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During the year 1964, inquiries were received from forty-eight (48) persons or firms indicating intentions to sell lands located in Arizona, Colorado, Connecticut, Florida, Hawaii, Idaho, Nevada, Oklahoma, Oregon, Utah, Washington, Australia, British Columbia and Ontario, Canada.

During the year 1965, inquiries were received from thirty-two (32) persons or firms indicating intentions to sell lands located in Arizona, Arkansas, Florida, · Hawaii, Nevada, Oregon, Texas, Utah, Virginia, Washington, Australia, Bahama,

Brazil, Ecuador, and Puerto Rico.

PRICE REDUCTIONS

In several instances the suggested price as submitted by developers failed to fall within a criteria which would meet the "fair, just and equitable" concept. In such cases the developer is offered the opportunity to either withdraw the lots or parcels so affected or reduce the prices accordingly.

Price reductions and withdrawals on projects located in Arizona, Colorado, Hawaii and Oregon have been made in a sum approximating $4,215,000.00. This sum includes three (3) projects upon which a permit has not yet issued, but are in various stages of processing.

In addition to the above, ten (10) projects located in Arizona, Nevada, New Mexico, Oregon and Utah have requested permits and have failed after a reasonable period of time to meet the full requirements necessary thereto and are thus considered to be no longer active and therefore will not qualify for a California Permit. The appraised value of these projects is estimated to be $7,595,000.00.

While the "fair, just and equitable" concept may not be the whole answer, it has had its deterrent effect and has reduced the flooding of the California market with the offerings for sale of sub-marginal developments. The price reductions, withdrawals and defaults noted above totaling $11,810.00 is further emphasis of the effect the current legislation has had on the local scene.

DESIST AND REFRAIN ORDERS

During the year 1965, thirty-three (33) Desist and Refrain Orders were
issued on "out-of-state" developments illegally offered for sale in California.
These were located as follows:
State:
Number State Continued

Number
Arizona
3 Tennessee

1
Arkansas
2 Utah

2
Florida
10 Washington

1
Hawaii

Australia

1
Idaho
2 Bahamas

1
Maine

Brazil

1 Nevada

2
Oregon

3
Total

33

CON UN CONCU

EXCHANGE PRIVILEGES

Several developers have devised a procedure whereby a purchaser of a lot may exchange for another lot which is located in the "built up" area of the project. Usually a development of this nature consists of several thousand acres.

The buyer may have purchased a lot in a remote area which is unimproved. The costs to bring necessary utilities to this remote lot is usually prohibitive, so the developer in order to show what the entire project will look like in the ensuing years, agrees to exchange the remote lot for one in the "built up" area if the purchaser agrees to build upon the exchanged lot. This "privilege" is good for the person desiring to build now and is also desirable insofar as the developer is concerned as it makes the project appear more impressive with dwellings erected in a concentrated area rather than spread over hundreds or thousands of acres.

This "built up" area is usually insufficient in scope to accommodate any sizeable percentage of the total lots in the project. Further the original lot is evidently not suited for the purchase for which it was sold or the exchange would not be necessary.

No permit has issued to date which allows for this procedure.

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CONTRACT DEFAULTS A public report and permit on "out-of-state" subdivisions is currently issued for a period of one year and may be renewed upon written request. At the time this request is made, the developer is required to complete, among other things, a questionnaire which indicates the number of lots sold, etc., and the percentage and number of contracts which fell in default and were canceled.

Figures received to date reveal a default rate of 0% running as high as 43.6%. A few subdividers allow purchasers a full refund for withdrawal within a certain period of time. The default rate in these cases would have a different significance than those where there is some type of forfeiture involved.

It is presently the practice to request additional information from the developer relative to the reasons for any inordinate default rate. We also are undertaking a spot check of defaulting purchasers to determine the cause of default from the purchaser's viewpoint. As this is a relatively new practice, no report on this facet is available.

PENDING FILINGS Filings have been received on 50,273 acres divided into 29,945 lots for which no permits have yet been issued. These applications are in various stages of processing. It is anticipated that some of the applications may never be completed and no permits will be issued.

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The total appraised value of all subdivisions which have been inspected and appraised by the Division's staff appraisers is estimated to be as follows: State:

Appraised value Arizona

$29, 808, 490 Colorado

556, 720 Hawaii

20, 198, 066 Nevada

19, 069, 730 New Mexico

11, 035, 900 Oregon

16, 553, 439 Utah

944, 510 Washington

1, 338, 000

Total

99, 504, 855 Numerically the greatest activity has been in the state of Arizona, followed by Oregon, Hawaii, Nevada, New Mexico, Utah, Washington and Colorado.

