Estate Financial attorneys blame market downturn

November 24, 2008

By KAREN VELIE

Following a fourth bail hearing and arraignment continuation, Joshua Yaguda’s attorney pointed at the downturn in the market as the catalyst for the financial ruin of Estate Financial inc. (EFI), on Monday morning.

“The market shifted and changed,” Yaguda’s attorney Dyke Huish said. “That’s what happened here. They made people lots of money on the upside.”

Karen Guth, 65, and Yaguda, 40, are accused of swindling more than 3,400 investors, primarily seniors, out of millions of dollars. Charged with 26 felonies, the mother and son team face more than 30 years in prison. Guth and Yaguda reside in San Luis Obispo County Jail pending $5 million each in bail.

Fielding a question by investor and real estate broker Jeri Kirkpatrick regarding the alleged failure of Guth and Yaguda to inform investors of their participation in numerous construction projects funded by EFI, Huish conceded the pair may have broken the law.

“Maybe they did some of the things,” Huish answered. “The question is how much did they do and how long should they be punished. If they did do it, they should be accountable and nothing more.”

Huish went on to suggest investors turn their attention away from Guth and Yaguda and towards the bankruptcy trustees.

“In your situation, I would want to know what the trustees are doing, not what Guth and Yaguda are doing,” Huish added. “They have your money. Put as much energy into them as you have done with these folks.”

In June, creditors forced EFI into Chapter 11 bankruptcy and asked the courts to appoint a receiver. About a week later, Guth and Yaguda voluntarily placed EFI Mortgage Fund into Chapter 11. EFI trustees continue to attempt to trace the money trail, analyze investments, and help creditors and investors to recover monies. The process is expected to take many months.

At the hearing, attorneys for Guth and Yaguda encouraged the court to continue the arraignment and bail hearing until December 12 at 10 a.m., to allow the defense to have more time to research the case, Huish said.

In addition, Huish beseeched the court to allow Guth and Yaguda access to two boxes of files along with a private place for him to meet with his clients. Currently, in step with the general jail population, Guth and Yaguda meet with their attorneys through a glass partition using monitored phones.

“We have agreed to their requests pending a court order,” said San Luis Obispo Undersheriff Steve Bolts. “We will let Guth and Yaguda see any documents while their attorneys are present. We do make accommodations when it is necessary for the defense.”