accounts to deposit and disburse money belonging to his investor clients. Records supplied by Branch Banking and Trust and LSB The Bank do not establish a clear audit trail. Respondent did not identify the persons from whom Respondent received money or the property or transaction for which it was received. Respondent often failed to note the purpose for the checks he wrote from the several accounts. Respondent disbursed money from the accounts to himself without authority and without recording the purpose of the disbursement on the checks. Respondent commingled investor money with his own and used accounts containing investor monies to pay personal obligations, including his credit card bills, cable television service bills, $15,000 for a pizza franchise, and earnest money in connection with the purchase of property not related to the Ryland Home scheme.
(16) Respondent failed to provide the investors with regular statements accounting for the money he held for them as trustee. On one occasion during 2004, Respondent represented to the investors that he had expended money for advertising. Respondent failed to produce receipts or invoices for the advertising he claimed to have purchased.
(17) The investors made repeated demands to respondent to discover what disposition he had made of their money. Respondent refused to provide them with a complete and accurate accounting.
(18) Between June 30 and August 13, 2004, Respondent undertook to purchase twelve houses from Ryland Homes. In connection with the contracts to purchase these properties, Respondent paid Ryland Homes earnest money totaling $6,000. Respondent obtained no significant special price concession from Ryland Homes for the properties.
(19) Respondent was unable to bring the contracts to closing within the appointed time. Although Respondent did purchase six properties, Ryland Homes cancelled the remaining contracts because Respondent failed to demonstrate that he had the financing necessary to complete the transactions. Respondent informed the investors that Ryland Homes had refused to close the transactions either because they would not permit assignments to CCRIC, LLC, or because Ryland Homes could not complete construction in a timely fashion. Respondent’s statements to his investors were false. The transactions did not close because Respondent did not obtain the financing required to complete them.
(20) Of the properties Respondent purchased from Ryland Homes as a part of the investment scheme, one was the house and lot at 4502 Wolf Run Trail. The contract purchase price was $131,790. The purchase price did not represent any special discount. At Respondent’s request, the deed was made to “CCRIC-NBLT.” At closing, Respondent received a brokerage commission of $6,549.10. Respondent, acting for CCRIC-NBLT sold the property on March 24, 3005. Although the sale realized a profit of more than $2,000, Respondent did not deposit the money into a trust account or disburse it to the investors. Respondent did not account to the investors for the money he received.
(21) On or about May 3, 2005, Respondent purchased the house and lot at 4430 Gray Wolf Way for a price of $152,840. The purchase price did not represent any special discount. At Respondent’s request, the deed was made to “CCRIC, LLC.” On July 5, 2005, Respondent, acting for CCRIC, LLC, sold the property for a profit of more than $15,000. Respondent deposited the money into the CCRIC, LLC operating account and not into a trust account. Respondent did not account for this money to the investors. Instead, he took $20,000 from the certificate of deposit he had purchased with investor monies approximately one year earlier and divided the money among the investors identifying the payment as the profit from the sale of 4430 Gray Wolf Way.
(22) Respondent contracted to purchase the house and lot at 4503 Wolf Run Drive for $123,990. On May 10, 2005, Respondent closed the purchase at a price of $146,997. This price did not represent a special discount. At Respondent’s request the deed was made to “Paul-New Build Land Trust-Gwaz.” Respondent received $4,409.91 as a brokerage commission at closing. Respondent also received a bonusof $1,500. On September 20, 2005, Respondent sold the property for a profit of more than $14,000. Respondent deposited the money into a trust account and disbursed it to the investors.
(23) Respondent undertook to purchase the house and lot at 4415 Gray Wolf Way for $135,990. When Respondent closed the purchase on April 8, 2005, however, the price had risen to $138,007. The purchase price did not represent any special discount. At closing Respondent received a brokerage commission of $4,140.21. Respondent also received a bonus of $1,500. At Respondent’s request, the deed was made to “CCRIC.” Respondent subsequently let the house to a tenant on what he represented to be a lease-option basis. The tenant-optionee paid Respondent $7,500 as option money and, during the life of the lease, approximately $11,000 in rents. The document memorializing what Respondent represented to be a lease-option contract was prepared on a standard offer to purchase form. Neither the lease nor the option arrangements were competently prepared. Respondent did not deposit these monies into a trust account, nor did he disburse the money to the investors or otherwise account to them for it.
