By Craig Malisow
By Jeff Balke
By Angelica Leicht
By Jeff Balke
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Ben DuBose
But Cyrus has a different story.
Barely 16 at the time ORIX foreclosed on his mother, Cyrus had already graduated from San Jacinto Christian Academy and spent a year at San Jacinto College studying business law. He then transferred to the University of Houston and started a software company with his cousins Tom and Mike Arjmandi. He'd been building computers since he was 12, a result of his father's success in the computer industry.
A follower of the Baha'i faith, Schumann Rafizadeh left Iran after the Baha'is became the target of religious persecution following the 1979 revolution. In the 1980s and 1990s, he built and sold a number of software companies, and he and his wife purchased commercial properties in Louisiana, Texas, Georgia, Ohio and Oklahoma. Growing up, Cyrus spent time working with both his father's technology concerns and his mother's real estate portfolio.
So whenever his mother received new demands from ORIX, Cyrus would pore over the paperwork and dig up whatever outside information he could find on the company. As far as Cyrus was concerned, ORIX was acting like an old-school bagman, extorting Mondona until she was wrung out.
He also took an interest in Wells Fargo, which by that time had been accused of predatory lending by the state of California, as well as by advocacy groups like the Association of Community Organizations for Reform Now (ACORN) and the Center for Responsible Lending. According to Cyrus's research, Wells Fargo, the trustee of the loan pools ORIX serviced, was complicit in ORIX's hard-nosed tactics. Ordinarily, a trustee would want all its loans to be performing, because of the greater fees generated by special servicers (who deal with troubled loans). But, according to Cyrus, Wells Fargo books the fees as grossly inflated assets. He discovered that, in the CMBS field, ORIX was notorious for vigorous litigation, even when it came to performing loans, as he believed his mother's was. By the time ORIX foreclosed on Mondona's property in 2004, a CMBS ratings agency lowered the company's rating for "aggressive litigation." According to the Commercial Mortgage Alert newsletter, the ratings agency, Fitch, stated that while the five other major special servicers had between 2 and 6 percent of their loans under litigation, ORIX had a whopping 27 percent. Moreover, Fitch stated, 74 percent of ORIX's 100 complaints involved performing loans. ORIX responded by stating, "Bondholders should question Fitch's clear conflict of interest in downgrading a servicer that has pursued rep and warranty claims against certain issuers that are clients of Fitch."
Commercial Mortgage Alert also reported that several issuers of CMBS bonds had asked investors not to do business with ORIX. The article stated that Lehman Brothers, Wachovia and UBS "have all asked investors to sign agreements aimed at preventing [B-piece] bonds from ending up in the hands of ORIX, according to multiple industry players."
The article did not cite anyone by name since, if true, the ploy would have been illegal. (When contacted for an update by the Houston Press on whether this scheme had any affect on ORIX, CMA Managing Editor Paul Fiorilla declined to comment. In 2005, a year after the story ran, ORIX sold its special servicing operation to a company called KeyCorp. Last January, KeyCorp's former senior vice president pleaded guilty to charges of fraud. He had embezzled $40 million from the company, most of which he used to buy his girlfriend gifts like a $5.6 million home in the Hamptons and a 12-carat diamond ring.)
Cyrus wanted to investigate how ORIX handled other loans it serviced. He knew he had to have information only investors have: distribution reports, servicing agreements — anything that showed how much money ORIX collected and how much went to investors.
Cyrus and his older cousin Tom were partners in a software company called Super Future Equities. In 2005, Super Future invested in the same trust that had controlled Mondona's Louisiana property. When he wasn't in class at San Jacinto Christian Academy, Cyrus was poring over financial documents and researching other suits ORIX filed against borrowers. What he uncovered, he says, was a scheme perpetrated by ORIX executives to foreclose en masse, even on performing loans — at the expense of other bondholders — and collect money not only for the company but for themselves, via a secret partnership.
ORIX sought a preliminary injunction in federal court to shut down Predatorix, claiming "business disparagement, tortious interference with contractual relationships, common law conspiracy and copyright infringement." ORIX said the site was merely a form of revenge. The company claimed Predatorix fell under commercial speech, which lacks the same protection as noncommercial speech. The injunction was denied last October.
So Cyrus is allowed to point the finger. ORIX is a predator, he says. And as far as he's concerned, the information on Predatorix reveals the biggest scam ever to hit the CMBS market.
ORIX wants its money. Period.
You can't blame a missed payment on a headache or a terrorist attack. Say you own an apartment building in Manhattan and one day, two passenger planes fly into the World Trade Center towers 200 yards north of your property. In a second, the windows blow out and the building's covered in soot.