Divorce allows peek between EFI’s sheets

August 16, 2008

By DANIEL BLACKBURN and KAREN VELIE

It took an acrimonious divorce and a protracted asset scrap to finally address the big question for investors in Paso Robles’ Estate Financial Inc.: Where did their money go?

Now, EFI principal Karen Guth has answered at least part of that question in the midst of her contentious court battle over marital assets with ex-husband and former partner, Charlie Applebaum. By her own admission, Guth utilized hundreds of thousands of dollars in investor money to capitalize her personal holdings.

Guth disclosed to the courts that she spent EFI funds to cover expenses for at least two family businesses over a period of at least three years, according to court documents.

Utilizing a number of hard money strategies, EFI principals Guth and her son, Joshua Yaguda, enticed more than 3,000 investors to place more than $300 million with the promise of high interest through secured construction investments. But for months, numerous sources have been alleging that Guth utilized funds for project construction to pay for a number of outside business interests she operated while at the helm of EFI.

The Guth-Applebaum drama continued recently when the pair engaged in a litigious battle over a $100,000 reimbursement check from the state for chemical cleanup of two service stations known as Templeton Products Inc. Guth told the court she wanted to use the check to cover some of the $760,000 in “advances” EFI has made to fund the service stations.

Templeton Products still owes $300,000 to $550,000 to EFI for those advances. Guth acknowledged June 24 in papers submitted to San Luis Obispo Superior Court that she made the cash advances between 2004 and 2007. By designating the monetary payments from EFI to Templeton Products “advances,” they became, in effect, non-interest-bearing loans.

“As is her style, she runs Templeton Products any way she sees fit, regardless of formalities and corporate law,” Applebaum claimed in sworn testimony.

Investigations by UncoveredSLO.com suggest that Guth wrote checks from EFI accounts for insurance payments, merchandise, and employees’ salaries for her Pasolivo Olive company.

The Guth court papers also put the spotlight on a practice of many local banks, that of loaning millions of dollars to local hard money lenders without securing the debt with borrowers’ assets.

Guth employed Templeton Products to secure a previously unsecured $5 million Heritage Oaks Bank loan, according to court records.

“Incredibly… she mortgaged both properties to the hilt,” Applebaum reported in sworn testimony. “By placing these liens against the gas stations, the gas stations are now grossly over encumbered.”

Applebaum claims officials at Heritage Oaks Bank authorized the loaning of millions of dollars to his ex-wife on property he owns without his knowledge or consent.

“The transaction came as a complete shock to me as I was in direct communication with Heritage Oaks Bank,” Applebaum asserted in sworn testimony.”

Heritage Oak Bank officials did not respond to numerous requests for comment.

“The bank is saying, as long as it is a corporate resolution, the lien is good,” said Gregory Abel, Applebaum’s attorney. “Hopefully, we have found responsible people at Heritage Oaks Bank willing to work together so that Mr. Applebaum is not personally adversely affected by the liens.”

Guth claimed she agreed to place the lien on her portion of Templeton Products following a request from Heritage Oaks Bank to secure an already funded personal loan. Applebaum’s interest in the property is not impacted by the agreement, she told the court.

Heritage Oaks Bank has doled out at least $15 million in loans to Guth. The bank secured a loan for $4.8 million through a lien on a Guth and Applebaum commercial property on Ninth Street in Paso Robles; and a second lien for $5.9 million on Guth and Yaguda’s Pasolivo olive ranch.

Applebaum and Guth purchased the Paso Robles hard money lending company in 1994 and divorced in 2004. Their bitter battle over personal assets became public when the company fell on hard times, along with 3,000 of its investors and a legion of creditors. EFI now finds itself in bankruptcy and its remaining officers, Guth and her son, Joshua Yaguda, under the critical gaze of regulators.

Early in June, creditors forced EFI into involuntary Chapter 11 bankruptcy proceedings. About a week later, EFI owners Karen Guth and Joshua Yaguda voluntarily placed EFI’s mortgage fund into Chapter 11. The state Department of Real Estate (DRE) has suspended EFI’s permits and has publicly alleged that many of EFI’s practices were fraudulent. Guth and Yaguda are being investigated by a host of state agencies and federal and local law enforcement.

