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Is Winston Lum a criminal mastermind or a patsy? 

Wednesday, Aug 4 2010
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It's hard to imagine there could ever be a patsy as gullible as Winston Lum, a club tennis pro and occasional shoplifter now facing a possible life sentence for his role in an elaborate Rincon Hill real estate scam.

During a jailhouse interview, he described the tragicomic set of circumstances that led to his predicament. It began a couple of years ago, when a stripper he'd met called his cellphone with the promise of a date and sex. She asked him to meet her at a department store. When he arrived, she asked him to hold her handbag while she took care of some personal business elsewhere. It was filled with merchandise store security believed was stolen. Lum had literally been left holding the bag. Police arrested him for shoplifting.

"I'm stupid. I'll admit it," he said.

In jail, he met a pleasant Nepalese man who instantly became his friend. This was Kaushal Niroula, an alleged con man accused of, among other things, masterminding a scam that resulted in New College of California having to shut its doors. Niroula convinced Lum he was a Stanford Law–educated billionaire in need of tennis lessons and a peculiar sort of financial assistance.

Lum's encounter with the smooth-talking schemer would change his life for the worse. Once out of jail, "we had two relationships: tennis, and signing things into my name," Lum recalls of his dealings with Niroula.

Lum's signatures have become key exhibits in a criminal case in which he, Niroula, and associates including San Jose real estate investor Jay Chandrakant Shah are alleged to have taken out $2.2 million in fraudulent home-equity loans on three luxury condos they didn't own. The condos were on the upper floors of the new 60-story One Rincon Hill building, which towers over the SOMA skyline.

The "scheme to forge documents and claim legal ownership of the victim's properties is an act of hubris difficult to fathom," District Attorney Kamala Harris said in a statement, in reference to the condos' unwitting owner, Shirley Hwang.

But Lum hardly fits the brazen fiend scripted in Harris' press releases. Instead, he's the true-crime equivalent of Chauncey Gardiner, the simpleton in Hal Ashby's movie Being There who stumbles into a vast and strange world of fabulous wealth he doesn't remotely comprehend. In signing documents that turned out to be forged property deeds, Lum says Niroula convinced him he was merely helping his new friend shield his assets in a nasty split with his domestic partner. Such gullibility seems implausible, until you look more closely at Niroula's proven mastery at enthralling victims with unbelievable ruses, and Lum's history of foolish life choices. "I will say that he doesn't really pay close attention to stuff," says Toa Duong, whose daughter took tennis lessons from Lum.

Lum isn't the only one who may not have seen the full picture behind Niroula's Rincon Hill fraud. Records and interviews show that intermediaries recruited to facilitate the Lum loan have been linked to troubling financial dealings that reach well beyond Rincon Hill. The escrow agent for that alleged fraud, Nga Ho Tran, has been implicated in more than a dozen mortgage fraud schemes around the Bay Area.

Indeed, leads emanating from Lum's tale point toward an extraordinary series of seemingly overlapping scams involving half a dozen of the nation's largest banks; a crew of straw-buyers, corrupt attorneys, and notaries; and careless mortgage lenders.

To carry out these schemes, real estate sharpies took advantage of the mortgage market of the mid-2000s, which was characterized by less-than-rigorous lending oversight, to orchestrate fraudulent transactions allegedly designed to bilk millions from banks. The thread connecting these apparent scams is Tran.

Banks alleged in a federal civil court case that the frauds involved at least $35 million in bogus loans. In a separate case, Tran and five purported coconspirators face felony fraud and larceny charges in Alameda County for their involvement in a plot to help an Oakland man steal his grandmother's house. Garrick Lew, who represents Tran on the Alameda County charges, declined comment.

San Francisco investigators and prosecutors on the Lum case appear to have been unaware of these other allegations of real estate fraud.

