California Real Estate Fraud Report

San Francisco real estate broker W.B. Coyle is the target of multiple civil lawsuits by investors after complaints to the NBC Bay Area Investigative Unit brought unwanted attention to him. Over a dozen investors have filed more than 20 lawsuits against Coyle, accusing him of diverting their investment funds, failing to provide financial records and real estate fraud. Coyle has denied the accusations and filed countersuits against the investors.

“I believe he embezzled more than $200,000 from us,” said investor Ralph VonderHaar.  Another of the investors, Elizabeth Klein said, “It is just horrible the level of damage that he has caused is incredible and nothing is being done.”

The California Department of Real Estate has jumped into the fray and filed a five-part accusation  against W.B. Coyle and Telegraph Hill Properties, for which he is the designated officer. Tom Poole, the Department of Real Estate’s Acting Chief of Enforcement, says of the DRE’s investigation,  “It’s about as serious as it gets.  The accusation speaks for itself.”  The DRE will be trying to prove that Coyle committed fraud or dishonest dealing, misrepresentation, failing to provide records, commingling funds and taking secret commissions. 

Coyle’s real estate license is expired, according to DRE records.

A lot is at stake besides the administrative actions of the DRE. The investors, who were forced to mandatory arbitrary because Coyle refused to settle with them, say$15 million of their money has been tied up for almost 10 years that was supposed to be invested in over two dozen properties.  Documents certified by the San Francisco Office of the Recorder-Assessor indicate that Coyle has received multiple notices of default or foreclosure. 

W.B. Coyle filed for bankruptcy protection on April 30, possibly in response to one arbitrator ruling in favor of five of the investors, awarding them $1.1 million.
Read the original article in NBC Bay Area.

A man who was already on home detention for a prior conviction for bank fraud has been sentenced to federal prison for 10 years for mail fraud.

U.S. District Judge Garland Burrell Jr. imposed the sentence on David Romo, 42, now formerly of Folson for operating a real estate investment fraud scheme that cost the victims over $6.9 million.

Romo was prosecuted by the office of U.S. Attorney Benjamin Wagner, who said that David Romo never disclosed to his victims-investors that he had been convicted of bank fraud in 2002 in the U.S. District Court in Sacramento. He solicited investors through his companies Sycamore Ventures LLC, Smarie Investments LLC and Groupo Immobiliare LLC. Wagner stated that Romo did not use the investors’ money for anything other than his personal use and for unrelated business expenses.

In imposing sentence on Friday, U.S. District Judge Garland Burrell Jr. noted that Mr. Romo was on home detention when he committed his current crimes.

In referring to Romo’s gall in committing new federal crimes while on federal supervised release, Judge Burrell said “This is appalling, he does not respect the law, he does not get it. It is evident the public needs protection.”

Read the original article in the Central Valley Business Times.

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.