Think Walter’s sleeping well tonight? How about Kelly? Unlikely. Here’s the link to the story by Dan Noyes and the I-Team crew at KGO:
Thank you to EVERYONE who helped make this happen and those who were brave enough to appear on camera. We have had an amazing amount of traffic to the blog today (nearly 2,000). That means people saw the story and wanted to learn more. THIS, friends, is our moment in time. We need to make hay. I propose that you send the video link to everyone you know and especially to ANY politicians you know. Send it to the dog catcher. Send it far and wide. Oh, and send it to the FBI, the SEC, the Dept. of Corporations and for the hell of it send it to Tracy Green. May that sweet woman receive 1,000 emails tonight 🙂
Good luck tomorrow to us all at court and let’s spread the word so that other outlets start picking up our story, like THIS ONE.
Here’s the text of the Noyes story:
An investment scandal that started in the East Bay could turn out to be the largest securities fraud in California history. At stake, according to a class action lawsuit, is $750 million from about 3,000 investors.
With so much money and so many investors involved, this drama is playing out right now on several fronts with lawsuits, bankruptcies and an FBI investigation.
The 3,000 investors are feeling the impact of the scandal in many different ways.
“It’s just outright thievery,” said investor Dr. Richard Homrighausen. “It’s such deception on such a monstrous scale.”
Homrighausen has had to scale back his plans for retirement after losing almost a million dollars.
“I have accepted that I will never get any money from this,” said Homrighausen. “I think I, at age 84, will not live to see any money come out, if any money comes out.”
Nurse Arlyss Rothman and her husband, also a doctor, now have to delay their retirement after investing seven figures; she’s uncomfortable saying exactly how much.
“And we understood they’d never lost a penny, this was repeated millions and millions of times, they’ve never lost a penny of investors’ money,” said Rothman.
And graphic artist John McGuire’s two sons have had to put off going to college. The family’s $300,000 account , which also included money for McGuire’s future medical expenses, is gone.
“They just kept taking checks,” said McGuire. “They knew this was coming down like a house of cards.”
Over the past 35 years, Walter Ng, his sons Barney and Kelly, the varsity volleyball coach at UC Berkeley, and pediatrician Bruce Horwitz ran a series of limited partnerships that made loans to developers. They told investors the properties were primarily in California.
“As it turned out, most of the holdings were out of state,” said lawyer Richard Brown who has filed a class action lawsuit against Ng and his partners. “They were very speculative, you know, the classic desert land outside of Utah or desert land in Texas or swampland in North Carolina.”
Horwitz recruited fellow doctors and his friends at the Orinda Roadrunners Club to invest. Ng worked the Sequoya Country Club in Oakland, and each year, they rented out the Silver Dragon restaurant for several nights of investor appreciation dinners. The message was always the same.
“It was safety first, safety second, safety third,” said McGuire. “You know, everything’s going great.”
And that message continued, even during the real estate slump. Ng has filed for Chapter 11 bankruptcy, and in response, Brown has filed that class action lawsuit. it accuses Ng of embezzlement, of violating federal securities laws, and of lying to investors to keep the money flowing into the latest fund, R.E. Loans.
“They set up the second fund, Mortgage Fund ’08, they began to use part of that money to pay off investors in R.E. Loans and their friends and family members, and that’s what made it a Ponzi scheme,” said Brown.
Brown says Ng and his partners took out a $50 million Wells Fargo line of credit and continued the disbursements to family and friends, and they didn’t disclose that the line of credit put the investors in a secondary position — the bank will have to be paid, before any investor sees a dime.
This is a complex case, and the I-Team has confirmed a coordinated criminal investigation is fully underway with the FBI, the SEC and the Department of Labor.
“It’s money, but the main thing is justice,” said McGuire, who is among the first investors to sue to get his money back.
Ng and Horwitz answered the complaint by saying, “At all times herein, they used their good faith business judgment in the conduct of the affairs of R.E. Loans, LLC.”
Ng got out of the trial by declaring bankruptcy. But the jury found Horwitz “failed to act as required by law” and “breached his fiduciary duties,” and awarded McGuire $150,000 in damages. He’s asking the trial judge to increase the amount at a hearing this week.
McGuire is struck by the elderly investors who’ve been watching his case so closely.
“At the trial, we had probably 10 to 12 investors. I get choked up& you would hear the stories of ‘Yeah, you know, i mortgaged my house and invested it with these people,’ ‘I took out my retirement and invested it with these people,'” he said. “They’re older and they can’t get that back.”
Late Monday, the I-Team received an email from Ng’s criminal defense attorney. It says, “He is distraught about the losses to investors. As an investor himself, Mr. Ng has also suffered losses that have caused him to file for bankruptcy. He knows that many of his investors were even more devastated, and he hopes they will be able to recover their losses through the bankruptcy proceeding and restructuring efforts.”
There is so much background on this complex case, we’re posting important links in a new I-Team Blog.
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