Miami Assn. of REALTORS® Uses Courtroom Extortion Drama To Shroud Massive Real Estate Data Scandal
Whistleblower exposes liability for deep pockets at the top of the real estate food chain
Last month’s sentencing of South Beach REALTOR® Kevin Tomlinson for extortion capped a three-year news and gossip fest in Miami. Tomlinson’s accusers are The Jills (Jill Hertzberg and Jill Eber), a pair of highly touted luxe REALTORS® who work for Coldwell Banker in Miami Beach.
Tomlinson was sentenced to two years house arrest, 15 years probation, and he is barred from selling real estate. Tomlinson said his lawyer will appeal.
The Miami extortion chronicle is well documented.
Katherine Fernandez-Rundle was the state attorney in charge when a squadron of Miami Beach police offers orchestrated a dramatic midnight raid on Tomlinson’s home. Shortly after breaking into his home, officers made a less-than-gentle arrest, and walked a handcuffed Tomlinson, bruised and bloody and beaten, to pose for his mug shot.
Rundle, who issued Tomlinson’s arrest warrant, is a 30-year friend of Jill Hertzberg. Hertzberg said she knows Rundle socially, hosts fund raisers for her, and makes campaign contributions to Rundle’s re-election campaigns.
Following Tomlinson’s arrest and arraignment, Rundle’s office notified the Governor of Florida about her conflicts of interest in the case and requested that a state attorney from another jurisdiction be appointed to prosecute the case.
The jury found Tomlinson not guilty of resisting arrest.
REALTOR® Multiple Listing Data At Heart Of Scandal
It’s no surprise the “extortion” part of the story gets the most digital ink. Extortion is a serious crime. But the scandal goes deeper and begins with Tomlinson’s allegations of multiple listing service manipulation, and admission by The Jills in court they were responsible for real estate data changes.
And that’s where the real scandal lies.
Tomlinson filed an ethics complaint with the Miami Association of REALTORS® (MAR) in April 2015, through the Grievance Committee. In the whistleblower complaint, he alleged 552 data manipulations over 51 listings ($372 million property value) over four years, resulting in a sum of 23,740 unreported days on market.
Since the complaint, MAR and Coldwell Banker have taken steps to prevent data manipulation in the future. But MAR has not taken action on Tomlinson’s three-and-a-half-year-old ethics complaint against The Jills.
MAR contends its hands are tied.
“If there is a criminal or civil action initiated subsequent to the filing of a complaint with MAR, MAR will not go ahead and adjudicate the complaint until either the civil or criminal action has been resolved. The matters are placed in abeyance,” said MAR CEO Teresa King Kinney.
The explanation does not satisfy many local brokers.
Miami real estate doyenne Esther Percal, senior vice president of EWM Realty International, said she laments MAR turning a blind eye to a gravely dysfunctional MLS.
“For four consecutive years, we South Florida REALTORS® were turned into liars and cheaters by the manipulation of our MLS information. The public suffered tremendously because of misinformation and lack of clarity,“ Percal said.
An Alleged Pattern Of Data Scheming
Tomlinson was a senior vice president at ONE Sotheby’s Miami in 2014 when he took a deep dive into data anomalies in Miami Assn. of REALTORS® (MAR) multiple listing system covering the luxury market.
“Everyone knew something was wrong, but nobody could figure it out,” said one prominent Miami broker. “He showed me what he found and he took it to the board, but nothing happened.”
Ethics complaints restrict discussions to principals only. REALTORS® are not allowed to discuss the specifics of a case with anyone who is not a party to the case.
Despite the REALTOR® code of silence, the data scandal erupted in 2015 when leading Miami brokers publicly petitioned MAR to enforce MLS data integrity by Coldwell Banker and The Jills. Miami brokers even started a Change.org petition that was supported by 600 people, who are no longer identified in the petition, because Change.org removed the petition.
MAR execs told Change.org that the video on the petition site constituted copyright infringement, and use of the trade name “Miami Association of REALTORS®” in the headline gave readers a mistaken impression that MAR sponsored the petition, according to brokers who organized the petition.
