Picking at bones of EFI: Lawyers wrangling

March 19, 2009

By KAREN VELIE

During the latest battle over assets of failed Estate Financial Inc. (EFI) , attorneys for trustees, former co-owner Charlie Applebaum, Joshua Yaguda’s wife, and Heritage Oaks bank argued their clients alleged claims at an asset hearing on Friday.

San Luis Obispo Deputy District Attorney Steve von Dohlen objected to Joeli Yaguda’s request that the court recognize an undocumented ownership she claims to have in the Willow Creek Olive Ranch. Currently, Mrs. Yaguda manages the operation under the watchful eye of the district attorney’s office. Von Dohlen noted that “Mrs. Yaguda has done a good job managing the property.”

Nevertheless, von Dohlen questioned Mrs. Yaguda’s request that the court discount the fair market value of the business by 30 percent because of an alleged verbal agreement Karen Guth, Joshua Yaguda, and Mrs. Yaguda made a few years ago. In addition, the price she is offering, $64,000, does not remedy a $100,000 debt the olive oil business reportedly owes to EFI for debts paid to the ranch’s vendors from EFI bank accounts.

“Are you lifting your pants up?” investor John Bell asked von Dohlen. “It is getting a little deep.”

An attorney representing trustees, Dave Juhnke of Sinsheimer, Juhnke, Lebens and McIvor argued that the San Luis Obispo County courtroom was not the place to discuss assets. He also asked the court to preserve the equity in the group’s assets for the victims of EFI.

Guth’s attorney, Steven Smith, noted that the trustees are looking to pocket 80 percent of monies collected through the bankruptcy court to cover their fees.

“The bankruptcy trustees’ task is to pay off creditors, not investors. They are the biggest and first creditors,” Smith said. “They will pay themselves first for they are entitled to fees.”

Smith questioned the trustees’ failure to pay rent while occupying Guth, Yaguda, and Applebaum’s Ninth Street office building. He noted that the trustees had no right to object to the sale of the office building regardless of the probable guilt of Guth and Yaguda.

“If they are innocent and I don’t think they are…,” Smith added.

Guth, 65, and Yaguda, 40, were arrested October 16 by a multi-agency task force at their Pasolivo olive ranch. They face 26 fraud charges, and both remain in San Luis Obispo County Jail pending $5 million bail each. They are scheduled for arraignment May 15.

Attorneys for Heritage Oaks Bank and Applebaum questioned the court’s authority to determine the allocation of assets and argued that monies received through the sale of properties owned by the mother and son duo not end up in investors’ pockets.

“On the Ninth Street property, we join in the banks position that no proceeds go to investors through this court,” Applebaum’s attorney Gregory Abel said. “I believe the same is true for the gas stations, no money should go to benefit victims.”

San Luis Obispo County Superior Court Judge Jac Crawford said he needs time to research the claims and that he will follow up by issuing rulings regarding Mrs. Yaguda’s request to purchase the oil business, the trustees claim to the assets, Applebaum’s request to sell the businesses and collect his portion of monies, and Heritage Oaks Bank’s alleged rights to Guth and Yaguda’s assets ahead of investors due to an outstanding loan of more than $5 million.

Crawford and attorneys battling for monies voiced concerns over the banks request to collect on a lien made to secure a previously unsecured line of credit doled out during a time when crimes were being committed. These funds allowed EFI appear healthy during a time of financial hardship.

“Everyone in the world is objecting to the bank getting paid,” lamented bank attorney and Vice President William Raver. “There will be a $1.8 million shortfall to the bank which more than covers the questionable advance.”

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