Tuesday, March 28, 2006, 7 a.m. Cyrus Rafizadeh, 17, wakes up and heads downstairs. The Rafizadeh house is full this morning; his parents, younger twin brother and sister, and older cousin are all there.
Skinny, with short, thick, black hair, Cyrus is still shaking the sleep out of his system when someone says, "They're back again." Instantly, he knows who they are. Looking out the window, Cyrus can see the teal Geo Prizm parked in the little patch of woods right across the street. Tinted windows, with a reflective silver sun-visor spread across the windshield.
Daniel Kramer
A UH student becomes an unrelenting pain in the ass to the two companies that sued and bankrupted his mom
Daniel Kramer
Cyrus enrolled at UH when he was barely 17.
Cyrus asks his cousin, Mike Arjmandi, if he feels like using his video camera. Then he heads upstairs to get ready for school at the University of Houston. He throws on a polo shirt and jeans, and the two head outside. It's about 8:30 a.m. They walk casually across the street and Mike aims the camera on the license plate. When they get close, the driver's side window rolls down to reveal a young white guy with short dark brown hair, black V-neck shirt and gold chain. He's got a cell phone pressed to his right ear, and his eyes are fixed on something off in the distance.
"Are you one of Wells Fargo's or ORIX's goons?" Mike asks.
"No, I'm just..."
Mike cuts him off. "Are you here to intimidate Cyrus?"
"No, I don't even know you guys. I'm actually waiting on someone."
It had been like this for months, ever since Cyrus sued Wells Fargo and its loan servicer, Dallas-based ORIX, for fraud in a Dallas federal court, a filing Cyrus calls "the mother of all lawsuits for criminal violations of SEC (U.S. Securities and Exchange Commission) regulations." The strange cars had disappeared for a while, but now it looked like round two.
Around noon, Cyrus uploads the video clip to www.predatorix.com, the Web site through which he gives Wells Fargo and ORIX the finger. But the site, launched the day after Cyrus filed suit, goes beyond a simple f-you. Started in February 2006, it contains hundreds of pages from court cases, videos, PowerPoint presentations and newspaper articles detailing what Cyrus believes is a multimillion-dollar fraud the nation's fifth-largest bank and its loan servicer are pulling off on investors throughout the country. The logo is a wolf in sheep's clothing. Wells Fargo and ORIX are not pleased. Last December, the companies filed suit in a Dallas court to shut the site down. They deposed Cyrus, his father and his 14-year-old brother, who appeared not to understand the questions asked of him. But the companies lost round one — a preliminary injunction that would've pulled the plug posthaste.
Of course, posting the video of the private investigator didn't affect the lawsuit. But Cyrus hasn't seen the Geo Prizm since. Either the companies stopped hiring private dicks, or they've hired smarter ones.
Beginning modestly in the 1980s, the commercial mortgage-backed securities (CMBS) industry has blossomed into a $500 billion business.
In CMBS, investors profit from mortgage payments that are pooled together in a trust, which is held by a bank or other investment firm. The debts are then sold as bonds to public and private investors, who collect payments on the principal as well as interest. Performing loans are overseen by a master servicer; troubled loans are overseen by a special servicer.
These trusts are for serious, moneyed investors; pools typically range from hundreds of millions to over $1 billion.
The bonds are issued in different tiers called tranches, which are rated based on risk, duration and yield. Investors with the highest-rated bonds are paid first. Holders of lower-rated or unrated bonds, called B-pieces, are the last to be paid and face the highest risk in the event of a default. Therefore, B-piece buyers (usually investment firms) typically buy bonds for pennies on the dollar and can choose the special servicer. In most cases, the institutional B-piece buyer is also the special servicer. The thinking is, because B-piece buyers have the most to lose, they have the greatest incentive to make sure all the loans perform, helping not only themselves but all the investors in the pool.
In 2001, Cyrus's mother, Mondona Rafizadeh, a real estate manager, took out a loan on an apartment complex in Louisiana. The mortgage was part of a pool serviced by ORIX Capital Markets, part of Dallas-based ORIX USA. With a reported $4 billion in assets, ORIX USA is a subsidiary of the ORIX Corporation, a publicly traded company headquartered in Tokyo. Among its myriad investments and subsidiaries, the company is proud of its Japanese baseball team, the Orix Buffaloes.
In 2004, ORIX sued Cyrus's mother for defaulting on the loan. ORIX won a $10.8 million judgment, and the judge's ruling outlined instances of fraud among Mondona's employees, including falsifying rent rolls. Mondona subsequently filed for bankruptcy in Houston.
It wasn't the first time the Rafizadehs had been accused of being delinquent property owners. A few years earlier, a New Orleans office building owned by Cyrus's father was cited for multiple environmental hazards. When it came to crying foul against ORIX, the Rafizadehs didn't exactly have a clean record.