Records show that the note for Lum's fraudulent home-equity loans was passed on to a bank in Solvang, Calif., which in June was struggling under piles of nonperforming loans. After reviewing documents associated with the loan, Richard Newsom, a retired banking-industry examiner who worked for the Federal Deposit Insurance Corporation, told me the loans could be enough to push the bank into deeper trouble. "A number of questions remain unanswered as to why the little fish is sitting in the slammer when there are all kinds of breadcrumb trails that lead from this to a massive fraud," Newsom says.

Lum, meanwhile, seems to only barely absorb the fact he may spend the rest of his life in prison. He seems more preoccupied with whether his hair will turn out nice in a newspaper photo, and that I refer to him in print as a "tennis pro," not as a "tennis instructor."

He compares the alleged scammers who drew him in to the real estate and financial services professionals behind the 2008 U.S. financial collapse. Facile? Perhaps. But Lum's comment puts his complicated situation in terms even the simplest person might understand. "These are the people who messed up America," he said. "Why am I going to jail for them?"


After completing his jail sentence for shoplifting, Lum returned home to find Niroula had sent him a letter.

During their jailhouse encounter, Lum had mentioned that his life fell apart when his wife died of cancer in 2002. Niroula responded that he, too, had cancer. Lum told him he had given tennis lessons at Stanford. What a coincidence, Niroula said, that was where he earned his law degree. Niroula told Lum that he was a man of great wealth, but that much of it happened to be tied up, and that his new friend might be in for a reward if he could help resolve some inconvenient circumstances that were making it difficult to access the money.

In Lum, Niroula seemed to have found a gullible sidekick.

This story echoed ones told to other alleged victims of Niroula's. In 2007, he apparently conned the president of New College of California into giving him academic credits and the ability to obtain a student visa on the promise of a $1 million donation to the school. The donation never came. When Niroula's scheme was revealed, regulators yanked the school's accreditation, causing it to collapse.

Later, Niroula allegedly posed as a wealthy investor in Hawaii. Claiming he had a fortune tied up overseas, he stole more than $50,000 from a Japanese woman, according to her lawyer. Niroula then told a Silicon Valley technology executive that he was an international art broker with connections to the British royal family in order to obtain a $400,000 deposit on a painting he never delivered. In August 2008, he was accused of befriending a failed Marin County video producer to steal $300,000 worth of jewelry. Niroula is now in a Palm Springs jail awaiting trial on charges he conned and robbed an elderly man and murdered him.

For Lum, Niroula concocted a special version of his standard yarn. Rather than reveal he'd been jailed in connection with his alleged swindles, Niroula said he was supposedly locked up on domestic violence charges contrived by his partner, who he said was Shirley Hwang. She was maneuvering to usurp some of Niroula's assets while he was preoccupied with visa problems and cancer treatments.

Hwang was actually a San Francisco real estate investor who'd never met or even heard of Niroula. But she happened to have bought prime and conveniently empty luxury condominiums on the 48th, 49th, and 55th floor of One Rincon, which Niroula had identified with the help of a real estate agent.

To Lum, Niroula had a simple, compelling story: "He was about to get deported by an angry Asian woman," he says.

Lum opened the letter. Niroula wrote that he was anxious to get started with tennis lessons. The two men went out for Chinese food. "Then he said, 'Let me buy you dessert,'" Lum recalls.

Niroula proceeded to turn on a particular version of the charm described by patrons of several Castro bars, who had seen Niroula toss around $100 bills, playing the part of a billionaire Nepalese prince. They went to a wine bar, where Niroula ordered expensive bottles of dessert wine. He told Lum he wanted to beat his old university buddies in tennis during an upcoming visit to the Hamptons.

"I really wanted his tennis business," Lum recalls. "He walked me to my car like a date. I said, 'You don't have to do that.' He said, 'I'll be calling for you later.'"

