The sweet deal that financed Erik and Angela Osborn's Polo Club home has turned sour

Where did all of Erik Osborn's money go? Documents filed in connection with more than $1.2 million in judgments against him suggest that a good portion of it went for improvements on the multimillion-dollar mansion that the Osborns bought at 7 Polo Club Lane in Denver's exclusive Polo Club.

Angela, formerly a broker with Coldwell Banker Devonshire, had been trying to sell that 15,000-square-foot "Italian-style villa" for $6.9 million for more than a year ("Parade of Homes," March 19). But this past June, the Colorado Real Estate Commission voted to allow regulators to revoke her Colorado broker's license and issue a $10,000 fine for misconduct connected with the initial purchase of the house. According to the commission's complaint, Angela, acting as the buyer agent for the Osborns' June 2006 acquisition of the home, "failed to ensure the contracts and settlement statements accurately reflected the true terms of the transaction," and these inaccuracies allowed her to receive $467,000 in proceeds above what she would have received in normal commissions.

A commission investigation report obtained by Westword reveals that a complicated series of carry-back and promissory-note contracts enabled the Osborns to squeeze at least $1.4 million from the fraudulent real-estate deal. Reynolds Cannon, who'd built the lavish home on land previously owned by Charles Gates, his late uncle, confirmed to investigators through his attorney, Kevin Shea, that the actual monetary amount that had changed hands for 7 Polo Club Lane was $1 million less than the $6.3 million sales price recorded by Denver County.

After trying to sell the house for $7 million for three years, Cannon had agreed to sell it to the Osborns for $5.4 million. The problem: The Osborns' then-home, in an enclave at 1991 East Alameda Avenue, had been mortgaged to the hilt of its $3.2 million asking price, with an extensive upgrade done by subcontractors involved with Osborn's developments. So Cannon provided the Osborns with a $1.6 million "owner carry" note on the East Alameda house that gave the couple the appearance of having enough equity to secure $4.3 million in loans from Countrywide Home Loans to purchase the Polo Club Lane mansion. As Cannon's attorney explained to investigators, the Osborns "wanted a purchase price and corresponding loan as high as the appraisal would support." The remainder of the purchase price was to be guaranteed back to Cannon in the form of a $2.5 million "investment note" on Osborn's ongoing real-estate projects.

Not only did this inflation of the property price beyond its market value enable Angela to secure a $151,200 commission, but the appearance of a high loan-to-value ratio on the house allowed the Osborns to secure an additional $1,222,000 in home-equity loans. According to Colorado Division of Real Estate spokesman Zachary Urban, an administrative settlement with Angela has not yet been reached. If no such settlement occurs, then the commission's investigative report will be sent to the Colorado Attorney General's Office for further action.

That report notes that Cannon still has $3.6 million in outstanding notes against the house. But he can get in line to collect: 7 Polo Club Lane has numerous liens against it, ranging from $350,000 in unpaid federal income taxes to $5,714 in overdue HOA fees. A judge also found that the Osborns failed to make payments on the $1 million loan on the house they got from United Western Bank in January 2008, and ordered a $1.1 million judgment against the couple and the property.

But bill collectors knocking on the door of the four-bedroom, seven-bathroom mansion — with a paneled library, ListenUp home theater, commercial-grade gym with a spa and steam room, humidor and wine cellar — will find that nobody is home.

Since August, the Osborns and their two young children have been living in California, where Erik Osborn is employed "as a construction supervisor," according to a judge's motion allowing him to leave the state. They've been renting a home in Laguna Beach, just a few hundred yards from the ocean. And thanks to a judge who ordered Osborn's $10,000 bond reduced to $1,000, he'll be allowed to reside in California until his day in Denver court.

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Jared Jacang Maher