The petition claimed:
“The recent coming to light of the “The Jills” manipulation of the MLS is a well-known fact to many inside the Realtor community. It is now a fact that is well-known to all Miami Board of Realtor members and the general public. This clear act of blatant, continuous, purposeful manipulation of the Multiple Listing Data is an egregious violation of the MLS rules.This manipulation of the MLS affected and hindered every Realtor, seller, buyer, the general public, financial institutions and data aggregators’ collective ability to market transparency by eradicating pertinent, crucial listing-related information. This manipulation created a break in the history of a property’s listing, thereby affecting the ability to clearly interpret the accuracy of the market and a property’s listing history as it relates to price, time on the market, the accuracy of days on the market prior to selling or many other related listing data points.
“According to the Real Deal ‘All the properties listed in the MLS that were manipulated by the Jills were actively for sale at the time, and the number is significant. In 2014 alone, 30 active listings were manipulated, amounting to more than $228 million. There was a total of 353 data manipulations for an average of 11.76 manipulations per listing, according to findings in the MLS records’.”
“This continued and consistent manipulation of the MLS information as it relates to their [The Jills] listings, over the course of at least 4 years, was deliberate with the intent to obliterate, manipulate, obtain an unfair advantage, exploit and deprive their fellow Realtors, buyers, sellers, clients and financial institutions of important crucial listing-related property information.”
How MLS Data Manipulation Works
New listings and listing status changes are posted in realtime to the MLS database.
When a home seller’s property listing contract with a broker expires, the “active” listing status on the multiple listing service is changed to “expired” and that information is posted on the MLS “Hot Sheet.” The Hot Sheet is a daily recap of market changes, including a list of new listings, status changes, expiring listings, and price adjustments.
Real estate agents watch the MLS Hot Sheet to scout opportunities to acquire new listing inventory. Once a listing contract expires, agents are free to call the seller to make an appointment to pitch their services and sign a new listing contract.
Jill Eber said in her deposition earlier this year that The Jills wanted to keep expired listings off the MLS Hot Sheet, “so that their sellers would not be contacted by other agents.”
Manipulating the data and removing a listing from the hot sheet reduces the likelihood that the seller will be contacted by another broker on the expiration of the listing. Plus, it could reduce buyer questions about why listings had languished on the market.
Jill Hertzberg said in open court earlier this year that they instructed their assistant, Juan Otoya, to keep expired listings off the Hot Sheet, and gave him their admin-level broker access code to accomplish that.
According to Otoya’s testimony at the extortion trial, he changed the information in key data fields in the property listings just before they expired, including area code, tax folio number, zip code and other pertinent information. These changes broke the data bridge between MLS property data and county tax records and rendered these properties non-searchable by MLS users.
When Otoya broke the data bridge between the MLS and county tax records, he altered the course of each property’s sales and marketing history, effectively erasing 65 years of market time for The Jills listings in the four-year period between 2011 and 2015.
Wealthy Clients ‘Don’t Want To Be Bothered’
Jill Eber said The Jills wanted to keep expired listings off the MLS Hot Sheet “so that the sellers wouldn’t be contacted [by other agents] and they wouldn’t be bothered.”
“I don’t even think that there is any kind of a rule that says an expired listing has to show on the hot sheet,” she testified.
While there are no specific rules addressing the Hot Sheet, the list is generated from the MLS to reflect property listing status changes. Manipulating the data causes the listing not to appear on the Hot Sheet.
Eber seems to dismiss the importance of changes to the Hot Sheet. She says in sworn testimony that luxury home owners whose listings expire should not be treated like sellers of lower-priced properties.
“The sellers are very sophisticated and they know the agent that would be the preferred person to work with who would handle the luxury property,” said Eber. “There are just a handful of people they would call.”
The implication is that affluent homeowners should not be bothered by everyday agents, and her job is to protect her clients.
MLS Rules Look Tough, When They Are Enforced
There is a screaming notice on MAR’s website threatening a $5,000 fine for a single instance of “Data Integrity — Manipulation of MLS Content.”
There is a formula to address the issue of data manipulation, said Robert Sadler, chief compliance officer at MAR in his deposition for the extortion case. Fines are assessed for each data manipulation, he said.
Technically, fines in this case could amount to $2.5 million, when you consider there were an alleged 552 data manipulations.
However, MAR has not levied fines to The Jills or Coldwell Banker because the trade group never took any action on Tomlinson’s ethics complaint because of the ongoing extortion case.
