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Federal government for approval, and that sufficient evidence that these buyer safeguards will be fully and faithfully complied with in actual sales operations be furnished by the developer prior to issuance of Federal approval.
We feel that any proposed legislation forwarded by this subcommittee to the Congress, to accomplish its intended purposes, must not only establish buyer safeguards as a requisite for Federal approval, but must also establish a reasonable and workable system of supervision which can be administered without unduly adding to the weight of the American taxpayer's burden.
Unless these objectives are attained, the effect of Federal legislation might very likely be no more than the imposition of an additional qualification burden on legitimate land developers who are already required to comply with the various land sales regulations of the several states, and who do so willingly a's a matter of the good business conduct which already characterizes their general operations.
Therefore, we respectfully submit for your consideration, our suggestions that S. 2672 be amended to include the following:
1. A requirement that prospective land purchasers be guaranteed an opportunity to personally inspect the property being offered for sale, and that the means for such inspection be provided to the purchaser by the developer or his sales agent, without obligation to the purchaser. We believe that the "see before you buy” sales program in effect at Lake Havasu City can be used as a prototype for this requirement, and we will be glad to work with this Subcommittee in preparing the wording for such a requirement. 2. A requirement that full disclosure of the property be made to the prospective purchaser, including staking of all lot corners by a registered engineering firm, and that evidence of related community or project development, if such development is an inducement to purchase, be presented to the prospective purchaser prior to consummation of the sale.
3. A requirement that, if a deposit of any kind is made prior to inspection of the property, and if upon inspection of the property the prospective purchaser does not wish to consummate the sale for any reason, all deposit money will be refunded within 14 days from date of request.
4. A requirement that the land developer must develop and fully qualify the property for sale in accordance with the laws of the state in which the property is located, and must have state subdivision approval prior to applying to the Federal government for approval of interstate sales.
We further recommend that the bill presently under consideration, amended to include the above requirements, all of which are intended solely to safeguard the interests of the investing public, vest exclusive jurisdiction over interstate land sales in the Federal government, and that, upon qualifying for and being granted Federal approval for interstate land sales, the developer be automatically authorized to sell the qualified property in all states, and that evidence of such Federal approval preclude individual states from imposing their own special requirements on interstate land sales.
Thank you for permitting me to express these views. We would consider it an honor and a pleasure to work with this Subcommittee on the specifics of proposed legislation designed to create nationally-recognized standards of ethical business practice and "fair play” for the real estate buyer.
Senator WILLIAMS. I have a short statement to make:
STATEMENT OF THE CHAIRMAN ON REQUEST FOR TESTIMONY OF LEONARD
ROSEN, CHAIRMAN OF THE BOARD OF GULF AMERICAN LAND CORP.
Back in June we had discussions with Mr. Leonard Rosen, who is chairman of the board of the Gulf American Land Corp., and we asked him to testify. There were many reasons for inviting him,
Gulf American is probably the world's largest installment land sales and development company. Approximately 90,000 people are now paying on property they have bought. In addition, Mr. Rosen is a member of the Florida Land Sales Installment Board.
We received no response to our first invitation. But after our first 2 days of hearings on June 21 and 22, we thought it important that
Mr. Rosen be asked to testify in person. Several critical comments had been made about his membership on the Florida board at that hearing. In addition, a series of articles from the Miami Herald were inserted in our hearing record. The articles raised many searching questions about Mr. Rosen's company, Gulf American and their operations.
To give Mr. Rosen an opportunity to testify, we asked that he appear earlier this month. I was told he was out of the country, or just about to get back to this country. I was also asked to send questions outlining those questions that I might put to him at a hearing. This was done. (See p. 461.).
On August 15 I received a telegram saying that Mr. Rosen or a representative would be present and that they wished to testify, and as a matter of fact they wanted to testify at 2 o'clock today.
Just yesterday afternoon I received å telegram. I will read it. As a result of my absence of over one month, airline problems, urgent business matters requiring my attention, impossible for me and members of my staff to be present for hearing on August 18. Written statement was mailed to you yesterday for record (see p. 461) and a written request for additional information desired will be promptly furnished.
Now I understand Mr. Rosen has representatives as far away as Baltimore. Baltimore is 32 minutes by rail and the railroads are running.
We don't subpena here. This committee is gentle in its legislative processes.
