ML-Implode

Evidence has surfaced in the long-running caseof Grant America (Russell, Penobscot, et al.) vs. Implode-Explode Heavy Industries, Inc. (“ML-Implode”) that shows the plaintiffs had been waging the suit ”tactically” all along, rather than on the fundamental merits of the alleged “libel” complaint. This is keeping in form with a classic “SLAPP” suit (Strategic Litigation Against Public Participation), which ML-Implode has been claiming was the situation all along.

ML-Implode was denied a Maryland Anti-SLAPP Dismissal Motion in 2009, with the court arguing that “bad faith (on the part of the plaintiffs) had not been proven”, as the Maryland law required. The result was criticized by legal experts (such as by Paul Levy at Public Citizen) as demonstrating that a requirement to prove bad faith is an unrealistic benchmark for a SLAPP defendant to achieve.

In SLAPP suits, as a rule, plaintiffs will always act as if they have a genuine libel claim — though they know they have no way to prove it.

The new evidence comes in the form of an affidavit (filed March 21st, 2012) by journalist Teri Buhl reproducing an email conversation between her and Christopher Russell, head of the defunct Grant America Program, on November 5th, 2008. Grant America was a FHA downpayment “grant” operation based in Gaithersburg, Maryland. The conversation took place a day after the Maryland Federal court ruled against Russell (and et. al’s) injunction motion, which sought to quash publication of an ML-Implode blog article critical of Grant America and related activities of its principals, Christopher Russell and Ryan Hill.

The court rejected the injunction on all possible points of merit.

In the email, Russell admits that he only ever thought the injunction had a “10% chance of succeeding”, a level that undermines the Plaintiffs’ contention that the motion was filed for any reason except a tactical one.

The Grant America program ceased operations along with all other FHA seller-funded downpayment administrators (SFDPAs) on October 1st, 2008 when a provision in the Housing and Economic Recovery Act of 2008 explicitly outlawed them (the Grant America vs ML-Implode injunction hearing took place November 4th, 2008, after Grant America was already conclusively outlawed). The SFDPA schemes, also run by major outfits such as Nehemiah and Ameridream, all practiced some method of conveying money from property sellers (such as builders) to home buyers in a way that avoided the statutory FHA 3% downpayment requirement.

Government studies (e.g., Additional Action Needed to Manage Risks of FHA-Insured Loans with Down Payment Assistance (2005) — especially pp. 19-20] have shown that home price inflation was used by the sellers to cover the downpayment amounts. Recent studies (by Wharton and George Washington University) have fingered past SFDPA-linked loans as a major factor in FHA‘s current financial quagmire.

The transactions were in violation of FHA guidelines explicitly ruling out such third-party reconveyance of funds, as they represented a seller concession and countered the fundamental intent of the downpayment requirement (see the FHAHandbook 4155.1 REV-5, 2003, SS 3.2-10(C) “Funds To Close – Gift Funds”). The IRS also ruled in 2006 that any 501(c)(3) nonprofits principally engaging in such transactions would have their tax-free status revoked.

Russell and Hill were the founders of Ameridream, of Gaithersburg, Maryland, which sought to clone the “success” of the Nehemiah Corporation (based in Sacramento, CA) by focusing purely on the SFDPA (no downpayment) transactions and marketing them aggressively to the “sell side” — builders, lenders and real estate agents.

Russell and Hill were purportedly forced out of Ameridream ca. 2005 due to concerns about misappropriation of the nonprofit’s funds. Ameridream’s 2002 tax return shows that an investigation as to “excess benefit transactions” had indeed been launched. In that year alone (far from Ameridream’s biggest in terms of “grants” issued), the return shows that Ameridream paid Russell and Hill’s private marketing firm “Global Direct Sales, LLC” $12 million.

In the newly-released emails, Russell describes himself as having been “attacked out of the blue” by ML-Implode, but neglects to mention that the US Congress had already outlawed his scheme that July amidst vastly increased government and public concern about the soundness of mortgage financing in the wake of the housing crash and mortgage implosion.

In the emails, Russell can also be found admitting that he “just hates losing”, and scheming on how to “make ML-Implode go bankrupt”.

Indeed, ML-Implode resultingly ran out of funds needed to pay counsel in 2011, causing it to be ruled in default by the court in July, 2011. ML-Implode continues to search for pro bono local counsel in the DC/Maryland area in hopes of salvaging the case from default so that it may defend itself at trial and prevail on the merits.

The attorneys handling the plaintiffs’ dubious suit against ML-Implode are:

Gary E. Mason

1625 Massachusetts Avenue NW
Suite 605
Washington, DC 20036

Michael L. Braunstein
Kantrowitz, Goldhamer & Graifman, PC
747 Chestnut Ridge Road
Chestnut Ridge, NY 19077