Three cheers for Mr. Jim McKenna’s letter to Walter & Kelly, linked here and copy and pasted below.
February 4, 20111
To: Kelly & Walter NG
From: Jim McKenna
Re: MF08 & RELoans
Having just received your Mortgage Fund 08 2010 Year End Summary I am disappointed in the information given and the apparent status of the Fund. When 91% of the Fund is on unimproved land it shows that you two were not monitoring Barney as to the type of loans he was making. Bruce had told me that all the land loans had permits and utilities. Any way, we cannot change what is.
However, for both MF08 & RELoans better and more useful information can be given to us. While I understand that you do not want to try to do financial statements in accordance with GAAP as it is almost impossible to fairly value the assets there is other financial information that could be provided.
In past years when everyone was receiving their interest at good rates no one cared about your expenses but now that both funds are in trouble you should prepare at least annual recaps of cash receipts and disbursements. This would show where the money is coming from and where you are expending it. We have a right to this information. The expenditures to protect the assets should be detailed enough for us to understand. Also, fees paid to yourselfs and other experts hired should be separately shown and told how they were calculated. This would at least be fairer disclosure.
Also, for RELoans a recap of monies paid to Well Fargo note indicating breakdown as to how they have been applied and reconciling the balance at the start of each year to the balance at each year end. Most of us investors feel this loan is cannibalizing the entire fund and could cost us to loose our entire investment.
What I have requested above is not costly to produce. You probably already have it in some form already. If you need guidance as to how to do this I would be pleased to assist you and your staff.
I hope you will seriously consider this request and I would appreciate a reply from you.