It has been reported in the local press in Loreto that a meeting was held yesterday March 9, 2010 in Loreto, Baja California Sur at the Loreto Bay Inn by the Governor of Baja California Sur, Narciso Agundez, the Director General of FONATUR, Miguel Gomez Mont, and the Mayor of Loreto, Yuan Yee, the Chairman of the Board of Desarrolladora Homex S.A.B. de C.V., Eustaquio de Nicolas, and others. At such meeting the State Government of Baja California Sur and FONATUR made the announcement of the re-launching of Loreto as a tourist destination. As a part of this effort it was announced that $368,000,000 Mexican Pesos would be invested in infrastructure and maintenance in Loreto and that the Loreto Bay development was purchased by Homex.
No official press release about this has been made by the State Government of Baja California Sur or by FONATUR. No official announcement of the purchase of Loreto Bay has been made by Desarrolladora Homex S.A.B. de C.V. yet. The homeowners at the Loreto Bay development have not yet been given any notice of the sale.
What are the terms of the sale of Loreto Bay? Did Homex only purchase the assets of TSD Loreto Partners? Did it purchase the entity TSD Loreto Partners S. en C. por A. de C.V.? How will the sale impact homeowners at Loreto Bay? Will the unfinished homes at Loreto Bay be finished by Homex? Will Homex honor the agreements entered into by TSD Loreto Partners S. en C. por A. de C.V.? What about those homeowners that hired a third party contractor to finish their homes but did not terminate their construction agreements with TSD Loreto Partners?
Here are some links to Radar Politico which published some articles about the purchase of Loreto Bay by Homex:
One recurring issue that comes up when non-Mexican nationals acquire real estate in Mexico through a real estate trust, often called “bank trusts” or in Spanish fideicomisos (the full name is actually fideicomisos irrevocables traslativos de dominio), and the real estate trust is not set up properly is the absence of designation of substitute beneficiaries.
Let us suppose that Joe from Seattle decides to buy real estate in Mexico. He buys a nice beach-front condo unit in a new condominium development in Los Cabos. He does so through a real estate trust since he is not a Mexican national. The real estate development company who is selling him the condo arranges for the closing through their own attorneys, including the creation of the fideicomiso. Joe puts himself and his wife Linda as the beneficiaries of the trust, just in case something happens to one of them. For many years Joe and his family enjoy the condo. One day both Joe and Linda die in a horrific automobile accident. Because Joe and Linda did some estate planning their properties in the United States are transferred without incident and outside of probate to their children. However, the real estate trust for the condo in Los Cabos did not include a substitute beneficiary clause. As a consequence, a lengthly and expensive probate proceeding in Los Cabos, Baja California Sur, Mexico is required for Joe and Linda’s heirs to take their beneficiary rights to the real estate trust in which title to the condo in Los Cabos is held. Having added a substitute beneficiary clause to their real estate trust would have prevented this from happening.
So what exactly is the substitute beneficiary clause? It is a very simple clause that should be inserted in all real estate trusts which designates who should become the “owner” to the property held through the real estate trust when the beneficiary (the “owner”) dies.
In the substitute beneficiary clause one or more individuals, and even legal entities, can be designated as the substitute beneficiaries to the real estate trust at the beneficiary’s death. Second place substitute beneficiaries can also be designated in case the substitute beneficiaries predecease the beneficiary to the real estate trust. Third place substitute beneficiaries, and so forth, can also be established in this clause.
So what is the disadvantage to having a substitute beneficiary clause? Unless having the beneficiary rights to a Mexican real estate trust be transferred outside of the regular estate planning and probate is counted is considered a such, there are no disadvantages to having a substitute beneficiary clause since it can be changed at any time through an amendment to the real estate trust.
In short, although a substitute beneficiary clause is technically optional, as a general rule it should always be included within the terms of a real estate trust in Mexico.
I have received many calls from people that invested in what they call a bank called Capital Institute or Capitalbank of Mexico which is no longer paying them an agreed upon interest or returning their investments back.
If you live in Tijuana you have probably seen the foreign exchange house with the name “Capital Institute” on Blvd. Agua Caliente with big red letters and you may have also seen a billboard touting 12% interest in US Dollars close to the intersection of Ave. Independencia and Blvd. Sanchez Taboada in Zona Rio. Or you may have learned about the Capital Institute for the first time in the weekly journal Zeta in its articles about the arrest of Miguel Angel Marquez Trevino and his alleged involvement in money laundering.
But if you are not in Tijuana you may have learned about Capital Institute/Capital Bank through the Internet in chat rooms, investment forums about high-yield certificates of deposits or the websites that were found at www.highyieldmexico.com and www.capitalbankmexico.com. You probably read information similar or identical to the information that you can still find at the press release that was originally published on PRweb.com on 11/25/2008 which was later syndicated on many other “news’ websites. You can still find the press release at PRweb.com’s website here: http://www.prweb.com/releases/2008/11/prweb1660394.htm
Interestingly, the contact information listed on the press release is for an individual named Robert Donell and a company called P5 Marketing instead of Miguel Marquez or Capital Institute. It would appear that Mr. Donell through the company P5 Marketing were part of a marketing agency hired by Capital Institute since they are listed as the “Technical Contact” for the domain name highyieldmexico.com at the Internet Whois database at http://www.networksolutions.com/whois-search/highyieldmexico.com where Miguel A. Marquez is listed as the Administrative Contact along with Capital Institute as the Internet domain registrant.