I don't think we will close this hearing. We will give him another opportunity to come in. (See p. 488 for additional material.)
Our next witness is Gunter David from the Newark Evening News. That is not Newark, Del., that is Newark, N.J.
We are very happy to have you with us, and we followed your observations with a great deal of interest. I applaud the decisive way you have been examining this problem.
STATEMENT OF GUNTER DAVID, NEWARK EVENING NEWS,
Mr. DAVID. Mr. Senator, may I first comment very briefly on the statements of the gentleman from the Justice Department? He was trying to give the impression toward the end that because of the small number of seller States the problem is not really a national one. That was my impression of his statement.
Senator WILLIAMS. I gathered that was their conclusion. It is not my conclusion.
Mr. DAVID. It is their conclusion. What I want to remind him, in his absence, is that the number of investor States is 50. There is hardly a State in the Nation in which there re not people who have not invested in some land in Florida or wherever. So from that point of view it is a nationwide problem.
Senator WILLIAMS. That is a very good point.
Mr. David. The other point I want to bring up is about the protection of the consumer through the mail fraud laws. We still have the problem in mail fraud that only the House passed the bill in which the postmaster can stop mail without having to prove intention to defraud. "This bill has not yet been passed by the Senate. So at this point, unless intent to defraud has been proven the postal authorities are helpless.
And intent to defraud, from what I have been told by the prosecutors and the postal authorities themselves, is a very difficult thing to prove.
The third thing, enforcement is often in the nature of closing the doors of the barn after the horse is gone, whereas your bill would be in the nature of prevention.
I got involved with Golden Palm Acres, a company which was selling swampland in Florida, in Dade County, from an office in Newark. I got to this through an assignment, and in order to find out what these people really do, I decided to go in and pretend that I wanted to buy some land. I only meant to pick up literature on my visit to the Newark office of the Golden Palm Acres Co. I did not identify myself as a reporter.
But after 15 minutes I beat a hasty retreat before an onslaught of salesmanship aimed at making me a partner in a Florida land venture and the owner of property that was almost sure to contain a gusher.
The office was on the sixth floor-
The office was on the sixth floor of a downtown building with a respectable name—the Chamber of Commerce Building. The chamber has long since moved to another location, however.
There were two rooms. A small office with a single desk opened into a large room with three desks overlooking Broad Street, a main thoroughfare. The walls were whitewashed only a short time prior to my visit.
But the tactics employed within those walls were far from new.
On one of the walls was a large map of Florida, cut out of the Miami Herald. It showed oil and other Florida treasures in various parts of the State.
"You see that spot on the map of this reputable newspaper," asked Louis Pilnick, a slight, short man with silvery hair, who lived at the time in Metuchen, N.J.
I nodded in the affirmative.
He took me by the hand and led me to another Florida map marked with the property of Golden Palm Acres. “That's where my land is," he said, "and it's the same spot where the Herald shows oil."
“Yes, there's an excellent chance for oil in this area," Pilnick said. "You can make thousands of dollars."
Two men, who had said nothing throughout the conversation, now joined in. Julius Gladstein of Brooklyn, who had just been named a vice president and director of the firm, smiled broadly.
“Florida is a growing State,” he assured me. “With all of that oil around you just can't miss if you buy some of this land.”
Another man, tall, with dark hair and dark complexion, whose mumbled name I missed, pointed to another spot on the map. "You see this place,” he asked. "I owned 1,000 acres there a few
“ years ago. I sold them at a fair profit. But now it's a whole big city. Incredible, what?"
I agreed with that statement wholeheartedly. Then I said, “Mr. Pilnick, if you are sure this land has oil, I would advise you to keep it."
He came over to me, put an arm around my shoulders, and said, “But I am. In a way. When they find oil on your land, you're going to have a partner-me. I keep 50 percent of the oil and mineral rights."
I asked if there might be a chance for industrial development.
“There is an excellent chance for industrial development," Mr. Pilnick assured me.
I said that the letterhead on the stationery of his firm—two palms and a beach umbrella-gave me visions of perhaps building a home there for part of the year.
"Well, you couldn't really build a home there because there are no sewers,” he replied.
At no time in the conversation did Mr. Pilnick mention the fact that the land was a swamp, that it often was under several feet of water, that it was in a conservation area where drilling for oil, industrial expansion, or home construction are out of the question because the State of Florida won't permit it.
