Ponzi Schemer John M. Donnelly Sentenced To 7+ Years, $5.3 Million Restitution

Confessed Ponzi schemer John M. Donnelly was sentenced on November 6 to 7 1/2 years in Federal prison and ordered to pay restitution of more than $5.3 Million.  He is currently being monitored by GPS, out on $100K bond, and must report to prison in six weeks.


During sentencing, one victim noted Donnelly lived a luxurious lifestyle. Donnelly's house is a 5 bedroom, 4.5 bath, 3,000 sq. ft. house on 3.4 acres on Church Plains Road in Crozet's Church Hill subdivision.  The house was purchased in 2003 for $440K; it is currently assessed for $597,700 (pictured, to left, from County records).

Wife Deborah Donnelly is the Executive Director of UVA's Curry School of Education Foundation, which is responsible for garnering charitable donations.  The house, which is titled jointly in both names, was purchased after the alleged Ponzi scheme began.  While Deborah Donnelly was initially named a "relief defendant," she has not been charged with any wrongdoing.

Additional assets include a Hummer, 64 acres in Fluvanna, and multiple motorcycles—all of which have or will be liquidated to help repay victims, according to Courteney Stuart for The Hook.

The judge was excoriating during sentence.  Again, from The Hook:

Judge Norman K. Moon expressed disgust for the crime that bilked 30 of John M. Donnelly’s friends and motorcycle racing teammates of more than $5 million.
“This defendant knew these victims were making life decisions,” said Moon, who referred to Donnelly as “evil” at one point and scoffed when defense attorney John Davidson suggested Donnelly was sorry for the pain he’d caused. 
“If they hadn’t caught you, you’d be doing it still today,” he said.


Related Reading: 
The DP's coverage of sentencing

Wife, UVA Fundraiser Deborah Donelly, Charged as "Relief Defendant" 
Madoff Lite: Feds Claim Charlottesville Ponzi Scheme by Lindsey Barnes, The Hook
SEC Press Release
SEC Complaint Against John M. Donnelly
US Commodities Futures Trading Commission Press Release
SEC Press Releases

Nat'l Unemployment At 10.2%, But Unemployment Benefits and Homebuyer Tax Cred Extended/Expanded and Fannie Mae Starts Deed For Lease Program

Big day in bailouts for the common man.

America is out of money.  It's time to fire Timothy Geithner.   Too bad all of the taxpayer funds that went to bailing out the Too Big To Fail banks and firms didn't go directly to the American people; would have made for a happier, if not better, nation.

The national rate of 10.2%, plus the "real" rate of 17.5% unemployment, highest ever, which includes those who have stopped looking or are underemployed in hours or salary, will continue to impact every state until it is resolved.

The Commonwealth is faring a little bit better than other states.

Our area has a 20-year high in unemployment: In the Charlottesville MSA (Metropolitan statistical Area, which includes the City plus Albemarle, Nelson, Greene, and Fluvanna) the most recent unemployment data shows 6.4% for the MSA, 7% for the City, and 5.3% for the County.  

A  commenter on this post sent the following links, showing that Va's unemployment scenario in the Southside has improved in the past six months: a smaller area of widespread 10-15% unemployment to widespread 8-10% & 6-8% unemployment. 


Related Reading:

DP on State Unemployment
BLS, Va Economy at a Glance
Current Unemployment in Cville Area
DP on Extending Tax Crud
Cville Move-Up Market and Tax Crud

Some pictorial representations of unemployment during this recession compared to others.  Click for larger image in new window.


From CalculatedRisk

From The Big Picture:

More Good Taxpayer Money Being Thrown After Bad As Fannie Mae Posts Another Giant Loss

Not only is the Obama Making Home Affordable program of mortgage mods not helping, things are actually getting worse. Read the insanity of the details.

THE LANDMARK HOTEL WILL BE COMPLETED!!!

But possibly not in time for any of us to enjoy that rooftop bar during our salad days.

Albemarle County Is Fast Tracking Back To The 20th Century As Deficit Grows

And not in a good way.   Albemarle County faces a budget deficit of $5.7 Million, $1M more than was projected just in October, due to declines in real estate and sales tax revenues.

Albemarle County needs a new way to project future revenue, which takes into account the coming wave of Option ARM resets that will lead to short sales, foreclosures, and further drops in  home property values.  Combined with commercial real estate foreclosures due to lack of commercial tenants and current commercial RE "owners" unable to re-fi due to being underwater, Albemarle County is seting itself up for years of pain.  Toss in shoppers who are keeping their wallets closed?  Ouch.

