California Real Estate Fraud Report

David Nilsen, the owner of now-defunct Cedar Funding, located in the Central Coast, has pleaded guilty to conspiracy to commit wire and mail fraud, a federal charge.

Prosecutors with the U.S. Attorneys office accused Nilsen of running a Ponzi scheme – bringing in new investors to cover the previous investments that were failing. The losses to investors may total up to $100 million in this real estate investment fraud case.

Cedar Funding was forced into bankruptcy in 2008. It was the bankruptcy trustee who characterized the operations of the business as a Ponzi scheme going on for several years.

David Nilsen agreed to restitution to the investors, many of whom lost their life’s savings, of $69.8 million. It is unclear if he can realistically repay those funds, which would still amount to only 5-10 cents on the dollar to the investors.

Manoel Errico, a loan manager at Cedar Funding who was also indicted in the case, is a fugitive.

Read the original article in the Monterey Herald.

James Hurst Miller, 63, president of defunct hard money lender Hurst Financial Inc., has been charged by the U.S. attorney in Los Angeles with federal fraud and money laundering.

The allegations are with respect to several projects Hurst and developer Kelly Gearhart  proposed to build, into a large golf course. The 1,200 Central Coast people who put money into the project in what prosecutors claim was a $100 million real estate investment fraud. Specifically, Hurst is facing four counts of wire fraud, mail fraud, money laundering, making a false statement to a bank and assisting Kelly Gearhart in fraudulently obtaining funding for his construction project. Prosecutors allege that the investment money was diverted to pay for prior loans his business made (hard money loan fraud).

Miller used Cuesta Title, also no longer in business, to clear title on some of the projects by stating falsely that the loans had been repaid (title fraud). He would then take out subsequent loans using his investors’ money

The projects for which Miller solicited investors were in the Beacon Road and Vista Del Hombre real estate development projects in Paso Robles and the Salinas River real estate development project in Templeton.

Many of James Miller’s investors, including elderly investors (elder financial fraud) have lost their life’s savings and homes. One is a 68 year old Cambria woman who suffers from multiple sclerosis and now lives in an assisted care facility because she was unable to keep her home because of her investments with Miller.

Read the full article in the CalCoastNews.

Royce Newcomb, 49, of Granite Bay,  has been arraigned on wire fraud charges in connection with a Ponzi scheme that solicited investors to put money into purchasing foreclosed homes (real estate investment fraud).

Newcomb’s ploy to convince the investors his operation was legitimate was to tell them he was placing their funds into escrow with Contour Escrow Services Inc. Contour Escrow Services Inc. was run by Barry Winnett, who holds a real estate salesperson’s license but does not have a license to run an escrow business. Barry Winnett pleaded guilty to wire fraud in December 2010 and is awaiting a possible 20 year prison term when he is sentence in June.

The Placer County Sheriff turned over the case to the U.S. Department of Justice to investigate and prosecute.

Read the original article in the Roseville Press Tribune.

A Sacramento-area man has been charged with wire fraud for allegedly scamming investors out of $11 million.

According to U.S. Attorney Benjamin Wagner, Christopher Jackson, 43, solicited people to invest in real estate between 2005 and 2009 under his company name Genesis Innovations. Jackson is accused of investing less than $2.5 million of the funds and using the rest to buy himself a BMW, lease a Lamborghini and Range Rover and fund his lavish tastes in food, hotels and jewelry.

Read the full article in the Central Valley Business Times.

Former investors in Pacific Property Assets a now-bankrupt real estate company, are suing the founders of the company and two of their employess for luring them into what amount to a Ponzi scheme.

Pacific Property Assets, based in Irvine, solicited investors to purchase, renovate and sell apartment buildings at a promised 15% per year return. Carlsbad attorney Kent van der Schuit is representing several investors who put $1.3 million into PPA. Many of the victims were elderly persons.

The defendants Pacific Property Assets’ co-founders Michael Stewart and John Packard, their family trusts and employees Natasha Ginnaty and Chandra Gibson.

In all, PPA received $91 million from nearly 700 investors. Attorneys and a court official estimated that PPA lost at least $80 million, predicting that investors will lose most, if not all, of their money.