Senator WILLIAMS. This is the area that is in a flood —
Mr. DAVID. Yes; this is in an area which is the water catch basin for the Florida Everglades National Park, and although most of the land is State owned, some of the land is privately owned. The State of Florida, however, has easements and full jurisdiction over the use of the property.
“I still have a few acres left of that land which is now a city,” said the man with the dark hair and the dark complexion. “I'm not involved with Golden Palm Acres. I'm from New York and I'm only here to interest Mr. Pilnick in my land."
"Perhaps the three of us can get a deal going together," Mr. Pilnick said with a smile.
I looked at my watch and said I had to rush back to my car or I'd get an overtime parking ticket. I backed toward the door.
“We wouldn't want you to get a parking ticket or you won't have enough money left for our land deal,” Mr. Pilnick said. He smiled again. I smiled back, waved to everyone, and left.
In a subsequent interview with a Newark News reporter who other than myself identified himself as such—we thought it would be too much of a shock and a risky thing for me to go back in-Mr. Pilnick said he did not tell prospective buyers everything about the property, adding, “If I knew for sure there was oil there, I'd be an idiot to sell any of the land.” Mr. Pilnick likened himself someone selling a house.
“Do they tell you everything that is wrong with it,” he asked.
Now subsequently the Essex County Prosecutor's Office, the day after our story appeared, began investigation. They are still investigating. The wheels of justice, on the county level anyway, are even slower than on the Federal level.
The company has moved out of New Jersey. The company's suite at No. 20 Brandford Place has been vacated and its telephone number changed to a Miami number.
Mr. Pilnick, who is 52 years old, has moved to Florida from the Jefferson Park Apartments, 148 Newman Street in Metuchen, without leaving a specific forwarding address with the management of the building.
Another firm, the Atlantic & Pacific Land Co. of 24 Commerce Street founded only last March has taken over some of Golden Palm Acres' land. The president of the company, Martin A. Fleishman, of New York has not been seen by the management of the office building for several weeks. He owes 2 months' rent.
Now, a check of the Branford Place address revealed that Mr. Pilnick moved out of the sixth floor, two-room suite in June. An investigation of the New Jersey Real Estate Commission, an investigator, rather, for the New Jersey Real Estate Commission—talking about a State-level investigation—who spoke to Mr. Pilnick in June quoted him as saying that his business in New Jersey was over. It was finished.
The investigator, Sidney Scharf, said Mr. Pilnick told him he had taken a larger suite on another floor of the building and was about to move there prior to the story in the Newark News and the subsequent investigation.
However, Golden Palm Acres continues to exist in Palm Beach, Fla., where it has maintained offices all along. The firm is incorporated in Florida. The answering service there said that Mr. Pilnick was in Florida.
The Atlantic & Pacific Land Co. was registered with the Essex County Clerk's Office on March 1, with Mr. Fleishman, then of Brooklyn as president. The company purchased 25 acres of land from Golden Palm Acres on May 9, according to records of deeds in Florida. Another 12 acres were transferred from Golden Palm Acres to Atlantic & Pacific Land Co. 3 days later. Several land sales by the Fleishman firm also have been recorded.
Now I want to give you briefly an idea of the kind of people that are going to this kind of business. Mr. Pilnick last January was barred by the SEC from being associated in any sales of stocks and bonds on charges of fraudulent selling.
Senator WILLIAMS. I would like to say at this point that we had testimony in June (see p. 38) dealing with Golden Palm Acres and statements were made about Mr. Pilnick.
We wrote, phoned, and gave him every opportunity to come in, or his salesmen or representatives. And Mr. Pilnick evidently has left New Jersey, left his office in Newark, I guess he is down in Florida, and his reason for not coming in was kidney stones, gall bladder, heart—what else? High blood pressure. So I just want to make sure that the record is clear that we gave him every opportunity to come in here and we have given him fair treatment, he or his representative.
You know we are not investigative in an aggressive sense. All we want to do is get the facts.
Mr. DAVID. Wasn't there also a situation where you were going to hold a hearing in Newark and you couldn't locate Mr. Pilnick?
Senator WILLIAMS. Oh, I am glad you reminded me. I said I would, at my expense, not the committee expense, hear him at his convenience in Newark; yes.