Get a clue (or 5.7 million), Albemarle County.

From The DP:

Richard Wiggans, the county's finance director, said the county is seeing continued declines in sales and real estate tax revenue....

[O]fficials are considering axing funding for recycling and affordable housing, as well as a program designed to secure conservation easements....

Even if the county raises the real estate tax rate to 77.2 cents per $100 of assessed value, the county might have to practically eliminate any new infrastructure projects for the next five years -- in addition to millions of dollars in budget cuts[....]

The next part of the article would be good for a laugh if it weren't so thoroughly contradicted by local and national projections regarding real estate values.

The proposed 77.2-cent tax rate means the average homeowner would pay the same real estate taxes as this year for the next two years, officials say.  Assuming real estate values begin to pick up, there would be a slight increase in the third and fourth years, maxing out at a three percent increase in real estate taxes five years from now[....]

"Assuming real estate values begin to pick up" = Wishful Thinking, not financial planning.

bolding = ours
Related Reading:
When Will House Prices Regain Their Peaks?  
Commercial Real Estate in Cville Area  
Higher Priced Homes Sell At Snail's Pace  
VHDA Forecast For Area Home Prices

Senate Votes Yes On Expanded Homebuyer Tax Credit...And What About That FHA Bailout? Coming Soon To An Income Tax Bill Near You

Piggybacked with extended unemployment benefits.  The House vote is expected quickly, as is President Obama's signature in order to offset the next unemployment report, expected to hit 10%. 

Meanwhile, the Fed left interest rates unchanged.   

All this as the Federal Housing Administration makes sure all the numbers are accurate and delays the release of its independent audit.

Related Reading:
What Will Homebuyers Tax Crud Due to Cville Move-Up Market?
Daily Progress Runs Long, Free Ad for Homebuyers Tax Crud

Patricia Kluge Lists Albemarle Estate For $100 Million

Is the philanthropist and vineyard owner leaving our fair County? 
WSJ has details.  C-VILLE has background.

Photo: WSJ.

Homebuyer Tax Cred Extended Through Apr/2010. Will This Do Anything For Charlottesville Area "Move-Up" Market?

Last night (10/27/09) it was a done deal; today, it's iffier.  But it's likely that the "First Time Homebuyer Tax Credit" is going to be extended and expanded to include "Move-Up Buyers" and run through 4/30/10. 

 Is this going to significantly increase Move-Up Buying in this area? 

Short Answer:  Not likely.  But do read on to learn why.

The new tax cred of $7,290 UPDATE $6,500  has expanded income caps and will be available for "move-up" buyers who have lived in their homes for five years or longer.  (The cred remains $8K for first-timers.)

But that's a huge problem here and elsewhere: lack of move-up buyers.  This blog noticed the phenomenon in the past in this post, and in another post about listings which had sellers who were not going to "move up."

While the second post was a one-week snapshot of new listings, the problem persists: those who are selling in this area for the most part fall into one of these categories:

1. seller is leaving town for a new job
2. seller is leaving town after a UVA program or residency ended
3. property is for sale by a trustee due to owner death
4. seller is retiring or ill and downsizing
5. seller has been in the property about 5 years--there's an Option ARM resetting
6. seller wants to unload an investment property
7. the property is REO or short sale
8. seller is trying to downsizee before a foreclosure or shortsale 

And--oh, yeah--then there's price.

After excluding the above sellers, there's a handful left over confronted with the prices of "move up" homes.  A tax credit of $7,290  $6,500 is not much of a motivator.  

With the current tax cred and an FHA loan,  $8K can essentially cover the 3.5% down payment for a "starter home" of up to $230K. Even so, 2009 sales were already below 2008 sales here, despite the tax credit and low mortgage rates.  Look at City sales for an example.  According to Nest Realty Group, 

• 69% of all transactions through Q3 were $325K or below 
• Nearly 2/3 were $250K and below

So this little bit of Federal Gov't intervention won't do much more in this area.  But it's a ridiculous version of "extend and pretend" and further enslavement of the American tax payers.