Even as the lending business began to self-destruct under pressure from worried investors and a legion of creditors, and with bankruptcy actions proceeding, Guth appeared to be transferring properties and other assets in a helter-skelter fashion.

Concern by investors and creditors now may have been partially addressed by state actions which have had the effect of icing any business that can be conducted by EFI.


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By: Anonymous on 9/4/08

Meeting with Brad and Tom at EFI

By Chuck Desmond

2 Sept. 2008


Armed with the list of questions you have sent to me, I went to EFI to meet Brad Sharp. Tom Jeremiassen was also there and so the three of us sat together in Karen’s former office for exactly 2 hours. Here’s my report and it’s in no particular order but I’ll try to group like thoughts together at least.


Both men are easy to speak with; both listen; both are clear in their thoughts and words, neither seems to shirk from a question but they will easily say why there might not be an answer yet. Both men are younger than I anticipated (not a lot of gray hair on the mountain tops) but both have over 13 years’ each of experience in bankruptcies.


Turns out I’m not the first person to get granted an audience. Seems six or so others have preceded me–some alone and some in groups. I haven’t seen a report from any of those meetings but if there are some, I’d love to read ‘em.


First area revolved around these two men themselves. So, here are my notes and some may be universally known and some might not be or might not be clear.

To start with, I will use the term “First Deeds of Trust” to describe what is referred to as EFI. Further, I will call Estate Financial Mortgage Fund (EFMF), “The Fund.” Why? Because I have spoken with investors who are confused as to what they actually invested in and what the difference is. I think everyone now understands that the First Deeds of Trust were on specific projects and The Fund is a pool of money that was supposed to be used to be applied to any Deed of Trust that needed additional funding, not raised by individual investors. How’s that for clarity?

Tom Jeremiassen is the Trustee for the individual First Deeds of Trust. He is employed with LECG Company in LA. His phone # is 1-310-300-2226

Brad Sharp is the Trustee for The Fund. He is a manager of DSI (Development Specialties, Inc.) in LA.

Both men have local phone #s and e-mail addresses but specifically asked me to ask you to contact thaem through their main LA #’s so calls and info can be tracked, monitored and routed to the correct person to best provide help. From what I gather, they do return phone calls–they did to me so guess everyone else too.

They were appointed by Judge Robin Riblet in Santa Barbara where the bankruptcy filling was issued. Her address is United States bankruptcy Court, 1415 N. State St., Santa Barbara. Thus, many meetings will be held in SB instead of SLO and that will make a difference in costs which I’ll explain later.

Both men effectively report to the judge but have many parallel reports as well.

Both have other on-going cases besides EFI, however this is their largest. Point is that we don’t have them full time on our behalf.

Both are paid (bill out) on an hourly basis. Brad is at $495 per hour and Tom at $450 per hour. As trustees, their compensation is limited to 3% of the amount dispersed from The Fund and the First Deeds of Trust.

Two former EFI ladies are on staff and are paid out of monies still in the Fund and Deeds’ accounts.

Brad has 4 people from his firm here. Tom has 5. Each of these folks is billed at between $125 per hour to $450 per hour. The number may go down or up, of course.

Thus, 11 people are in the EFI office working on our behalf and two of them are paid from EFI as an entity. 9 of them are paid by Tom and Brad’s firms but we as investors are paying for them from our investments–not the State, not the judicial system nor the USA. US! Whatever you do, don’t send any money to pay salaries!

Every ~ 120 days, a fee application is prepared to cover the expenses and work for those previous days. It is sent to Judge Riblet for her to review. Her criteria are 2-fold as far as I can tell. A) Was work done on our behalf and progress made? B) does the bill pass a “reasonableness test.” If so, she will stamp it and pass it on for the 2 companies to be paid.

These Fee Applications include all the hours as well as all the expenses; travel, hotels for 9 people, meals, etc. etc. etc. My simple math says that 9 people at $400 average per hour plus $300 per day per person for expenses, we as investors are paying $162,000 per week for their services. Earlier, I said that SB was going to be more costly than SLO. Why? Because at an hourly rate, for the men or staff to travel there for meetings is a hell of a lot further and takes far more time (hours–think hours) than going over the grade.

