Wayne County treasurer breaks tax auction rules

Thousands of bargain hunters who register to buy foreclosed homes from the Wayne County Treasurer each year recently have been competing against family members of the official who runs the auction, in violation of county rules.

As chief tax collector, Wayne County Treasurer Eric Sabree leads one of the largest government foreclosure auctions in the nation. It has transferred ownership of more than a quarter of Detroit properties since Sabree started as deputy treasurer in 2011.

Treasurer's office rules ban family members from participating in the auction, which seizes properties from homeowners with late taxes and sells them to the highest bidder.  

A Detroit News investigation found, through multiple Freedom of Information Act requests, real estate transactions involving Sabree's family overlap his public role, including county sales to relatives and family properties purchased at auction that later racked up enough tax debt that they could have been seized but weren't.

Sabree refused to be interviewed by The News, but issued a written statement late Tuesday expressing remorse.

"I truly regret that I didn't get more involved in my family's long-standing real estate business by directing them away from auction properties," he wrote.

Some legal and government transparency experts say the instances erode public trust that the foreclosure system is fair if the perception is the official in charge is participating for private gain. 

"The appearance casts a large shadow," said Wayne State Law professor Peter Hammer, a critic of the auction.  "If people inside the system are speculating as well, it fully corrupts the process. ... If the public can't trust the process, then arguably there is no chance for it to succeed."

Among The News' findings:

• U.S. Development Services, a real estate company Sabree formed in 2002 and is now run by his wife, bought three foreclosed Harper Woods homes in the 2011 auction while he was a deputy treasurer coordinating the sale. The company would later violate a requirement on two of the homes to stay current on property taxes for two years, an auction policy instituted that year to curb speculators. 
• Ten properties either owned by Sabree, his wife or U.S. Development Services owed nearly $29,000 in delinquent county taxes as of November 2018, most of it three years late. It was paid 10 days after The News first inquired. 
• One of those properties, a vacant west side lot on Wyoming near Marygrove College owned by his wife, escaped foreclosure this year even though it should have been sold at the annual auction, according to state law.

In earlier written statements to The News, Sabree said that he's only had a minimal interest in his former company since his wife took over in 2006 and had no role in his relatives' auction purchases. But he acknowledged his family's tax debt, comparing it to what many working families face today.  

Sabree suggested that his family's participation was less problematic when city and county real estate was lagging. 

"Their auction involvement was at a time when few were investing in Detroit or Wayne County," Sabree said in his written statement Tuesday. "Now that the city and county property values are on the rise, there could be a perception problem or appearance of a lack of transparency. I assure you there was no special treatment and the facts bear out the auctions are open bidding."

But the real estate dealings could add fuel to an already controversial auction critics have called flawed and tried to shut down for years; over complaints foreclosures were driven by inflated city assessments, tax breaks for the poor weren't accessible, some owners weren't properly notified and many new auction buyers didn't pay taxes either.

Auction buys

Sabree joined the office in March 2011 as deputy treasurer, a job that included supervising all  "activities related to the collection of delinquent property taxes," according to his resume. About six months later, two real estate agents successfully bid just under $58,000 for three foreclosed Harper Woods bungalows at the auction he was coordinating. 

By the numbers, the homes were a good deal, with the price less than half of what each were valued by the city of Harper Woods at the time.

After the auction closed, the county issued the deeds to U.S. Development Services LLC. That year Sabree was a "member" of the company, as well as in 2013 and 2014, according to annual statements sent to the state. 

Sabree ran the "land development consulting firm" after he left the city as its deputy director in the Planning and Development Department under then Detroit Mayor Dennis Archer in 2002. The company helped developers through projects with site selection, acquisition and project management, according to Sabree's resume. 

Sabree, who has been treasurer since 2016 and makes $115,891 a year, said he is a "limited member" in the company but his role only has been to "sign and file papers and to provide legal advice" since his wife took over.

"My wife assumed full ownership of U.S. Development Services LLC in 2006 and has been buying real estate for 41 years," Sabree said. "She, like other women, is very qualified to own and operate her own business."

"I was not involved with these transactions and they were done at arm’s length ... Anyone who completed the proper forms and paid the appropriate fees could participate in the public auction of these properties."

