This screen shot is old. It dates back about three years or so. It illustrates, though, the innuendo that Cathy Harris has engaged in for a very long time. She asks questions. That’s all. Just questions. But they are carefully worded to cast doubt, specifically on the character and business practices of Cleo Smith.
It didn’t take me six years to figure it all out. I admit it took awhile to actually get the documents but honestly I didn’t try very hard, and in the end, I didn’t find them at all. Somebody else did and very kindly sent it all to me. Nobody had to spend hours with musty old boxes.
First, what she is referring to with that IRS stuff (it was actually the Pennsylvania Department of Revenue, not the IRS) is the fact that Cleo’s will was tied up in probate from right after her death in 1979 until they finally finished in 1984.
But right now, let’s talk about what Cathy calls “aliases.”
Cathy wants people to think that Cleo was engaged in very illegal stuff with her real estate holdings. The implication is that Cleo ran whorehouses in Philadelphia and since she was already a madam, it wasn’t hard to stretch that into “she kidnapped Cathy when she was three and pimped her out to preachers for years.”
Cathy has insisted that she never, ever accused Cleo of running whorehouses, but yes she did. Right there.
But let’s answer the question, why don’t we? Why would Cleo need to own all those properties under different names?
This is a list, from the declaration made to the Pennsylvania Department of Revenue so they could figure up the inheritance tax owed by Cleo’s estate, of the property she owned at the time of her death. There was also the issue of the farm, which I will get to later. It left her possession years earlier.
And here is the page where Richard Harris, as executor of her will, filed the will with the probate court. The important thing to notice here is the “AKA” stuff. Cleo used more than one name.
That has to mean that she was hiding something, doesn’t it? I mean, doing that is just illegal, isn’t it?
Well, here’s what her lawyer had to say about it.
Richard Harris says that she “used this name as well as many other straw names because she felt she could avoid legal suits from her tenants.”
Frankly, I’d never heard of this. So, I asked Lisa, my friend who is a retired attorney, the real kind, not the Beth James fake type.
First off, it’s not illegal to use a fictitious name. Samuel Clemens did it for most of his adult life. Lots of authors, movie stars, musicians and other celebrities do it. It’s only illegal if you are trying avoid taxes, for instance, or defraud somebody, or something like that.
It’s also not illegal to use another name to buy property. Some celebrity did so not long ago using the name of her dog. Today, celebrities often do so due to privacy issues. Sometimes, people will do so because they don’t want property values to rise around them due to their having purchased property (because of their celebrity status) and they want to buy the adjacent property in the future.
Why did Cleo believe that using all these fictitious names would shield her from lawsuits?
To understand that, you have to go back in time a bit.
Prior to the establishment of the law allowing limited liability companies (LLC), people like Cleo often found themselves between a rock and a hard place. If Cleo wanted to shield her farm, for instance, from being seized because a tenant in one of the Phildelphia properties fell down the back steps due to a rotten board and sued her for more than the property was worth, she could do that by incorporating the property in Philly. So far, so good. Then if the tenant fell down the stairs, that tenant couldn’t sue for more than the Philly property was worth.
But incorporating would have created a problem.
Because the corporation was seen as a separate entity for tax purposes, that meant that when the tenant paid his rent, the corporation would have to file an income tax return and report that rental income and pay taxes on it.
And then when Cleo needed to pay Cathy’s tuition at the Christian school, and took some money out of the corporation for that purpose, that would create another taxable event. That money would be income to Cleo and have to be reported as such on Cleo’s tax return.
What Cleo wanted was a way to limit liability and at the same time, make the IRS not “see” all those separate entities as separate, so she only paid income taxes once.
Nothing like that existed until 1977.
So prior to then, it was a very common practice among landlords to own property under lots of different straw names. This was especially true among slum landlords. They face a bit of a unique problem. They can’t upgrade their property significantly, because if they do, they won’t be able to charge enough rent to justify even owning it. Anyone who can pay more rent won’t live there. So, to make ends meet, slum landlords generally do shitty maintenance. Shitty maintenance increases the likelihood of the tenant falling down the back steps because a board is rotten.
At any rate, this practice of owning property in several different straw names was not only common, it was often recommended by the landlord’s attorney, and the courts were well aware of the practice. One of the ways that the courts determined who actually owned property held in straw names was to see who paid the taxes.
This is an excerpt from, as you can see, a title report. Cathy calls it a “deed transfer,” but it’s not. It’s the title report from the title insurance company.
Title insurance is something you buy, if you have any sense, when you buy property to make sure that the person selling you the property holds a free and clear title to it, so that twelve years later, a person you never saw before won’t come to you and say that really they owned that house and not the person you bought it from so please move out and leave the keys on the kitchen counter.
The title company does a search.
One of the things they look for is a history of who got mortgages on the property. And that’s what we’re looking at.
Notice the first listing?
It says that there was a $23,000 mortgage on the farm initiated in 1960 and held by a couple named Urbani and a couple named Snyderman. The person who owed the money was named Claire Malanee. In 1969 that mortgage was “assigned” (real estate-speak for transferred) to a local bank.
Claire Malanee was actually Cleo M. Smith. It was a straw name.
From the same title search, on the next page, they describe the property, and make it clear that Cleo M Smith transferred the deed to that property to the Christian Beacon on November 19, 1965. To do that, she had to own it.
Up until then, though, she had owned the farm under the name of Claire Malanee.
There are more documents about all this, and I’ll be going through all of them, but the important thing to understand right now, before I begin with all this convoluted stuff, is that Cleo Smith used fictitious, or straw, names to own her various pieces of property, that there was nothing nefarious or illegal about doing that, that it was quite common practice, that the title company didn’t even bat an eyelash over it (and title companies go berserk if stuff isn’t just right because they are insuring the title).
Coming up next, we’ll talk about the farm, and why Cleo gave it away.