(24) On or about June 16, 2006, Respondent sold the property at 4415 Gray Wolf Way to David Collins, one of the investors. At closing, Respondent received cash totaling $10,303.10. Respondent did not deposit the money into a trust account. Nor did Respondent disburse the money to the investors or account to them for it.
(25) On January 20, 2005, Respondent purchased 924 Wolfpack Way for $114,678. This price did not represent a special discount. At Respondent’s request, the deed was made out to “CCRIC-NBLT.” Respondent received a brokerage commission of $5,733.90 at closing. On June 16, 2006, Respondent sold the property to investor David Collins. At closing, Respondent received cash totalling $3,789.99. Respondent did not deposit the money into a trust account. Nor did Respondent disburse the money to the investors or otherwise account to them for it.
(26) On January 20, 2005, Respondent purchased the house and lot at 4419 Gray Wolf Way for $144,490. This price did not represent a special discount. On May 23, 2006, Respondent sold the property for $177,000. Respondent loaned the purchasers $17,700 in the form of a purchase money note and second deed of trust. Respondent received no cash proceeds from the sale. The beneficiary of the note was not the New Build Land Trust, but CCRIC, LLC. Respondent did not account to the investors for the money or payments realized on this note. Respondent did not deposit the money into a trust account.
(27) In August 2006, Respondent began to pay himself $1,500 per month from monies belonging to the investors as a management fee. Respondent had no authority to pay himself a management fee under the investor agreement or trust documents.
(28) Although Respondent identified himself as a buyer’s broker in the agreements he signed with investors, the agreements provided that Respondent’s fee would be 1% of the profits when property purchased by the trust were sold. The agreements made no provision for Respondent to receive a sales commission when the trust purchased properties. In at least four of the six Ryland Homes transaction, Respondent received a sales commission.
(29) Because Respondent did not make regular payments on the loans used to purchase the Ryland Homes properties, during February and March, 2006, the lender, Branch Banking and Trust Company, seized all of the monies in accounts Respondent controlled which were not designated as trust accounts. Respondent was able to secure the balance of the money he had used to purchase the certificate of deposit and move it to a new account at LSB The Bank. This account was not a trust account and Respondent claimed the money as his own.
(30) During September, 2005, investors Elizabeth Henderson, Randy Durso, Robert Smith, Natassia Coullard, and Mary Rancer sued Respondent, CCRIC, LLC, and New Build Land Trust alleging fraud, unlawful securities transactions, breach of fiduciary duty, misrepresentation, and other claims against the defendants. The case was referred to arbitration. Following a hearing, the arbitrator awarded the plaintiffs approximately $22,000.
(31) Respondent's conduct as described in this Notice of Hearing constitutes improper, fraudulent and/or dishonest dealing.
(32) Respondent's conduct as described in this Notice of Hearing constitutes incompetent conduct and conduct unworthy of a real estate broker such as to endanger the public interest. You have the right to a hearing before the Commission to demonstrate that, despite the above, you possess the requisite character for licensure. The hearing has been scheduled for Thursday, May 14 2009, at 9:00 a.m., or as soon thereafter as the matter may be heard, in the Commission’s offices, 1313 Navaho Drive, Raleigh, North Carolina. If you are not present, a decision will be reached in your absence and you will be deemed to have waived your right to a hearing. You are entitled to be represented by counsel and to put on evidence in your behalf. You are referred to Chapter 150B of the General Statutes of North Carolina for a full statement of your rights.
This ___ day of April, 2009.
North Carolina Real Estate Commission
Thomas R. Miller
Roy A. Cooper
Thomas R. Miller
Special Deputy Attorney General
North Carolina Department of Justice
Post Office Box 17100
Raleigh, North Carolina 27619-7100
Miriam J. Baer, Legal Counsel
Assistant Director of Legal Services
Janet B. Thoren
Chief Deputy Legal Counsel
Charlene D. Moody
Deputy Legal Counsel
Sandra L. Good
Associate Legal Counsel
North Carolina Real Estate Commission
Post Office Box 17100
Raleigh, North Carolina 27619-7100
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