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Unauthorized biography of Russ Whitney by John T. Reed 2

COLUMN HEADINGS: Date Event
11/15/80 around 2-3 AM Whitney hits a 19-year-old, male pedestrian Bob Deering [not his real name] with his pickup truck in Glenville, NY.
11/15/1980 7:30 Deering is found lying unconscious and bleeding on road side by another pedestrian.
11/15/1980 Police identify vehicle model that hit Deering and issue all-points bulletin for its driver.
11/16/1980 Whitney surrenders to Glenville Police, is charged with leaving the scene of a personal injury accident. (page 29, 11/17/80 Schenectady Gazette)
12/8/1980 Deering leaves intensive care unit and is transferred to regular hospital ward.
12/16/1980 Deering can swallow food for the first time since collision, but cannot follow verbal commands.
12/20/1980 Deering undergoes surgery for knee.
1980 Mortgage interest rates at 13.95%
1/10/1981 Deering begins to emit vocal sounds, but they are incomprehensible.
1/7/1981 Glenville police investigator testifies before Schenectady County grand jury deciding whether to indict Whitney
1/13/1981 Schenectady County grand jury returns “no true bill” on Whitney which means they decided not to indict.
1/24/1980 Deering is able to say one-syllable words.
2/12/1981 Deering transferred from Ellis Hospital to Sunnyview Hospital. Able to speak in two- or three-word phrases. No spontaneous conversation.
3 or 4/81 Whitney decides to investigate moving himself and his assets to Florida—because of the weather and better growth prospects, he claims.
5/12/1981 Whitney’s son born
6/8/1981 Whitney gives deposition in civil suit filed against him by Deering.

Also buys and sells 813 and 819 Lincoln Avenue, Schenectady NY at same closing for $5,000 profit.
6/25/1981 Lawyer for Bob Deering serves summons on Confederation of Organized Purchasers by serving its employee Russ Whitney
10/30/1981 Gives 812 Grant Avenue to a tenant and another person. The deed contains this clause:

“This conveyance is made without monetary consideration and is accepted with the understanding that the [buyers] are to pay all back taxes together with Abstract of Title costs and are to modify and correct any code violations.”

On page 14 of Overcoming the Pitfalls and Hurdles of Real Estate Investing, Whitney says, “While I was pricing material to fix the property, my handyman said he would perform some free labor for me if I gave him 812 Grant Avenue…” Whitney goes on to say that the handyman put five new ceramic baths into other Whitney buildings and installed a new furnace at his 8 Hawk Street. Whitney does not identify the second person to whom he deeds Grant Avenue.

Such barter is “monetary consideration.” The value of the labor performed by the handyman, and any materials he provided, is considered the sale price for income tax purposes and, to the extent that sale price exceeds his basis, it is taxable income to Whitney under both New York and federal income taxes. Having ceramic baths and a furnace installed elsewhere would increase Whitney’s basis in those other properties by the amount of the fair market value of the labor involved and he would be able to depreciate the cost of the baths and furnace with regard to those properties.

Also, the value of any equity in the building must be reported as taxable income by the handyman. It may be a gift with regard to the non-handyman. The handyman’s basis in 812 Grant Avenue would be the fair market value of the labor he performed for Whitney elsewhere. The basis of the handyman’s buddy in the property would be Whitney’s basis, or half of it, assuming it was a gift to that guy.

If the amount owed on the property exceeded his basis after the depreciation deductions he claimed while he owned it, Whitney would have a taxable capital gain on the deeding even though he received no cash from the handyman. Finally, Schenectady County has a transfer tax which Whitney apparently avoided paying on this transfer. I do not know what their rules are on taxation of labor-for-real-estate barter transfers, but Whitney should have mentioned all these tax aspects in his how-to book.

It should also be noted that Whitney makes it sound in Overcoming the Hurdles… like he gave the property to the handyman and other guy shortly after the fire. The county recorders office shows that the deed was about two years later. The fact that there appear to have been housing code violations and unpaid back taxes suggests that Whitney neglected the property after the fire for two years.

Whitney says he pocketed $10,000 of the $18,000 insurance proceeds and crows that it was “not taxable as ordinary income.” I think it was taxable as short-term capital gain, which had the same tax rate as ordinary income back then.

This may have been an “involuntary conversion” (Internal Revenue Code §1033) because of the fire. If so, he might have deferred taxes by buying another property of “similar use” within two years after the end of the year in which he gains from the conversion. Whitney makes no mention of having done so or of being aware of this consideration.
1981 Mortgage interest rates at 16.55%—worst ever time to sell real estate
10/30/1981 Whitney gives duplex at 812 Grant Avenue, Schenectady to tenant and another man in return for some repair work.
late 1981 Tobin Packing Company merges with Chicago firm and lays off Albany workers
1/29/1982 Confederation of Organized Purchasers, Inc. declares Chapter 11 (reorganization) bankruptcy, later converted to Chapter 7 (total liquidation). (U.S. Bankruptcy Court, Albany, NY case 82-10071) Whitney loses his $12,000 investment and his customers lose their $550 membership fees.