Several brokers said that they called MAR and asked why systematic MLS data manipulation by The Jills Coldwell Banker team did not exact a fine, reprimand or any disciplinary action by the governing association.
Generally, agents who are accused of MLS violations face immediate fines, and punishment when they are found guilty of far less grievous offenses such as waiting more than two days to load new listings, placing a URL in remarks or forgetting to upload a photo.
Tomlinson says that when he approached MAR with the charges of data manipulation, Sadler encouraged him to file an ethics complaint.
An ethics complaint is a more involved process and cannot move forward if a pending criminal or civil lawsuit is going on.
MAR would not comment on any advice that they may have given Tomlinson.
Brokers and agents in South Florida are in an uproar over the course of events, with one asking, “Are The Jills too big too fail?”
Janie Coffey, executive director of sales, Compass Jacksonville, said MAR and Coldwell Banker have a duty to disclose the data manipulations to REALTORS® and the public. (Coffey was executive vice-president at ONE Sotheby’s Miami when Tomlinson filed his complaint in 2014.)
“I hope every single buyer who bought a house thinking it was fresh on the market when in reality it had been sitting hundreds of days if not years, is notified by Coldwell Banker and the Miami Assn. of REALTORS® acknowledging the wrongdoing and owning up to it. I hope MAR takes appropriate action and stops hiding behind ‘we can’t do anything as long as an active case is unresolved’,” said Coffey.
‘A Misrepresentation Of The Properties’
“I didn’t even know such a thing was possible,” said Robert Bass, a Phoenix-based broker defense lawyer and educator who has represented licensees for over 30 years.
“The real issue is misrepresentation of the properties,” he said. Bass started his career as a regulator with the Arizona Dept. of Real Estate, and was formerly a part-owner of one of the largest real estate companies in the Southwest.
“This type of manipulation could be interpreted as consumer fraud. It appears to be using false and misleading information to lure buyers into believing real property is more valuable or desirable than it really is.
“I wouldn’t be surprised if there is a law firm burning the midnight oil, evaluating damage claims to see if grounds exist for a class-action lawsuit,” he added, “If a top firm with substantial market share finds a way to manipulate MLS data on high-end properties to make it look like there were fewer days on market, it gives their clients an unfair advantage. What if they are representing both buyer and seller in this scenario? While I foresee some problems of proof, lawyers could look at these as multi-million-dollar cases.”
Bass posed a hypothetical: “Let’s say I’m looking at buying a $20 Million property and I hire a top REALTOR® to help me buy this property. I decide what to offer based upon their advice, and later I learn that this house may have been worth millions less. Would I wonder how my agent did not realize that this property had been languishing on the market for several years? More importantly, how would the buyer’s agent prove they performed their market research competently, when it appears the agent was as much a victim as the buyer? Even a groundless claim can cost huge amounts of money to defend.”
“This looks like a wake-up call for MLSs around the country, big and small,” he said. “How did they manipulate the data, how did they make this happen? If buyers believe they were cheated and took action, how will the E&O companies for agents and MLSs react? Is this a ‘covered claim’, or would the company and services be on their own? It presents some novel and complex issues involving fiduciary duties and standard of care, among others.”
“I don’t know all the details of this case, but I would recommend that we pop up to 10,000 feet to use this as a learning moment. What can the industry, the MLSs learn from this experience? Now that this has happened in Miami, I think this is something that organizations like our own MLS should look at (if they are not already doing so) to see if something like that can happen here,” said Bass.
“Maybe it’s time for MLS groups around the country to hire some ‘white-hat’ hackers, find out where their systems are vulnerable, remove those vulnerabilities, and develop the triggers that tell us when someone is intruding on the data.”
Case History: Tommy Hilfiger Golden Beach Sale
Tommy Hilfiger and his wife purchased the property at 605 Ocean Boulevard in Golden Beach Estates in 2013. MLS data reflects a sale price of $17,250,000, following 175 days on market.
The pricing trajectory and marketing timeline are raising eyebrows in the real estate arena, and brokers pointed out that The Jills had both sides of this transaction.
The Jills’ data manipulations erased 375 days on market prior to the sale of this property. In Tomlinson’s complaint to MAR he asked if reduced market time gave the buyer “a false sense of the home’s desirability.”
