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OFFICE OF INTERSTATE LAND SALES REGISTRATION

Nevada Land Builders

U.S. v. Norman Lester Dacus,

Abe Fox,
Raymond E. Anderson
Don Johnson,
Dan Keser,
Jay Luna,
Louis D. Sidwell,
Cary M. Weiler,
Donald C. Wilson,
Nevada Land Builders, Inc.,
Green Saddle Ranch Company,
Real Estate Loans, Inc.,
Evaluators, Inc.,

H-Bar Ranch, Inc.
Indictment returned July 20, 1977

The indictment alleged conspiracy, willful non-registration and
misrepresentation in the offering and sale of lands located in
Nevada. Land in several geographical locations was involved and
misrepresentations allegedly involved lakes, riding stables,
swimming pools, tennis courts, shopping centers and industrial
developments which did not exist and was not planned. The indictment
was dismissed in December of 1977 for technical reasons and has not
yet been revised and refiled. (February 1978)

This promotional scheme was a classic "interstate" one.

ENCLOSURE "D"

OILSR ACTIONS RESULTING IN REFUND OFFERS

OILSR enters into administration settlements with developers who have made non-exempt sales without providing purchasers with an effective property report. These administrative settlements result in the offer of refunds to affected purchasers.

During fiscal year 1977, it is estimated that, under these agreements, developers offered to buyers an opportunity to rescind purchases of real estate sold for over $133 million.

In addition to administrative settlements, OILSR also initiates litigation when widespread consumer abuses are detected. A recent civil suit filed by HUD through the Department of Justice resulted in the developer of a Florida subdivision offering refunds to buyers of approximately $13,000,000.

OILSR also provides a service to the public by interceding with developers on behalf of purchasers who complain that they were victimized. Several millions of dollars have been directly refunded to lot buyers through these efforts.

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Enclosed is the testimony of Mr. Richard Yetwin, Esq., of Tucson,

Arizona to be submitted for the record of your hearings on the Interstate

Land Sales Full Disclosure Act pursuant to our telephone conversation of

last week.

If you have any questions concerning the testimony, or if it is not

to be included in the record for some reason, please contact Mr. Timothy

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Testimony before the Senate Small Business Committee
concerning the enforcement of the Interstate Land
Sales Full Disclosure Act, 15 0.8.c. S 1701 through
S 1720, and Regulations Promulgated thereunder
(24 CFR S 1700.1, et seq.)

Gentlemen:

This letter is prompted by an article which appeared in the Arizona Daily Star on Friday, January 6, 1978, concerning HUD and its office of Interstate Land Sales Registration.

Por some time, I have been planning action on behalf of a very good client to attempt to bring to the attention of the appropriate body, either legislative or judicial, the apparent abuses by HUD of its powers as granted by Congress in the area of interstate sales. My concern centers around activities west of the 100th Meridian (approximately the Mississippi River).

My client is a well-known land developer in Tucson. Although active in the construction aspects of development in the past in certain commercial transactions, the client now limits itself to the subdividing and improving of residential land for sale to ultimate consumers and contractors.

The client has developed or presently owns several thousand acres of land in the area commonly known as the "Catalina Foothills." This is one of the nicest areas around metropolitan Tucson, and fully improved lots (all roads, underground electric, sewer, if required, and telephone in place) sell for between $18,000 and $40,000, with the average price set at $28,400. The lots vary in size from one to two true acres.

The subdivisions developed by my client are located two to three miles from the Tucson City line, but only eight miles from downtown Tucson and seven miles from the University of Arizona.

Pebruary 9, 1978
Page Two

My client is a family business, and the land which it owns is free and clear of liens and encumbrances, including purchase money mortgages or deeds of trust. All improvements, such as roads, underground electric, gas and telephone, and sewer, are paid for with cash. At the time of the very first sale to the consumer, there is no outstanding indebtedness on the part of my client to another. The expenses incurred in complying with the Act are substantial and are passed on to the ultimate consumer. (See 15 0.8.c. S 1705)

A specific problem has been encountered by us which should be a major concern for all developers, regardless of size, west of the Mississippi River. The question raised is:

If a subdivision is covered by the Act, does
the reservation of patents for lands granted
by the 0.s. under the Act of August 30, 1890,
concerning ditches and canals (43 U.S.C.
S 945, 96 Stat. 391) preclude an exemption
under the Interstate Land Sales Pull Disclosure
Act, 15.0.6.c. 1702 (a) and 24 CFR § 1710.11?

This.problem was prompted by a letter which my client received almost three years ago when attempting to comply with the Act concerning one of its subdivisions. (See attached letter.) We have recently been informed that the same position is still being taken by HUD. As you will note from paragraph 6 of the enclosed letter, the writer states that he is aware that almost all of the land west of the Mississippi River was conveyed by land patents. In fact, my client's land does include the standard reservation for canals and ditches purBuant to the Act of August 30, 1890, 43 U.S.C. S 945.

Upon receipt of the attached letter, my client called the Office of Interstate Land Sales Registration and questioned whether the reservation for canals and ditches precluded the use of this exemption. It was told at that time that there was significant case law to support HUD's position that the reservation for canals and ditches precluded use of $ 1702 (a) (10) exemption anywhere west of the Mississippi River.

After a rather exhaustive examination of case law in the area, our office has concluded that the canal and ditch reservation is not a "lien or encumbrance" as was probably contemplated by the Act. A list of the few cases in the area, with citations, is attached,

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