The Berkeley City Council has thrown its support behind a growing group of activists, public officials and entrepreneurs calling upon governments to seize mortgages to provide relief to financially troubled homeowners.
The idea of using governments’ powers of eminent domain to help homeowners has been gaining traction nationwide. But Berkeley’s plan is the first to gain impetus from the Occupy movement and from self-described Silicon Valley startup specialist Michael Sauvante.
Sauvante is urging local governments to seize mortgages in foreclosure, potentially with assistance from a nonprofit corporation he founded called the National Commonwealth Group Inc. Sauvante believes home loans could be annulled through government's power of eminent domain, which can apply to all sorts of property, including mortgage contracts.
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“I don’t think we could be doing this without Occupy,” said anti-Wall Street activist Susan Harman, who’s been proposing Sauvante’s plan to officials in Alameda County, San Bernardino County and elsewhere. “It’s just catapulted the whole issue into the public consciousness.”
The Berkeley City Council on July 31 unanimously passed a resolution to ask Alameda County officials to explore “strategies including eminent domain to enable homeowners to stay in their own homes.”
However, the idea’s Berkeley champion, Councilman Kriss Worthington, was unaware that Sauvante’s background included significant financial instability of a different sort. Beginning in the 1990s, Sauvante founded a series of technology companies that a federal judge in a 2007 bankruptcy case declared were created to defraud investors.
Told about Sauvante’s past, Worthington said that his resolution was not tied to Sauvante or his companies. Instead, he said he was enticed by the possibility of channeling eminent domain in a positive direction.
“We are not proposing this for the benefit of a particular individual or business,” Worthington said. “As a general notion, (the approach is) poetic justice and beautiful, and we need to work out details to make sure whether it’s legally possible to help these people.”
Sauvante, who recently moved from Lompoc to Youngstown, Ohio, strenuously denies the North Carolina judge’s characterizations of past businesses linked to his nonprofit.
“He did this parting shot, saying ‘I believe you guys are scam artists,’ ” Sauvante said. “It wasn’t true.”
Sauvante’s plan is one of several proposals in which counties would use eminent domain to help troubled homeowners.
San Francisco-based Mortgage Resolution Partners has pitched a similar plan to San Bernardino County and to Suffolk County in New York. San Francisco Lt. Gov. Gavin Newsom recently told reporters that plan was a “bold” and “meaningful” response to the mortgage crisis.
New York attorney Ira Hecht and New York small-business lender Steve Kravitz have proposed another plan involving eminent domain to the state of Arizona as well as to San Bernardino County.
Under Sauvante’s approach, counties would notify banks of eminent domain proceedings. Investors holding the notes might find it difficult to prove ownership, allowing counties, and potential partners such as the National Commonwealth Group, to possibly keep the mortgages for free, Sauvante said. They could then create a bank and issue affordable loans to troubled homeowners.
According to the IRS, National Commonwealth Group is a new name for Rolltronics Foundation, a nonprofit that Sauvante founded in 1999, naming himself as chairman.
Rolltronics also is the name of one of a series of linked companies Sauvante founded, which “were all non-operational shell corporations,” wrote U.S. bankruptcy Judge J. Craig Whitley, in a September 2007 order closing the bankruptcy of a company also founded by Sauvante, Seertech Corp. They were created “in succession to bilk investors,” Whitley added.
Sauvante’s companies claimed to be developing advanced batteries and digital displays.
"But what it really was, was a scheme wherein we start a company, we sell stock," said federal bankruptcy trustee Richard Mitchell during a May 2008 hearing. "We close that company up, transfer the purported technology, and it just keeps going on and on and on."
The Seertech bankruptcy proceedings ended in 2008 without relieving Sauvante of his debts. He said his only current income is from Social Security payments.
Sauvante said many of his investors agree that he did nothing wrong. The Bay Citizen, sister site of California Watch, spoke to four former investors referred by Sauvante, and each called him an honest businessman.
“I’ve never seen him do anything that was inappropriate,” said Chelli Croucher, a bail bondswoman in Mariposa County who also lost thousands of dollars investing in Rolltronics and VoltaFlex, another Sauvante company.
Sauvante also said that publicity about his rocky business past would distract from his current efforts to help people hold on to their homes. His plan, for which he said he is currently raising money, is poised to go viral, he said.
“With Facebook and the other social networking sites, we could potentially get a viral dissemination of it, both inside and outside the Occupy movement,” Sauvante said. “That will just create that much more motivation on local governments to break free from the Wall Street banks.”
Already, the Occupy-friendly Public Banking Institute has put Sauvante on its advisory committee. In January, Sauvante gave a presentation to a nationwide Occupy movement conference call. In April, he presented his plan to a Public Banking conference in Philadelphia. His proposals have been picked up by Occupy movement blogs.
Harman, a national volunteer coordinator with the Public Banking Institute, was the link between Sauvante and the Berkeley City Council. In the spring, Harman proposed Sauvante’s idea to Worthington, who subsequently talked directly to Sauvante. Worthington then sponsored a measure to send a letter to the Alameda County Recorder of Deeds and the county sheriff inviting them to discuss an “action plan about stopping foreclosures.”
Berkeley Mayor Tom Bates expressed enthusiastic support for the measure when Worthington initially introduced it at a July 18 council meeting, and he joined the rest of the council in unanimously approving it two weeks later.
“We should really get on top of this issue,” Bates said. “I’d be happy to be involved in this. We could put together a delegation with the mayor of Oakland. So let’s do this right.”
Oakland City Council members Rebecca Kaplan and Nancy Nadel also support Worthington’s measure, according to Worthington.
“We are very interested in working with them to explore what options we have available to go after foreclosure,” said Kaplan’s spokesman, Jason Overman.