One of the Harper Woods homes later was transferred to Sabree’s son, Yusuf Sabree, who now lives there. Both Eric Sabree and Yusuf Sabree are listed as owners, according to the most recent deed on file with the Wayne County Register of Deeds.  

The two other homes still are owned by U.S. Development Services.

His wife, Badriyyah Sabree, declined an interview through a spokesman for her husband and his son Yusuf Sabree didn't return calls for comment. 

Current auction rules ban treasurer employees and their immediate families from participating  "directly or indirectly, in the bidding and purchasing by any means, including and not limited to, joint ventures ..." The rules don't included possible penalties for violations.

Sabree suggests it is unclear if the rules would have applied in 2011. Initially, Sabree told The News the rule was "in effect" that year but he later responded that because the auction was run by a third-party contractor in 2011, it didn't apply. It currently is the office's policy.

Peter Henning, a Wayne State University Law professor, said that because the public has access to the auction, it doesn't appear to be an obvious ethical violation. 

"This is an open system," Henning said. 

Sabree said he saw "no reason" to disclose the buys to his then-boss, former Wayne County Treasurer Raymond Wojtowicz. He also said Wojtowicz agreed to allow family members to buy at the auction between 2014 and 2015 but it was never formally adopted. 

Wojtowicz told The News that he doesn't remember agreeing to the change and felt the auction ban on staff and family members was important. 

“I thought that was the proper thing to do,” Wojtowicz said. “The job was to (operate the auction) for the general public. To me, it would have been suspicious because someone would have had an inside track.”

Other relatives bid

Other Sabree relatives have participated in the auction or bought properties from the office as well, while he was deputy and more recently as treasurer. 

Sabree's son, Adam, an attorney, was listed as a successful bidder in 2017, pledging $9,600 for an east side brick home on Gallagher near Eight Mile and Ryan roads, according to county records. That's less than half of the $21,600 in tax debt that was owed on the home when it went into foreclosure. 

Because his father ran the office, the rules banned him from participating as a bidder. But his own delinquent tax debt would have disqualified him as well. He owed the treasurer's office at least $1,500 in back taxes on a property on Waverly in Highland Park at the time. 

To register, a bidder has to submit an affidavit, punishable by perjury, that neither they or anyone to be listed on the property's deed owe back taxes on any other property. 

But Adam Sabree, an attorney, told The News he didn't register in 2017 or bid and that he was just walking a client through the registration process. 

"It’s probably just an error," Sabree said. "I helped him. I just helped him register."

"I didn’t bid. ... I am assuming he put in my information."

The home's deed was issued to Cortez Sanders, who also said he didn't know how his lawyer's name became listed as the bidder. 

"I bid on it and I paid for it," Sanders said. "It had to be a mistake. His name shouldn't be on any of the paperwork."

Eric Sabree said he wasn't aware his son was listed as a bidder but wouldn't have expected him to tell him because it could have breached attorney-client privilege. 

Adam Sabree also registered as a bidder, along with his brother Yusuf, in 2016 but records don't show a successful bid. 

Sabree's nephew, Charles Humphries, bought a property from the county in 2012 for $500, another east side brick home on Somerset in the Morningside neighborhood. Humphries bought it a year after the home went unsold at the 2011 auction. 

About a year after, Humphries transferred the property to Yusuf Sabree for $1. In 2014, he sold the home to a third buyer for $1,500.

Like many auction properties, the taxes weren't paid and it was auctioned off again in 2016. 

"Deputy Treasurer Sabree was not executing these sales, staff was," according to a written statement from Sabree spokesman Mario Morrow. "Based on the volume of properties sold, if a property was sold to a relative or friend of the Treasurer's Office employee, it was insignificant."

Sabree said he plans to allow employees' family members to bid in time for 2019 fall's auction, calling the rule "intrusive and unrealistic." 

"We want to encourage everyone, including our police officers, firefighters, teachers, and others to purchase property in Wayne County and especially in Detroit, our central city," Sabree said.

Taxes chronically late

Once purchased at auction, property taxes have been chronically late on the family's auction buys and the houses were on payment plans for the tax debt. 

They were forfeited to the county a year and a half after they were bought at auction and again in 2015, 2016, 2017 and 2018. Forfeiture is a pre-foreclosure step where a lien is recorded with the county's Register of Deeds after about a year of unpaid taxes. 