Niroula took Lum to the Financial District law office of attorney David Replogle. Replogle is a reputed former boyfriend of Niroula's who police say is his accomplice. But to Lum, Replogle was a high-class lawyer who promised to expunge his yard-long shoplifting record.

Lum recalls another expedition in which Niroula introduced Lum to Shah, a purported real estate investor.

Shah "is like Don Corleone with a poker face and very smart," Lum says.

Niroula took Lum in a limousine to a hotel construction site in Sunnyvale, supposedly part of Shah's empire. Once the hotel was completed, Shah said, Lum would stay there for free while making $130,000 per year as the hotel's tennis pro. For someone who'd dreamed only of tennis since he was a kid, events were unfolding well.

"They'd say all these amazing things about how they were international financiers with huge amounts of money," Lum recalls. He believed them.

Once Niroula's promise of the easy life was firmly lodged in Lum's head, things began to turn strange.

One Saturday morning in March 2009, Lum was giving tennis lessons to a girl at McCoppin Square Park in the Sunset District when a limousine pulled up and Niroula and an associate got out.

"They kind of came up to him, talked to him, said they had to do something or whatever, and me and my kid were kind of left sitting there, wondering what the hell was going on," recalls Toa Duong, the student's father.

Lum was told he needed to quickly sign some papers. The explanation for the urgency was confusing, but to Lum it seemed vaguely consistent with Niroula's story about needing to protect his assets from his unscrupulous domestic partner, Hwang. Her name appeared on the condo deeds Niroula placed before him. Lum wasn't concerned with what the papers were for; he was more worried that his clients were waiting for him across the street.

"I asked them if this couldn't wait until later, because I couldn't interrupt a tennis lesson," Lum recalls. "They're all pissed off, and say I have to do it now. They walked me across the street to the [Trolley Caffe] at 24th Avenue and Taraval. They kept telling me there were more papers to sign. I kept telling them, 'I've got to go because my student is waiting.'"

Not long afterward, Replogle called Lum, telling him to meet Niroula in the lobby of a downtown hotel. A few minutes after Lum arrived, "here comes Kaushal, stepping out of a minivan, his hair bleached blond. I said, 'What's up?' He said, 'There's some people who need to meet you about my properties, which I have to have signed over to you.' He said, 'Do you speak Chinese?' I said, 'Yeah, I'm the only Cantonese-speaking tennis pro in Northern California.'"

The visitors included Peter de Witte, a so-called hard-money lender from Santa Barbara doing what turned out to be farcically lax investigation on an application for a $2.2 million home equity loan, based on the allegedly forged deeds for the three condos. Niroula ordered Lum to speak only Cantonese, apparently to prevent Lum from saying anything to contradict the story given to the mortgage brokers.

"They said, 'Hey, why don't you take out a bigger loan?'" Lum recalls the Santa Barbara guys saying. "I was there, twiddling my thumbs, talking fast Chinese. They're doing all this banking talk, and I was just enjoying the hotel lobby, drinking a $12 bottle of water."

To put into perspective the apparently sloppy due diligence undertaken by de Witte, after Lum's name showed up in San Francisco County deed records as owning three condos, he was deluged with dozens of credit card offers. Lum said he applied for every one. But his credit was so bad that he was turned down each time.

"Why would these guys give me a $2.2 million loan when I can't even get a credit card?" he says.


Niroula's scams are essentially what hackers like to call "social engineering" — the expert psychological manipulation of unknowing marks. But the Rincon Hill deal involved more than fancy talk. It required recruiting a room's worth of real estate professionals to aid in what turned out to be a fraud.

According to the district attorney's public version of the case, Lum, Niroula, Shah, Shah's attorney, and a notary he recruited were the parties wise to the scheme. It seemed that such a complicated bank fraud would have involved more players.

I called Newsom, who became famous 20 years ago as the banking examiner who testified before Congress about the crooked savings and loan dealings he discovered at the heart of the 1980s banking crisis. In February 2009, his retirement sleuthing exposed yet another national scandal in which federal regulators neglected to do their jobs overseeing a failed Southern California bank.