Same day: Whitney turns his New York holdings over to a “buyer” of his Schenectady properties whom he refers to as “Satan.” I have many Whitney documents with that date on them. I am trying to identify “Satan” so I can talk to him. The 1/29/82 recorded documents show Whitney turning his properties over to two construction workers he refers to on page 75 of Building Wealth, not just one. One of them was later a prominent real estate broker in Schenectady.
2/1/1982 Moves into Apartment #2 in a 6-plex at 343 Cape Coral Parkway, Fort Myers, FL. He and friend who moved with him from Schenectady put $12,000 down ($6,000 each?) on $198,500 purchase. Friend lives in unit #5 in the building.
12/20/1982 Buys pre-foreclosure, single-family house at 2520 S.E 8th Place, Cape Coral, FL for $36,000 no down.
6/29/1982 Whitney sells his New York home and 3 Eagle Street, Schenectady properties on land contracts to two construction worker friends
1982 Mortgage interest rates at 15.82%
Jan-83 Whitney attends a real estate convention with a number of different speakers—probably Mark Haroldsen’ annual convention.
2/1/83-2/23/83 Whitney claims he and his friend from Schenectady buy $500,000 worth of property with no money of their own.
2/7/1983 Whitney says he buys 931 Orange Grove Boulevard, Sec. 4 Unit 1 Tropic Isles subdivision For $20,600, $100 down.
2/23/1983 Whitney says he and Schenectady friend close on 2 duplexes at 5648 and 5652 Ninth avenue, Fort Myers, FL. Paid $76,000 no money down. Later says he gets $15,000 home improvement loan on the properties and pockets entire amount. Purchase agreement says buyers will immediately place $4,000 to $5,000 of improvements on the property.
3/4/1983 Whitney says he and Schenectady friend buy single-family house at1630 Woodford Avenue, Fort Myers, FL for $90,000 nothing down. Whitney says he did not disclose the existence of a third mortgage in the deal to the bank and told the banker he had $60,000 equity in the property at closing due to “trading some things” (p.87 Overcoming…) He also borrowed $15,000 more for improvements, but say he only spent half that on the improvements. See my article on the legality of Whitney’s improvement loan “overfinance” techniques.
1983 Mortgage interest rates at 13.45%
1983-1984 Bought three properties in deal where partner was not told Whitney was borrowing
1984 Marc Haroldsen’s National Institute of Financial Planning publishes Whitney’s books Overcoming the Hurdles and Pitfalls of Real Estate Investing and Rehabs Basics Realities Overcoming the Hurdles and Pitfalls of Real Estate
1984 Whitney publishes the book Overcoming the Hurdles and Pitfalls of Financing Locating & Analyzing of Real Estate Invest
1984 Mortgage interest rates at 13.81%
4/16/1985 Doctor makes medical statement for court regarding injuries inflicted on Bob Deering by Whitney and his pickup
5/13/1985 Whitney, but not his wife, and four friends become owners of three properties on Mumford Avenue and Schenectady Street in Schenectady, NY
11/18/1985 Whitney’s 30th birthday
9/23/1987 Civil trial by disabled Deering against Whitney begins in Schenectady County Court House
10/27/1987 Civil trial ends
1/11/1988 Jury returns a verdict holding Whitney 75% responsible for injuries to Deering.
1/14/1988 Judgment against Whitney for $1,190,809 recorded in Schenectady, NY County Clerk’s office.
2/16/1988 Whitney files notice of appeal of loss in civil suit.
4/15/1988 Whitney’s homeowners insurance company, Aetna, pays the $100,000 limit of liability on his policy plus $18,671.14 in interest to pedestrian.
11/14/1988 Satisfaction of judgment recorded by Deering’s attorney, however, the attorney says they let Whitney off the hook cheap because he threatened to declare bankruptcy if they did not.
1990 Whitney begins having an affair with an employee.
Aug-93 Whitney gets his employee pregnant.
Oct-93 Whitney stops having sex with his two-months-pregnant employee.
5/14/1994 Whitney’s employee gives birth to his son.
11/18/1995 Whitney’s 40th birthday
11/29/1995 Paternity suit filed against Russ Whitney in Lee County, FL court. Case #95-009059CA You can read the chronology of the case, which Whitney lost, by going to http://www.leeclerk.org/Court_Inquiry_Menu.htm and searching for the name Whitney.
12/19/1997 Final judgment of paternity and child support ($800/month) entered in Lee County, FL Circuit Court.
2000 Whitney Education Group, Inc. publishes Building Wealth Keys to Real Estate Financing Locating & Analyzing and Building Wealth System
6/6/2001 Payoff of $35,000 mortgage from Perpetual bank to Daniel M. Kelly and Russ Whitney recorded in book 1725 page 24 Anderson County, SC recorded in Lee County, FL Court
6/25/2002 Whitney files trademark/libel suit against John T. Reed
to be continued

Copyright 2002, 2003, 2004, 2005 by John T. Reed
Last update 4/19/05

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John T. Reed, a.k.a. John Reed, Jack Reed, 342 Bryan Drive, Alamo, CA 94507, Voice: 925-820-7262, Fax: 925-820-1259, Email: johnreed@johntreed.com

CONSUMER WARNING NOTICE: I recently saw Russ Whitney on a late night TV infomercial and then attended one of his "free" seminars. Unfortunately I believed all of their LIES and FRAUDULENT CLAIMS and I paid thousands of dollars to go to his "training camps". Needless to say I was clearly ripped off, cheated and lied to by Russ Whitney and his employees (band of thieves). My mistake was not searching the Internet to find out more about Russ Whitney and his company's HORRIBLE reputation for fraud, deception and illegal activities. Had I searched online I would have found out about THOUSANDS of customers being cheated, HUNDREDS of investigations by the Attorney General into the fraud of Russ Whitney and his company's, and that Russ Whitney himself is a CONVICTED VIOLENT FELON and spent years in PRISON. I saved the cached pages from the major search engines of the John Reed lawsuit with Russell Whitney and the TRUTH and FACTS that Reed discovered during his investigation of Whitney. I am posting this information on real estate discussion boards so other people do NOT get cheated and ripped off like I did.