As this blog pointed out the other day in response to The DP's advertisement article, this homebuyer tax credit is rife with problems.  Read more about the problems via The Baseline Scenario  (Thanks, Main Street).   And for the most cogent indictment of this idiocy, see The Automatic Earth:

That principle is: the US government is busy actively raising home prices. And there we are back to what I've been saying about Fannie and Freddie for the longest time. While the reason given by Washington is that its involvement is driven by a desire to "stabilize" the markets, that is at best only part of the truth. What the White House and Capitol Hill are trying to do is "stabilizing" the markets at a level that they find acceptable. Which, if we recognize that their policies increase the number of homes on the market as well as their prices, evokes the image of a hamster on a flywheel. And that hamster WILL get tired at some point.

Who loses in this set-up? First, homebuyers, since they pay much more for their homes than if the government would stay out of the market. Then again, what obligations do the buyers really have? They get a home for free, more or less, and often with a non-recourse loan to boot. In the end, the by far biggest losers are the American taxpayers, who have to watch helplessly as their own chosen government shifts a fast increasing share of the losses of the housing market onto their tab, all solely for the benefit of the one and only party that stands to profit.

That is, the banks. Which can unload repossessed properties at much higher prices, given the tax credits. Which can keep properties and loans at greatly elevated prices on their books, which allows them to fool their shareholders and depositors into thinking they are far more healthy than they would be without government involvement. Who can use the artificially raised "values" on their books for highly leveraged financial wagers that if they pay off allow for multi-billion dollar bonuses, and if they don't can be channeled back to the taxpayers' account.

(BB emphasis) 
More:
Updated Details...CR notes this can be used for "move down" buyers as well.

The Details of the Tax Credit Extension
US Senators Near Deal (Thanks, anon)
Uncle Sam Adds 5% w/ Tax Credit

OUCH: The Worst September Since '81 And New Home Sales Cliff Diving

Follow the embedded links to even more data from Business Insider.

This is some mighty ugly data.

Yep, it's some mighty lazy bloggin' in this post. But while you're here, be sure to follow this link to the NYT's ("New?" What do they mean "new"?) handwringing.

The Charlottesville Daily Progress on the First Time Homebuyer Tax Credit: Was That An Article, or An Ad?

The DP had a Sunday feature about the up to $8K First Time Homebuyer Tax Credit, which will sunset on November 30, 2009--36 days from now.  

But it's confusing: is this feature a "news" article, or is it a long advertisement? 

The piece quotes area RE broker Ray Caddell and the Charlottesville Area Association of Realtor's President-Elect Greg Slater, in their roles as salesmen.  

But if this is a "news" article and not an advertisement, why isn't there additional, vital information included?  There's no local or national insight into the First Time Homebuyer's Tax Credit.

Here's What The DP missed:

SALES:  National real estate had its worst year in a decade--in 2008.   Locally, the Charlottesville Area followed this trend and had a terrible 2008--but the first three quarters of 2009 have had even lower sales than 2008.  Even with the Federal tax credit and historically low mortgage rates (kept that way by the Federal government) sales are way down.  The real story here is that despite sales being so low, and despite home prices increasing by 135% in the 10 year period ending 2007, prices haven't adjusted downward at the same pace as elsewhere.  Where's The DP coverage of this?

 LOCAL PRICES and "VALUES" WILL CONTINUE TO DECLINE: Due to low sales, lack of buyers, increasing foreclosures, plus Option ARMs resetting in the next couple of years, real estate prices will continue to decline in this area for the foreseeable future, according to the Virginia Housing Development Authority.  Housing  won't regain current "values" until 2023.  Using an $8k tax credit to buy a house that is going to continue losing value only makes sense if the purchaser is staying put for years.  Thus, that "starter home" isn't a springboard--it's the landing place.

THE TAX CREDIT INCREASES ASKING PRICES: According to a study by giant Goldman Sachs just reported in the WSJ, the First Time Homebuyer Tax Credit has increased asking prices by 5%, on a national average.

THE COST TO TAXPAYERS: The First Time Homebuyer Tax Credit, according to CalculatedRisk, costs taxpayers $43,000 per house sold. 

$1 BILLION PER MONTH: This is the price tag to continue this tax credit.  Business Insider offers more math, then calls this program Insane and Toxic.  

IRS FRAUD: as reported in the NYT. 

AND WHERE'S THE  REPORTING ON LOCAL OPPOSITION TO THE CONTINUATION OF THIS CREDIT? Why is the most active and most respected voice in local real estate missing from this feature?  Realtor/Blogger Jim Duncan has gone on record opposing the extension.

If this is a news article and not an advertisement, why isn't The DP covering any of these details and issues? 

The link, again:
Daily Progress:  Deadline for Homebuyer Tax Credit Looms

Boycott

After you're done reading this piece of sanity, be sure to click around the whole site, which is regularly ref'd and linked across financial cyberspace.