Newsom advised me to take a closer look at the escrow agent, the professional in charge of divvying out money to the various parties, who must be remunerated once a property sale is final. "Typically ... they would leave nothing to chance that somebody could blow the whistle. The con guy essentially needs to control everything," Newsom says, adding that frauds he had investigated sometimes involved numerous real estate professionals in on the deal.

I went to interview Lum in jail a second time.

On March 6, 2009, escrow cleared on the $2.2 million fraudulent Rincon Hill loan. At about the same time, Lum stopped hearing from Niroula. He figured either cancer had got the better of him, or Hwang had managed to get him deported.

However, Niroula had been in jail in Palm Springs on murder charges. He had allegedly set up a scheme to fraudulently transfer the home of retired art dealer Clifford Lambert. Niroula was arrested and charged with hiring two men to stab Lambert to death; he is still awaiting trial.

A few days later, Lum got a phone call from a number he didn't recognize.

"I pick up the phone and he says, 'Hey, it's me. It's Jay. I'm mailing you a check for $225,000. I will give you instructions on what to do with the money,'" Lum recalls. "I asked, 'Is this check coming from you?' He said, 'No, It will be coming from one of my people.'"

The name on the check was Tran's Escrow. A state records search shows that the firm was owned by Nga Ho Tran, a former title company employee from Morgan Hill.

"Nothing came up that looked unsavory or out of the ordinary in that case as far as Tran's Escrow company went," San Francisco police inspector Gregory Ovanessian says. Tran "has been very co-operative, and very forthcoming. I do know that Jay Shah has opened many escrows through her office, for a variety of properties. But that in and of itself doesn't mean anything's wrong."

While Tran's firm raised no red flags for Ovanessian, she is charged in a separate case with felony fraud, forgery, embezzlement, and money laundering in Alameda County, where she allegedly schemed to help an Oakland man take possession of his 93-year-old grandmother's house. The house was then used as collateral for allegedly fraudulent loans. Tran is one of six criminal defendants linked with those alleged frauds.

As in the Rincon Hill case, after the Oakland property was fraudulently transferred, a straw buyer took out a bank loan, the proceeds of which were divided among alleged coconspirators.

It turns out that deal was only one of many transactions involving Tran that have become the target of fraud allegations.

Last November, she and her husband, Quan Le, filed for bankruptcy in San Jose federal court. In January and February, several banks including JP Morgan Chase, Wells Fargo, and Wachovia Mortgage filed complaints in bankruptcy proceedings, alleging that she helped steal millions of dollars through mortgage fraud.

They accused her of organizing a series of so-called double-escrow frauds, in which buyers took out home mortgages on the same property nearly simultaneously, without either bank knowing that the property was burdened with nearly double its value in loans.

According to allegations made by Countrywide Bank in a Jan. 22 filing, Tran "aided and abetted a far-reaching mortgage loan fraud conspiracy in which buyers, sellers, and other co-conspirators, acting in concert, fraudulently obtained loans and other benefits from federally insured depository institutions."

According to other similar bank complaints, Tran helped orchestrate frauds worth at least $35 million. The complaints describe transactions conducted in 2006, when California's no-questions-asked mortgage-lending frenzy was nearing its peak.

Attorneys for the banks did not return calls requesting comment. Calls to Tran's home, her business and her husband's businesses, and to an attorney who until recently had been representing her were not returned.

One curious aspect of the district attorney's characterization of the Rincon Hill fraud is that there appears to be no obvious victim. Hwang endured some panicked months when she discovered her property was mysteriously in someone else's name. But her attorney eventually had the fraudulent deed expunged from city records, and Hwang was again officially the rightful owner.

So was this a victimless crime? Hardly. Somebody has to end up holding the bag on the fraudulent loan.