APPENDIX 5.-STATEMENTS, LETTERS, AND DATA

Post OFFICE DEPARTMENT,

CHIEF POSTAL INSPECTOR,

Washington, D.C., June 23, 1966. Hon. HARRISON A. WILLIAMS, Jr., U.S. Senate, Washington, D.C.

DEAR SENATOR: This is in further reply to your letter of June 17, 1966, in which you requested certain information relative to the prosecution of our land fraud cases under the mail fraud statute (18 USC 1341).

It is believed that the accompanying charts are self-explanatory and will give you the information listed under items 1 and 2 of your letter. With respect to a showing of motions, however, it should be pointed out that all such legal steps in a prosecution are not necessarily brought to the attention of this Service by the various United States Attorneys or by the Courts. It is reasonable to assume, therefore, that there are more motions in the overall picture than shown in our records.

With respect to items 3 and 4 of your letter, you are advised that the total number of land cases investigated and closed to date is 353. An additional 115 cases are currently under investigation including 9 cases (involving 53 persons) presently in the hands of United States Attorneys awaiting decision as to prosecution.

Also attached is a list of certain abuses, omissions, or misrepresentations found to have existed in various of our land fraud investigations. Additionally, Mr. Oriol of your staff asked Inspector M. I. Dworkis of our Phoenix, Arizona, office, for information regarding lot sales to persons in foreign countries in connection with one specific case now on appeal. This data is attached.

Please be assured that your interest in this program is deeply appreciated.
With kind regards,
Sincerely yours,

H. B. MONTAGUE, Chief Inspector.

ABUSES, OMISSIONS OR MISREPRESENTATIONS IN INTERSTATE MAIL ORDER SALES

PROMOTION LITERATURE AND DOCUMENTS Item No. 1. “Giveaway" lots for so-called "Closing Costs” which far exceed acquisition

expense or actual value of land. 2. Unrealistic projected values advanced to lull lotowners into sense of security

as to equity and continuation of investment on installment plan. 3. Boundary surveys only are made with subdivision lots platted in areas

honeycombed with washes, gullies, and arroyos, so that some lots are directly in the path of natural drainage courses without flood control, or

actually in arroyos many feet below the normal land surface. 4. Roads in subdivisions dedicated to county authorities for maintenance will

not be serviced unless or until there are nearby residents in the subdivision. This means original roadways installed by developers will deteriorate

through weathering and lack of maintenance. 5. Ready water access claimed to be available although shallow water tables

may be restricted by existing water right reservations. 6. No figures on information given as to depth of water table or cost of wells

where lotowners must arrange for their own water supply.

7. Distances to nearby facilities inaccurately described in units of time instead

of mileage and road conditions. For example, a 47-mile mountain road with two-way traffic has been referred in subdivision promotional litera

ture to "as 30 minutes travel time" between points mentioned. 8. Public transportation facilities "to the subdivision" not accurately explained

as being to the edge of the property. Lots sold and assigned within the subdivision may be as far as 15 miles from the nearest accessible public

transportation. 9. References are made to "availability" of public utilities in a subdivision,

but does not include mention of cost of extending them from peripheral or

marginal areas. 10. Artist's conception of subdivision property is misleading when not labeled

as such. 11. Failure to issue promised “Survivor's Certificate” to lot purchasers' heirs.

or assignees in event of death, 12. Description of lots by metes and the bounds so that cost of survey to de

termine lot boundaries is far more expensive than the lot itself. 13. Designation on subdivision plats of road easements misleads reader to be

lieve roads are actually present. 14. Subdivision location maps out of scale or proportion and thus deceptive as.

to relative distances. 15. Lot sales contract describing installment payments and having no accelera

tion clause unduly protracts time when deed will be conveyed (37 years in one instance). This may be done purposely because vendor is unable

to promptly furnish deed. 16. Refund or lot switch privilege restricted to on-site inspection within limited

period, making the offer unrealistic to extent the expense of special travel may exceed cost of lot.

PURCHASERS OF TAOS COUNTY, NEW MEXICO Lots FROM FOREIGN COUNTRIES AND

OUTSIDE UNITED STATES
Austria
France (2)

Peru
Bahamas
Germany (8)

Philippines (5)
Bermuda (2)
Guam (3)

Puerto Rico
British Columbia (2) Guatamala

South Africa
Canal Zone (3)
Israel

Spain
Chile
Mexico

Switzerland
China
Netherlands (2)

Venezuela (2)
England
New Zealand (2)

West Indies (2)
Finland

Norway
Plus approximately 500 persons in Canada.

(NOTE.—The case to which above data relate is currently under appeal by convicted operator.)

66-628--66--25

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