For two of the houses, the debt was a violation of a deed restriction, called a reverter clause. It required auction buyers stay current on taxes for two years or risk losing it to the city. One of them was the house Sabree is listed as an owner in and where his son lives. 

The reform was added in 2011 after The Detroit News wrote about owners who bought back their own foreclosed properties, often for a fraction of the cost of their tax debt.

"We don't want to sell properties to people who aren't going to pay taxes," former Chief Deputy Treasurer David Szymanski said about the policy in 2013. "We are trying to break that cycle."

But no owners were ever held to the rule. Szymanski said recently that he didn't know of any city that used the provision to take back a delinquent property. And the county didn't seize any either, Sabree said.

It would have been too costly to take owners to court and the county already had thousands of unwanted foreclosures so the office removed the requirement in 2015, Sabree said in a statement.

The Harper Woods homes owed about $20,000 in tax debt as of November 2018, including $6,100 on the home owned by Eric Sabree and his son Yusuf Sabree. That debt was paid 10 days after The News submitted questions to Sabree.

On the same day, his wife also paid another $9,000 in tax debt on seven other properties, including a string of six vacant lots on Wyoming near Curtis purchased at the 2008 county auction. All have owed back taxes periodically, and she was on payment plans for all of them but one. 

That vacant lot escaped foreclosure this year even though it should have been sold at the annual auction because it owed $855 dating back to 2015. 

It was a mistake in part because "past payments were misapplied by staff," Eric Sabree said.

Sabree said "we are a working family and like most Americans today, we have debt and we work through debt." He said his wife planned to pay the outstanding taxes in full because new payment plans would be starting soon.  

John Chamberlin, a professor emeritus of public policy at the University of Michigan's Gerald R. Ford School of Public Policy, said instances could be troubling to outsiders who may question what's going on behind the curtain at the auction. 

"This is what often has people wondering who is playing favorites," Chamberlin said.  "This is something that needs a lot of transparency."

Blight suit buy 

Even before Sabree started with the treasurer's office, his former company's auction purchases intersected with Sabree's role in Wayne County government. 

As an attorney for Wayne County, Sabree sued a private owner to seize the property on the county's behalf, arguing it was blighted. A year later, his wife purchased it for $500 in the foreclosure auction. 

Sabree filed the lawsuit while working as Wayne County's chief assistant corporation counsel in 2007, before his post with the treasurer's office. There he led the Wayne County Nuisance Abatement Program.

The program filed lawsuits against neglectful landowners, making the case to the courts that the vacant properties were a nuisance and should be given to the county. The county would then sell them to someone who pledged to fix them.

One was a dilapidated former bakery facility at 15175 Hamilton in Highland Park, owned by C and C Building Materials. One wall had collapsed from a fire and there was no roof left on much of the building, according to the lawsuit.

The owners didn't responded and Wayne County Circuit Court Judge Michael Sapala ordered in September 2007 that "all property interests" be transferred to Wayne County. 

That title wasn't transferred, according to the Wayne County Register of Deeds. The  property was going through tax foreclosure process at the same time. 

About a year after Sapala's ruling, Sabree's wife was the sole bidder at the tax auction. She paid $500 and put the deed in the name of U.S. Development Services. (Eric Sabree told The News that was a mistake and the property should have been put in his wife's name.)

Highland Park demolished the building prior to the auction sale, state records show. 

U.S. Development Services sold the vacant land three years later for $11,000 to Anjuman-e Ahya-il Islam of North America, a mosque across the street on Hamilton, according to the deed.

Eric Sabree was listed on the deed of sale as the person who prepared it. When asked by The News if he had any involvement in that sale, he said he didn't remember. 

"The nuisance abatement activity and tax foreclosure are completely different in subject matter and in the sequence of time," Sabree said. "There were no other bidders and my wife bought it. There was an offer to purchase the property and the offer was accepted."

Chamberlin said the transaction creates the appearance that Sabree and his wife benefited from inside information. 

"(Husband and wife) is as close of a relationship as you can have," Chamberlin said. "There is no way to build a wall between the two."

cmacdonald@detroitnews.com

(313) 222-2396