"The elephant in the room is, who's the person who lost the $2.2 million?" Newsom notes. "Somewhere down the line there is a legitimate, but very unhappy lender."

According to Ovanessian, the loan included instructions to prepay the first 13 months' installments, meaning the lender got stuck with only $1.7 million in outstanding debt.

Documents filed with the San Francisco recorder show that de Witte sold the note a month after the deal closed to Los Padres Bank in Solvang.

Kerry Steele, chief financial officer for the bank, did not return calls requesting comment. But records show that on April 23, the federal Office of Thrift Supervision notified Los Padres Bank that its finances were deteriorating so swiftly that "it was subject to prompt corrective action" to ensure it had sufficient capital to cover its deposits.

By Newsom's reckoning, the bank is in such a perilous financial condition that the Rincon Hill loan could create serious problems. The bank apparently remained unaware the note was fraudulent even after police had cracked the case.

And as of mid-June, de Witte had yet to make good on what had turned out to be a fraudulent note. "Pretty soon, it's not going to be a problem because [Los Padres Bank will] be paid in full," says de Witte, who says he has sufficient insurance coverage to repay. "When you pay off a bank, then the problem is gone for them, right? Isn't that the way it works with banks? If you pay them, there's no problem."


In a case of complex criminal fraud, it's normal for prosecutors to go after small players first, trying to get them to flip and give up bigger ones, all the way to the top. Key to this technique is a willingness to send noncooperative suspects to jail.

So the fact that detectives and prosecutors have not indicted additional suspects doesn't mean they won't in the future. And there's plenty to pin on Lum — even if it's true that Niroula duped him.

"Dumb or not dumb, he did receive $225,000 for his troubles, which he promptly spent," Ovanessian notes. "And it's kind of an unusual arrangement for someone in his kind of situation to come across, where money is raining down on you in droves."

Indeed, Lum had reason to believe something was amiss. The way Lum rationalizes it, Niroula, who had promised him a fancy job and place to live, owed him the money, and by spending it he was merely collecting a reneged debt.

Lum used this fragile logic to withdraw money for himself, checking into the fanciest downtown hotels, buying a $5,000 used Mercedes-Benz, eating at fine restaurants, and giving nice gifts to friends.

His love life began looking up, too. A woman he'd met at a bail bonds office near the San Bruno jail spent the night with him. She even said she'd marry him; she also suggested he give her one of the Rincon Hill condos.

It would seem that nobody could be so stupid as to give away a stolen condo for sex. But, it turns out, the San Francisco recorder shows that he indeed signed a quitclaim deed on one of them. Also on record are legal filings against the erstwhile girlfriend to get the property back.

In January 2009, Lum's comfortable new life got complicated when he began receiving property tax bills on the condos. He talked to his friend Kevin Nakagawa, a deputy sheriff.

"I said, could he explain what this was? He said, 'Dude. You own property,'" Lum recalls. "He asked me if Shirley Hwang was related to my ex-wife. ... I said, 'I'll give you the documents. Could you find out what's going on for me?'"

Could a man involved in a criminal scheme be so dense as to ask a law enforcement officer for help? I had my doubts, but then I read the San Francisco Police Department description of the investigation.

According to detectives, Nakagawa called a representative at the Rincon Hill Homeowners Office, who called Hwang. She sought the help of police, who then stumbled onto the latest chapter in the saga of Kaushal Niroula.

My hope is that prosecutors — or at least a jury — will see that Lum was, to a degree at least, the latest in Niroula's growing list of victims.

Gilbert Wong, a student at Notre Dame de Namur University in Belmont who took tennis lessons from Lum, described an epiphany that comes with meeting Lum. "I've hung around with Winston," Wong says, "and he does not seem that smart."

Lum is scheduled to appear at a pretrial hearing in San Francisco Superior Court on Aug. 9. He remains in custody; his bail was set at $7.5 million.

About The Author

Matt Smith

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