Now, the press release referred to above states in plain terms that Capitalbank of Mexico is a “…banking institution..” which is “…chartered by the Mexican Federal Banking and Securities Commission…” and that “…Capitalbank received its federal licensing and accreditation as a Mexican Savings and Loan Association..” These are representations that would make Capitalbank/Capital Institute appear as a legitimate bank to the unwary.
The press release later quotes Miguel Marquez, who is referred to as the CEO of Capitalbank, as saying:
“Our Savings and Loan Association pays its depositors among the highest returns on dollar-denominated Certificates of Deposit by making high interest, short-term loans to fully collateralized borrowers providing much-needed access to credit. If we have funds that are not being used for loans they do not sit idle. We invest those funds in the $2 billion dollar a year cross-border currency exchange industry between San Diego and Tijuana, both of which provide substantial returns that get passed on to depositors. As a federally-regulated and audited part of the Mexican banking system, we are authorized to receive deposits and lend these funds for the benefit of our depositors. Since interest rates are traditionally much higher in Mexico, we can offer superior rates of return to our CD’s depositors.”
However, Mexico’s National Banking Commission later issued a press release on April 13, 2009 (you can find the original press release it issued here: http://www.cnbv.gob.mx/recursos/023_Capitalbank.pdf) where it stated that Capital Institute S.C. de R.L., which has used the name Capitalbank in its advertisements, is not part of Mexico’s Banking System and that it does not have authorization by the financial regulators to use the name “Capitalbank” in any way. Further, that it was not authorized to receive deposits from the public or perform any activities that are restricted to financial intermediaries (ie. banks). Many investors in Capital Institute/Capitalbank may not have received news of this press release made by Mexico’s National Banking Commission. Capital Institute continued to operate after publication of such press release by the National Banking Commission until November 2009 when it unexpectedly “closed down”.
It turns out that in November 2009 Mexico’s Organized Crime Unit (SIEDO) raided Capital Institute S.C. de R.L. to conduct searches under federal warrants for money laundering activities. Also, Miguel Marquez, the alleged owner of Capitalbank/Capital Institute, was sent to Mexico City for questionning by Mexico’s Federal Authorities. You can read the press release (in Spanish) that Mexico’s PGR (Attorney General’s Office) issued about such raid here: http://www.pgr.gob.mx/Prensa/2007/bol09/Nov/b146009.shtm
The latest development in this story is that on January 22, 2010 Miguel Angel Marquez Trevino was formally indicted for the crimes of 1. organized criminal acts, 2. conducting operations with illegal funds, and 3. possession of illegal ammunitions. Mr. Marquez has been transferred to a Federal Prison in Rincon, Nayarit from where he will probably remain during his criminal trial. You can read the press release (in Spanish) that Mexico’s PGR issued about such indictment here: http://www.pgr.gob.mx/prensa/2007/bol10/Ene/b07010.shtm
Will the legitimate investors in Capitalbank/Capital Institute ever recover their investments? This is a question that remains unanswered.
This is my first post regarding real estate investments made in Mexico that have either fallen through, because of the financial downturn, or because they were simply fraud on buyers/investors. Since I am in the Southern California/Northern Baja California region this blog will mostly deal with real estate developments in Tijuana, Rosarito, Ensenada and San Felipe. So, here are all of my disclaimers and notices: Yes, I am an attorney but it is important to establish from the outset that none of the information that will be posted in this blog will be legal advice and should not be considered as legal advice. If I provide any information regarding the laws of Mexico it will be done exclusively to illustrate general principles of Mexico’s laws and not so that such information can be used as a substitute for specific legal advice regarding your case or someone else’s case. Also, reading this blog does not make me your attorney. If you want to retain me as an attorney then you will have to enter into a retainer agreement with my law firm just like anyone else would have to (provided our law firm has no conflict of interest in accepting you as a client, of course). Following is another very improtant notice: any post made to this blog is not intended or written to be used by a US taxpayer for the purpose of avoiding penaltied that the US IRS may impose on the taxpayer.
One of the rumors that I have kept hearing is regarding Desarrolladora Homex’s negotiations with Citigroup for the sale of TSD Loreto Partners S. en C. por A. de C.V. (commonly known as the Loreto Bay Company). If this is true, then what does it mean to a homebuyer that did not have their home construction completed by TSD Loreto Partners? What if they hired a third party contractor to finish their construction, such as the “global solution” for the Aqua viva homes as proposed by Beck Internacional de Mexico?
It is clear that there are many questions that remain unanswered for the buyers of the Loreto Bay development in the Nopolo area of Loreto, Baja California Sur, Mexico. We will have to wait and see how things develop.
Today I learned about a website (http://sanfelipedevelopments.com/) that allegedly was formed to “collect” information from victims of real estate fraud in San Felipe developments so that the “authorities” could act on such information. The website is supposed to have been put up by “…unfortunate victims of fraud and misrepresentation…” that are just like the visitors for the website. They are collecting information regarding people that have had problems with their real estate investments in real estate developments located in San Felipe, Baja California, Mexico. A very interesting thing is that the website does not list anyone as being behind this website. This begs the questions: Who is behind this website? Why are they hiding their identities?
I did some searching on the WHOIS internet domain names database (see the following link http://www.networksolutions.com/whois-search/sanfelipedevelopments.com) to find out that whomever registered the website did not want anyone to find out their true identities as they used a “proxy”, One and one Private registration service, to hide their identities. I personally would not give any of my information to someone that hides their identity from me. There probably are many people that will give their information to the owners of this website. Hopefully they will not fall victims of another internet scam.