Both men said they expect expenses to go down as routine jobs will require fewer people and they are over the hump of getting started. Nice to hear but in my 40 years in business, the only place I saw costs go down was Walmart.

This is going to go on for years!


Add to this, lawyer fees which are not in these numbers. Each time something is submitted to the judge, it will be done by an attorney. Both Tom and Brad have an attorney(s).

Now, the reality is there is only $55K in “cash’ in the Fund and $5K in the Trusts. Obviously this will not cover even the first Fee Application. So, how will they get paid? Well, they won’t until properties/projects are sold and cash flows. But, make no mistake about it, their companies are the first on the list to get money when it shows up. As investors, we are last. Also ahead of us come any other fees, liens, closing costs, etc that would / will result in a net leftover to split among appropriate investors. Don’t forget, The Fund is also an investor on virtually every loan that exists. This is the only way anyone in the Fund will get any of their money back.


If my notes are correct, there are approximately 1000 investors in the First Trust Deeds and 1700 in The Fund and ~ 400 of whom are in both. The total is ~2500 and Tom says he has a complete list of everyone and how to find them. First time I’ve heard that. Good!


There are 544 loans and most of them are First Trust Deeds.

6 are in escrow and while that sounds great, there are extremely messy and it could be some time before any of them are finished “deals.”

250 of the properties have been physically inspected. By the middle of Oct. the rest should be done as well. Two contractors have been hired to do this work and also make recommendations as to whether the property should be sold as is, what’s its current value, whether money should be raised to finish it, etc. Their work and subsequent reports will also be a cost to us of course. Mel McCullough who was doing some of this is not being used. As it turns out, he is also an investor.

No work is being done on any of the projects and they are all in various stages of completion or not even started. Some have been idle for a year and may have been weather damaged, vandalized, or materials on site were stolen.

No work is done because there are no funds to make advances to the general contractors. Obviously the contractors have moved on.

Any disputes arising from sub contractors would be between the general and the subs unless the sub was hired expressly by EFI. (none that they know of yet). Thus there should not be any legal action against EFI from any “workers groups.”

No borrowers are making any payments. They all stopped. Maybe some are taking advantage of the situation—don’t know.

Every First Trust Deed is messy as far as Brad and Tom know so far. Paperwork and proper recordings seem to be in virtual chaos. Many times the Fund is not recorded as a lender and that will cause friction between Tom and Brad. For example, Tom will say, “I sold a property and am ready to pay the investors” Brad representing The Fund will say, “I get my portion.” Tom will say, “You’re not listed so prove it.” It’s gonna be terrible. In some cases, a borrower had multiple projects and money for one, got moved to another and the last one on the list has no money at all and never got started. By this time, a normally pretty mild guy called me was beginning to steam at the collar.

Every project (no matter its current condition) is for sale. Some bottom feeders are submitting offers. None have been accepted and all will have to go before the judge and presented by an attorney. A veeeerrry long process ahead of us.


Tom is in charge of the money trail. His firm specializes in forensic accounting and he seems extremely bullish that he’ll find where the money is.

At this time, despite allegations, innuendos, and guys like me writing stuff, neither Tom nor Brad flinched when I asked about fraud. If there is some and they know it, they hid it from me like pros. But, Tom will investigate everything from the Olive Ranch to personal assets to gas stations to Heritage Bank and beyond.

It was 13 months ago when Fund investors were still receiving monthly interest payments which could only from available cash—no matter what pocket held it. In one month, it stopped. Where in the world did all that money go so quickly? Go get it back Tom!!!—and quickly!!!

If Fraud or theft is uncovered, it’s not up to Brad or Tom to deal with it. They will hand it over to the DA and of course, that’s an interesting issue by itself as you’ve read the scathing letter sent to the DA about it’s role in protecting us. Nothing is simple is it?


As to the matter of the Fee Application that was submitted from Gould /Landau (who were replaced by the court) for work done prior to Brad and Tom. Wow! I don’t know the exact amount submitted but it is between $155 and $250 K. They worked for about a month and supposedly the info they put together was useful to Tom and Brad. My guess is the judge will find that it meets the criteria I stated early on and approve that payment. As I believe those folks were appointed by Karen ( I may be wrong here), I would hope there will be some sense of negotiating on charges to take place before a check is authorized. .