Virginia Unemployment Rises

The Commonwealth of Virginia's unemployment went higher in September 2009 to 6.7% from 6.6 in August, the Bureau of Labor Statistics reported.  In 2008, the figure was 4.1%.

In the Charlottesville MSA (Metropolitan statistical Area, which includes the City plus Albemarle, Nelson, Greene, and Fluvanna) the most recent unemployment data shows 6.4% for the MSA, 7% for the City, and 5.3% for the County.  A 20-year high.

Data for the MSA will be next released in one week, on October 28.

Related Reading:
DP on State Unemployment
BLS, Va Economy at a Glance
Current Unemployment in Cville Area
Mohawk Plant Closing

White House Skeptical On Renewing $8K Tax Credit for Homebuyers

Via Reuters.  For more on this, and additional links, visit CalculatedRisk.  For a local take on this bit of financial folly--every home sold during this program cost taxpayers $43K--follow the link here.

Mohawk Plant Closing

The massive Waynesboro installation has already had more than 100 layoffs.  Now 120 employees, many of whom were long-term, will lose jobs a week before Christmas.

Although the largest flooring producer in the world, the drop in new home construction and corresponding lack of carpet demand has challenged Mohawk, said Kemp Harr, publisher of Floor Focus Magazine.

The carpet market is down about 35 percent since its peak in 2005.

Read the rest at the DP here. 

Related Reading:
Current Unemployment in the Region
Map of Layoffs in Virginia

That's One Lucky Charlottesville Police Officer....

A local charitable organization has pledged $75K toward purchasing housing for Charlottesville's finest.

According to the DP, fewer than one dozen of the City's 117 officers live in the City. That's about to change, though.

The $75K will go a long way to help one lucky police officer!  

Consider:

• Cville police officers have a starting salary of $35,000.   
• A prudent buyer would spend only 4x annual salary on purchasing a home: $140K. 
• The median price of a single family home in the City is $283,750 during the Third Quarter of 2009. 
• The average price is $309K.
• So with the $75K grant, one lucky officer can buy a house at $215K. 
• That's the "charming Belmont cottage" at 900 sq ft.
  

Oh...wait...that's right, there are condos and townhomes for sale in the City, too.  Except that these have been declining in value even faster than single family homes lately as the real estate market corrects itself, and it would be imprudent to "invest" in a depreciating "asset"--

Well, it's the thought that counts.  Perhaps some more local charitable organizations and/or eminent residents will be motivated to match this grant and get more of the City's finest living inside the City limits.

Read the details here.

Foreclosures: Worst. Quarter. Ever.

Q3 2009 was a record breaker, despite the Federal Gov't's  Home Affordable Mortgage Program.  Only a few thousand of the HAMP mods are out of the trial period, however...so Q1 2010 could beat this quarter....

Sometimes, Somebody Takes the Words (and links) Right Out of Your Mouth

Couldn't have said it any better about letting the $8K tax credit die on November 30, 2009.

Dow Goes to 10,000 First Time in a Year

Yee.  Ha.

Click for larger image in new window, or go to www.dshort.com
 

CNN Money Puts Charlottesville on List of 50 Best Small Places to Launch a Business

Charlottesville may be a good place to launch a business--it just may not be a great place to stay in business.

Yes, it's another list: CNN Money's 50 Best Small Places to Launch a Business.

The resources definitely are here to launch a business.  Consider: 

There's plenty of commercial real estate available for office space and retail, and prices are negotiable. 

Local private sector business growth has ended--jobs are needed.

UVA, the largest employer, has a wage and hiring freeze in place--jobs are needed.

Unemployment is at a 20 year high here, nearly doubling in one year. 

Plenty of workers are highly educated and many are underemployed.  Those with PhD's and 4-year degrees have the highest unemployment:

The graph is from the Thomas Jefferson Partnership for Economic Development, in a presentation to the local Realtors' association this month.

The presentation also wondered:   

Is Charlottesville losing its middle class? 

Why is unemployment among African-Americans so high?   

Don't miss the whole thing at CAAR.  

So yes, this area definitely needs all the business help it can get. 

And hey, here's an opportunity.  Anybody want to take over this project?

Related Reading:

Kiplinger's List of Best Cities to Live In -- For Jobs

In the News

Check out "In the News" on the right side of the screen, beneath "Recent Comments" and "Recent Posts."  It has the latest news articles about the housing market.