YARMOUTH—As part of the bankruptcy proceedings of Yarmouth-based Levee Breaks Investment GroupLLC, three propertieswill be abandoned, one propertyhas been sold and four others are up for sale.
LBIG filed forChapter 7bankruptcy Oct. 22a week after the state Securities Division filed a civiladministrative complaintagainst LBIG, formed by Brian Serpone of Yarmouth in 2015,and DennisSerpone, Brian's uncle, forwhat it alleged were violations of Massachusetts General Lawand willful violation of a consent order they had entered into with the state in May 2020.
Brian Serpone is listed as the manager and resident agent on the Secretary of the Commonwealth's Corporation Division website for Levee Breaks.LBIGused investor money to purchase Cape properties, remodel them and sell them or rent them at profits.
LBIG wasnot registered with the state’s Securities Division, asrequired by Massachusetts law, and the promissory notes they sold investors were unregistered securities, according to state records.
Dennis Serpone had run afoul of the state Securities Division before. In 1998, his registration as a broker-dealer agent was terminated following regulatory action,according to records.
What is being abandoned?
U.S. Bankruptcy Judge Frank J. Bailey on Jan. 12 approved trustee David Madoff’s motion for the authoritytoabandontwohousesinYarmouthandonelotinDennis Port.
The decision didn’t come without controversy.Three creditors objected to the motion to abandonthe properties, claiming the values used by the broker hired for the case were low. The judge overruled the objections.
The three properties to be abandonedare 28 Seminole Drive in Yarmouth Port,148WendwardWay in WestYarmouth and 24 Indian Trail inDennis Port.
The Seminole Drive home is assessed at $438,800, according to Yarmouth town assessing records. LBIG bought the 2,164-square-foot home in May 2018for $215,000. The three-bedroom, two-bath home on 0.35 acres was built in 1975 and remodeling work on it remains unfinished. Porch railings are missing, as is a second floor window.
A 960-square-foot ranch sits on 0.44 acres onWendwardWay. The modest home with an unfinished basem*nt is assessed at $285,400, according to assessing records.LBIG bought the house, which was built in 1960 and hasthree bedrooms and one bathroom,in November2018 for $192,500.
Remodelingofthe home stopped afterthe town issued a stop-work orderin 2019 becausework being done without permits, according to Yarmouth Deputy Building Commissioner Tim Sears.
A now-empty 0.3-acre lot at24 Indian TrailinDennis Portused to havea 636-square-foot home. Bought by LBIG in 2019 for$185,000, the property had been assessed at $126,000.
Controversy over value of properties
Denise Benjamin, one of the 77 creditorsand a Levee Breaks investor listed in theclaimsregistry for the bankruptcy proceedings.
The trustee’s function is to act as a fiduciary for the unsecured creditors, and get as much money from the sale of assets as possible. If a property is useless or worth less than the mortgage, it’s of no use to the bankruptcy estate, said University of Massachusetts law school Professor Emeritus Michael Hillinger. In that case, the trustee can abandon it to the mortgage holder.
Benjamin saidthe values of the homes and properties were underestimated by the broker hired by the bankruptcy trustee. In this case, it was Samantha Steward of Compass Realty,who was a partner with Brian Serponein Team Serpone StewardLLC in 2018.That limited liability company wasdissolved by court order bythe Secretary of the Commonwealth in 2021, according to state records.
Using figures from Zillow and Realtor.com, Benjaminsaid the estimated valuationof those propertieswere higher than the broker’s opinions of value.Bailey disagreed.
In a Jan. 17 decision, Bailey wrote, “Based on the Court’s experience with these websites(Zillow and Realtor.com), I find that those online valuations are often unreliable.”Baileyadded thatMadoff was exercising his business judgment properly.
Madoff said the properties were abandoned because the amount owed to the mortgage holders wasgreater than the amount he would have gotten from the sale of the properties.
“If there’s not going to be a benefit to thebankruptcy estate, the Trustee’sjob is to abandon the properties so they don’t incur expensesthat we have to pay for,” he said.
Madoff said LBIG and BrianSerponewouldn’t receive any benefit from the abandonmentof the properties.
Madoff saidthe prior business relationshipbetween Steward andBrianSerponewas disclosed to the court.She was retained as broker after court approval.
“I felt that that relationship didn’t preclude her from representing us,” Madoff said.
But Benjaminclaimedthat the original estimatedvaluefor one property was so low that a bidding warensuedduring a bankruptcy hearing, proof that the valuations were low.
The original sale price for99 Berry Ave. in West Yarmouth wasset at$475,000. At the court hearingfor the sale, counteroffers raised the ultimatesaleprice to $543,000.
“That bidding war was proof that these valuations are undervalued,” Benjamin said.
Properties being sold
Madoff said five properties are invarious stagesof being sold. Thesale of99 Berry Ave. has closed. Other properties for sale include21G Fruean Ave. inSouth Yarmouth, $350,000; 55Bayberry Roadin West Yarmouth, $560,000; 3 Jerusha Lane, West Yarmouth, $543,000; and14 Egg Harbor in West Yarmouth,$550,000.
Trustees must file motions to approve the sales of properties in bankruptcy proceedings, and at every hearing,counterofferscan bemade.
Along with liquidating the properties belonging to LBIG, Madoff willneed toreview the claims filed bythecreditors as well as the schedules provided byLBIG.
There havebeen $4.5 million in total claims filed, of which $1.4 million are secured claimsor mortgages,Madoff said. But Madoff will review each claim to determine ifthe records are accurate.
Madoff will eventuallyhire an accountant to review the books and records of the company.
“There was a lot of money invested and a lot of money not accounted for,” Madoff said. “There havebeen a lot of suggestions by people as to where the money went, so we will start to look at that.”
Madoff will eventually ask the court for the authority to make distributions to the creditors.
Benjamin saidshe is afraid she’ll get just pennies on her investment dollars.
Contact Denise Coffey atdcoffey@capecodonline.com. Follow her on Twitter: @DeniseCoffeyCCT.