Hilfiger listed his home for sale with The Jills last February, asking $27,500,000. The property was taken off the market in June following two price reductions (final price $23,500,000) and 480 days on the market.
“Did the buyer know the house was on the market in 2010 for $18.5 million, and that it came back on the market several months later at $21 million?” asked brokers familiar with the complaint.
“How can he be sure the process was not compromised?” asked Tomlinson in his complaint.
Damage Control At Coldwell Banker And Miami Assn. of Realtors
Following Tomlinson’s complaint, the Coldwell Banker Miami Beach office, following legal guidance and the direction of regional officers, revoked admin-level MLS access privileges company-wide, restricting The Jills and other agents and teams to “search only” level MLS access, according to testimony by Nancy Corey, the Coldwell Banker Miami Beach office manager at the time.
Following that move, only Coldwell Banker employees who report directly to Corey have the ability to add or modify listings in the MLS. Corey said she “will conduct random periodic audits from time to time in an effort to ensure there are no irregularities.”
Coldwell Banker did not have a written corporate policy concerning MLS access prior to the data breach, according to Corey.
MAR processed the ethics complaint following National Association of REALTORS® (NAR) directed protocols and left most of the data untouched. Corrupted data remained on the MLS servers for most of a year, shaving substantial market time for luxury properties in a four-year manipulation window.
MAR CEO Kinney said active listings were changed, but expired listings remained untouched.
Kinney said that they did not want to disturb the data, inferring it was like messing up a crime scene.
So, the issue of MLS corrupted data fixes were held in abeyance until legal issues were resolved, following consultation with NAR.
Because Tomlinson’s case is awaiting an appeal, a final resolution at MAR remains unresolved.
Kinney said MAR recently implemented an enhanced data security “i-check” system that triggers MLS staff when it detects data entry anomalies in property data fields. This system should protect data integrity moving forward, according to Kinney.
“In addition to documenting everything, we set up i-check rules and processes so that an agent gets notified when the system triggers an error, and we have a record of it,” Kinney said.
The delay frustrates local brokers who feel The Jills should be reprimanded.
Jill Hertzberg said in sworn testimony she is not worried about sanctions from MAR, or possible suspension of her MLS access.
Hertzberg said MLS suspension would not impact her business. “I don’t deal with MLS. I have assistants who do that. So they would keep their license and they could provide it [MLS data] to me.”
“Theoretically, if any agent, including The Jills, could not use the MLS we would have to do business differently,” she added. “I could go on to anyone’s website and pull up any information I need. Any top producer has a website. Or you could go to Redfin. There are many different sites you could go to that pull up everything you need. So we would just have to rely on different things. You don’t have to be a member of MAR to be a real estate agent.”
“You can be a real estate agent and not pay for MLS. And be a real estate agent. Sell and buy and represent people and do everything. And have a nice business. So I guess I would have to just figure it out,” Hertzberg said.
Not all brokers agree.
“It affects us terribly because you cannot rely on the information you are pulling out of the MLS,” says Elena Bluntzer, broker of The Bluntzer Group Real Estate, Inc. “It is time for the Board of REALTORS® to respond. We work very hard to have people not consider us to be truthful and reliable. We are in dangerous waters now following what they have done.”
The Jills have faced no consequences associated with accusations of data manipulation. However, according to The Real Deal, The Jills were removed from the prestigious Master Brokers Forum Miami Chapter. Membership is by invitation only and based on “outstanding production, as well as ethical and professional behavior,” according to The Real Deal. After publication of the article on The Real Deal, a spokesperson for Hertzberg said she “recently decided to resign.”
The Jills turned down requests to comment for this article.
Some say that this story has not ended. At the least, the lack of action on the part of organized real estate creates more questions than answers.
Data Manipulation In The MLS Is A Must Fix Issue by Rob Hahn
(Frances Flynn Thorsen is a real estate author and educator who lives in State College, PA. She gave Kevin Tomlinson advice in 2015 relative to his ethics complaint. She made the first public revelations about Miami real estate data manipulations in August 2015, at the Florida Assn. of REALTORS® annual convention, where she spoke about real estate risk management. She manages a Facebook group, Real Estate Risk Management.)