VERNON BRYANT/DMNThe criminal investigation centers on a group of investors that repeatedly bought and sold townhomes among themselves. Often, their transactions appeared to inflate the values of those homes, according to property records.

The questionable property transactions occurred in Frisco Square, a showcase for suburban growth aided by more than $50 million in city government investment. The investigation centers on a tight-knit group of investors led by Nigerian businessman Ademola Kumapayi. Mr. Kumapayi and his group repeatedly bought and sold luxury townhomes among themselves beginning in 2004. Often, their transactions appeared to inflate the values of those homes, according to property records.

Lenders involved with Mr. Kumapayi and his group poured millions into a three-block stretch of Library Street and suffered at least eight foreclosures since December, property records show.

Some of those investors now say they face claims for hundreds of thousands of dollars in foreclosure costs rather than the payoffs Mr. Kumapayi promised.

Agencies involved in the investigation include the Frisco Police Department and the Collin County district attorney's office. Mr. Kumapayi has not been charged with any offense, and an investigation does not necessarily mean a crime has occurred.

Neither of the investigating agencies will discuss the case. But two investors, including one who filed complaints with authorities, said they were interviewed by prosecutors.

"I cannot comment on whether there is an investigation," said Christopher Lee Milner, who leads the Collin County district attorney's special crimes division.

Mr. Kumapayi's investors say he paid them to borrow inflated amounts to purchase the townhomes. They also say he falsely promised they would never be responsible for mortgage payments.

Mr. Roddy is president of Addison-based Foreclosure Listing Service, which tracks foreclosures in North Texas. He also leads Roddy Information Service, which tracks commercial building sales in the area.

Mr. Roddy said that paying someone to borrow money can be an indicator of mortgage fraud. And he noted that the FBI and other law enforcement agencies in North Texas recently established a task force to investigate the growing problem.

Although he is not familiar with Mr. Kumapayi's real estate deals, Mr. Roddy urged investors to use caution when considering an offer to accept cash in return for borrowing large sums of money.

In September 2004, Mr. Bitter acquired a 3,500-square-foot townhome at 8426 Library St., which the Collin Central Appraisal District valued at $381,984 on tax rolls.

Records show Mr. Bitter also took out a second mortgage for $103,000 at the same time he acquired the unit, but he said he never received that money and doesn't understand why.

In March 2005, Mr. Bitter sold the home to Mr. Kumapayi. Deed records don't show the purchase price, but the unit's tax-assessed value increased to $622,932 two months later.

Mr. Kumapayi sold the home back to Mr. Bitter in November 2005. It was foreclosed the next month. Its current tax-assessed value is $670,273. But the foreclosing lender was attempting to sell the property for $439,900 last month.

Flips can be used to increase a home's appraised value quickly, to generate closing fees for some insiders, to obtain bigger mortgage loans, to fatten financial statements for future credit purchases or to set the market for a particular neighborhood.

"It can be any of those things," said John Baen, professor of finance, real estate, insurance and law at the University of North Texas. "Another reason to flip them is to take your profits in some form of second [mortgage]."

Second mortgages on some of the Library Street properties ranged from $27,000 to $103,000 and were signed on the day of the original transactions, according to county property records.

Frisco Square is scheduled for development for the next five to seven years. The new City Hall, which opened in July, sits in the middle. Builders and city officials are hoping to attract a theater, a hotel, several restaurants and other retail and residential development to the 150-acre tract.

Three restaurants and a furniture store have already opened. And portions of Frisco's planned 350-acre Grand Park are expected to stretch to Frisco Square within a few years.

"That's got to be a winner," said Mayor Mike Simpson, who also predicted that Frisco Square would weather any unpleasant publicity about property flips on Library Street.

City Manager George Purefoy said he, too, believes in Frisco Square's future. He expressed disappointment over questionable transactions in the development but said he was not surprised.

Frisco Square is within walking distance of Pizza Hut Park professional and amateur soccer complex. And you can see the Dallas North Tollway running alongside the development.

"Very few of those units appear to be lived in," Mr. Crawford said. "It's worrisome to me that they don't appear to be able to sell those units to families who want to live in them. I'm concerned that we could have a collapse, and we could wind up with a bunch of unsold units."

Mr. Kumapayi's investors have suffered through eight foreclosures on Library Street. Four other units remain under the control of Mr. Kumapayi or his investors.

Any lender losses on those 12 properties could have ramifications for 11 other homeowners on the street, according to Dr. Baen, the UNT real estate expert.

Those homeowners and others on nearby streets may see unusual increases in their property taxes, the UNT professor said. New homebuyers may face higher-than-expected prices. Interest rates and insurance premiums may be bumped up. Or, as Mr. Crawford worried, the bottom could fall out of the neighborhood market.

Mr. Kumapayi is a former car salesman who was living in a Collin County homeless shelter in May 2000, according to court records in a child custody case. Seven months earlier, he told a judge he earned less than $1,600 per month from a mortgage company.

As they repeatedly purchased and sold their townhomes among themselves, Mr. Kumapayi and his associates increased the paper value of their property by more than $1.5 million.

In the 1980s, straw buyers pumped up land values along Interstate 30 in eastern Dallas County for landowners and developers in a massive fraud that bankrupted five lending institutions and cost taxpayers more than $1 billion.

More than 100 people, many of whom were paid to buy land in their names, were convicted on felony charges for their participation in that scheme.

Mr. Bitter said he met Mr. Kumapayi in 2004 by responding to a classified advertisement that suggested real estate buyers with good credit scores would be paid between $5,000 and $15,000 at loan closings.

Mr. Bitter also said Kumapayi & Associates paid him to place his name on deed records. Mr. Kumapayi was supposed to manage the properties, find renters and pay all mortgage notes, insurance and taxes, he said.

In addition, Mr. Kumapayi promised his buyers that the purchased properties would be held under their names for no more than two years, Mr. Bitter said.

"He does not make the agreed-upon mortgage payments, as well as payments for taxes and insurance," Mr. Bitter said of Mr. Kumapayi. "He [Mr. Kumapayi] also was collecting money at closings. You're getting a mortgage that's high and paying the money to yourself."

In April, a lender sold one of Mr. Bitter's foreclosed townhomes to a man who borrowed $199,500 to make the purchase. Mr. Bitter had borrowed $313,500 to buy the same property in 2004.

Mr. Bitter said Kumapayi & Associates paid him "closing bonuses" after the townhome purchases. But he said Mr. Kumapayi later persuaded him to plow that money back into the investment program.

Mr. Bitter said Mr. Kumapayi told him: "The upside is that if you get $50,000 for closing and dividends, it could be turned into as much as $100,000 in a couple of years."

Without an attorney, Mr. Bitter filed a $5,000 claim against Mr. Kumapayi in a small-claims court in Frisco in January. He said he also filed a criminal complaint with the Frisco Police Department.

"Mr. Bitter needs to be careful about the statements he's making," Mr. Goens said. "All of the investors knew what they were getting into and the risks involved."

Dr. Baen said the investors should have heard alarm bells if Mr. Kumapayi told them they would be paid to place their names on deeds for mortgaged properties.

Tarrant County resident Nick Datoo said he worked with Mr. Kumapayi in a Library Street townhome purchase in March 2005. He said he lost $100,000 when Mr. Kumapayi failed to make promised payments and the lender foreclosed.

Frisco resident Abiola Ogunsola borrowed $490,000 in March 2005 to buy the townhome at 8364 Library St. The county appraisal district valued it at $263,112.

She said a lender foreclosed because Mr. Kumapayi did not uphold promises to make the mortgage payments. The property is valued for tax purposes today at $455,862.

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