Read the full article in the Orange County Register, aka OC Register.

Cedar Funding was a Central Coast real estate investment firm that the bankruptcy trustee says was run like a Ponzi scheme. Now some of its creditors are objecting to the large amount fees some of the trustee’s attorneys are seeking in the proposed settlement.

About $950,000 of a proposed $2.85 million settlement with the Salinas accounting firm of Hayashi & Wayland Accounting would go to two law firms for Cedar Funding, which has been in Chapter 11 since May 2008. 

Cedar Funding has been in Chapter 11 proceedings since May 2008 after the company owned by mortgage broker David Nilson imploded and left about 1,600 investors in the lurch. Investors, many of them Central Coast residents, had sunk an estimated $160 million into Cedar Funding real estate investments. James Hicks, a Pebble Beach resident, referred to the proposed settlement as “a sweetheart, back-room deal” for the attorneys and Aron Oliner, the attorney for the creditors committee, said that the two firms should receive only $296,000 for their work.

Mortgage broker David Nilsen is charged with 31 counts of fraud and conspiracy in a federal criminal case that saw 1,600 Central Coast investors lose close to $160 million from 2003 to 2008.

Read the full article in the Silicon Valley Mercury News.

Two men who were described as minor players in the large-scale financial fraud master-minded by convicted fraudster Rollo Richard Norton II were received their sentences. U.S. District Court Judge Marilyn Huff, who had previously sentenced Rollo Norton, imposed a five month prison sentence on Todd Johnson, 38 and three years probation on Scott Greer, 33. Both men must serve halfway house time and Judge Huff ordered Johnson to pay $92,828 in restitution to two of his victims.

Norton, whose fraud has been written about on earlier posts on this blog, pleaded guilty to grand theft in relation to a condominium project in which he had taken out loans using his investors names without their knowledge or permission. Greer also pleaded guilty to grand theft; Johnson to making a false statement on a loan application as part of his work for Norton. 

Read the full article in the Ramona Sentinel by Neal Putnam.

After pleading guilty to 112 felony counts, 68 year old Joseph Anthony Veltre was sentenced to 18 years in prison for running a Ponzi scheme that fleeced investors, many of them elderly, out of $2.6 million. He was ordered to repay that same sum in restitution.

Veltre ran his Ponzi scheme out of Sea View Financial and Allied Corporate Investments. He made hard money loans to borrowers wanting to take out second and third mortgages and promised high rates of return to his investors.

Read the full article in the OC Register.

The San Joaquin County D.A.’s Office has completed a three year investigation into a Tracy, California brokerage, resulting in the arrests of the firm’s chief executive and a second person.

Ward Real Estate Brokerage & Foreclosure Services Inc., no longer in business, was the focus of multiple complaints. Authorities believe $4.5 million was stolen from investors through a house-flipping scheme that promised high returns but failed when the real estate market turned sour.

Leesa Marie Ward, 45, of Lodi, was arraigned on a 46-count felony indictment by a criminal grand jury, which charged her with tax evasion, grand theft and securities fraud. Alison Ann Jensen, 45, of Pleasanton turned herself in and was booked on identical charges. Bail for each licensed real estate broker is set at $3 million. Jensen’s broker’s license has expired, but Ward’s is still active with the California DRE.

Some of the victim’s of this alleged investment scam were elderly.

Read the full article in RecordNet.com

Mary Elaine Perkins, owner of Carlton Financial Enterprises, Inc., has pleaded guilty to mail fraud after brazenly defrauding 90 investors out of $7 million in a real estate investment fraud scheme that was bound to be detected by authorities.

Perkins’ fraud was that she promised investors returns of 12% – 15% by using their money to make hard money loans to homeowners, using their properties as collateral instead of the homeowners’ credit scores. Instead, Perkins foreclosed on the borrowers’ homes in some cases and either sold their property to a company she owned or to members of her family. Apparently some of the early investors were repaid with monies she obtained from later investors, classic Ponzi scheme tactics.

Read the full article in the Los Angeles Times (LA Times).