The Pennsylvania Office of Attorney General for the past year has been conducting a noncriminal consumer protection investigation of ABC Capital, the Philadelphia-based company that has been accused of running a Ponzi scheme for failing to renovate homes in distressed neighborhoods in Baltimore and Philadelphia for its foreign investors.
The office said it is looking into whether ABC Capital has been engaged in a “pattern or practice of unfair or deceptive conduct” in violation of the Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, and is considering whether regulators should take action “to prevent further harm to Pennsylvania consumers from Respondent and/or obtain restitution for such consumers.”
The Baltimore Banner reported in November that in dozens of lawsuits, investors in foreign countries and states across America say they paid ABC Capital to acquire homes for them — through a hands-off process in which ABC would renovate and maintain the homes with the investor receiving guaranteed rent — but that ABC did not follow through. Some of those lawsuits charge the company is running a Ponzi scheme.
Additional investors from South America to Israel say they are in a similar position but unfamiliar with the American legal system and don’t know how to seek redress. Tenants also say they were subjected to squalid conditions in homes managed by ABC.
Jay Walsh, who ran ABC Capital and a related company, IPP USA, has brushed off criticisms, saying people were piling on and that he helped more investors than hurt. Walsh did not respond to a message seeking comment Monday.
The attorney general’s office in Pennsylvania initially had declined to comment on whether it was investigating ABC Capital, and denied a “right to know” public information request filed by The Banner regarding how many complaints the office had received about ABC Capital, as well as what — if anything — it had done about them.
The Banner appealed that denial, and received a more detailed response last week that confirmed the ongoing probe, which the office said has involved “in person subpoena hearings” and interviews of witnesses and victims. The office declined to release additional information, saying it would hinder the investigation.
ABC Capital has since filed for Chapter 7 bankruptcy protection, saying it owes $4 million in judgments, and its bankruptcy attorney in December told the judge overseeing those proceedings that a Chapter 11 filing is forthcoming.
The bankruptcy filing halted proceedings in lawsuits filed in Pennsylvania’s federal and state courts, including a suit brought by 30 investors based in Hong Kong that was slated for trial.
But other proceedings and settlements have gone forward. ABC’s Maryland attorney, Brett Dieck, took part in a hearing in Baltimore Circuit Court last week in which an investor was seeking to enforce a settlement agreement with ABC Capital.
The investor’s attorney, Stanford G. Gann Jr., said Dieck had two days earlier delivered a $10,000 check and that ABC had agreed to make installments over the next six months for an additional $28,000. There was no mention of the bankruptcy proceedings.
New lawsuits have also continued to be filed. Three investors filed suit in U.S. District Court in Pennsylvania earlier this month, saying they gave ABC $109,375 for the purchase of a home in Baltimore’s beleaguered Carrollton Ridge neighborhood, which included approximately $73,500 for the full renovation of the property.
No such repairs were made, they said. The investors also alleged that squatters have been living in the home for year — “a fact believed to have been known to Defendants, but not disclosed to Plaintiffs prior to their purchase of the property.”
Matthew Weisberg, a Philadelphia-area attorney for those investors who has filed suit on behalf of others, on Monday said he could not comment on whether his office had been in communication with the attorney general’s office.
Timothy Manuelides, a Towson-based attorney, also filed a suit in Baltimore Circuit Court on behalf of a Miami-based client who said they bought a home north of Patterson Park for $105,300, which included more than $53,000 for extensive renovations. The lawsuit says ABC “absconded with the funds” without performing the work, and the home was sold at a tax sale and foreclosed on last year.
“The attorney general should step in and bring a criminal case,” Manuelides said in an interview.
Banner reporter Dylan Segelbaum contributed to this article.