Following Three Bells Winery money trail helps explain why DA, FBI are interested in Estate

April 3, 2008

By KAREN VELIE and DANIEL BLACKBURN

Angry investors wondering where their money went after funding Estate Financial of Paso Robles may be on the road to an eventual explanation.

Whether that translates into returns for those who have put money into Estate is yet to be learned. What is known is that millions of investor dollars have apparently been misappropriated, misspent, or misdirected, according to an investigation by UncoveredSLO.com.

Now, law enforcement investigators from the San Luis Obispo County District Attorney’s office and the FBI have finally entered the picture with a “preliminary inquiry” into a growing litany of fraud allegations leveled by an ever-widening group of individuals. Joint interviews with investors are being conducted by the two agencies, according to some who have shared information.

Deputy District Attorney Steve VonDohlen confirmed the interviews: “We are talking to some of the plaintiffs, and the FBI,” he said this week. “It’s a preliminary inquiry. We are mindful that some of these complainants are well over 65 years of age. There may, or may not be, criminal wrongdoing here.”

Criminal or not, many of the financial transactions of Estate Financial principals Karen Guth, her son, Joshua Yaguda, and others with access to the lending company’s money, are interesting if confusing. As a result, the money trail often becomes tangled. (Information for this article was gathered from court documents, interviews with investors and lenders alike, and a variety of informed sources. Guth declined comment when contacted by telephone Thursday.)

Trying to answer questions about how money moved once it was invested with Guth, UncoveredSLO.com focused on the funding and construction of Three Bells Winery in Paso Robles. The probe discovered critical inconsistencies in many documents; identical names buried within a potpourri of limited liability companies; and questionable use of Estate Financial funds intended for development of the Paso Robles winery.

In 2006, Estate Financial President Guth and her vice president, Yaguda, under the name Third Press Partners LLC, and Al D’Amico, as Signature Homes LLC, became financially equal partners in Three Bells LLC. An operating agreement between the three holds Guth and Yaguda responsible for day-to-day management and record keeping of the winery project.

Three Bells LLC borrowed $3,665,720 from Estate Financial to construct the winery. Of that total amount, Estate Financial doled out approximately $1.4 million for actual building and other facility construction.

D’Amico allegedly snagged more than $1.2 million for his own personal use. Guth filed bankruptcy, claiming $6,199,929 in liabilities on the project and noting her failure, as an owner of the winery, to stay current on her loan payments.

“The question is, how you can foreclose on a property for $6 million when the construction loan was for $3.7 million, and the actual construction cost was only $1.5 million?” wondered one involved party who asked to remain unnamed.

Three Bells LLC filed a lawsuit June 18, 2007, against its non-managing partner, Signature Homes LLC; D’Amico individually; and D’Amico’s Town and Country Landscaping LLC, alleging fraud, intentional misrepresentation, conversion, breach of fiduciary duty, and imposition of constructive trust. The latter allegation suggested that D’Amico used his position as construction manager to rent equipment, purchase sod, and hire supervisors for property other than the winery.

“Yes, I am involved in both sides of the lawsuit, not as myself, but as separate entities. It’s a legal thing,” D’Amico said, responding to UncoveredSLO.com’s questions about why he would sue himself for fraud. He then added, “The case has been dismissed by mutual parties.”

A subsequent check of county records, however, shows the lawsuit has not been dismissed, and a case management conference is scheduled May 7 in San Luis Obispo County Superior Court.

D’Amico and Guth continue to work together on other projects despite their mutual, intertwining litigation. On August 1, Guth signed over six deeds of trusts to D’Amico valued at approximately $77,000 each.

“That was reimbursement for money she (Guth) owed me for out of pocket expenses,” D’Amico said.

D’Amico contends the loan for the winery project was never properly funded.

“What happened to the money is the million-dollar question,” D’Amico said. “She (Guth) foreclosed on herself. She will own the property in a month or two and I will be out of the picture.”

Guth allegedly sent a letter to a number of investors placing the blame for the demise of the winery investment on D’Amico’s shoulders.

“I lent the money to Estate Financial and she is responsible to live up to her promises,” said one winery investor. “The money lost to D’Amico has nothing to do with me.”

Information obtained by UncoveredSLO.com suggests Guth knew her hard money lending business was in trouble back in 2004, long before the downturn in the market. Investors and contractors claim projects, funded from as early as 2002, have not been finished due to alleged mismanagement of funds.

Even so, Guth continued at the time, and to this day, to seek investors, primarily seniors, with the lure of high interest on property secured loans — without disclosing the company’s financial woes. On her Web site, Guth touts interest payments of 11 to 13 percent, though most investors claim they are no longer receiving any interest payments.

“If she is running a business and knows she is having financial problems, I think she would have to tell people,” said investor John Childers. “A person robs a grocery store, they go to jail that day. Guth robs millions from the elderly and nothing happens. She is continuing to get money from the elderly.”

Hard money loans are based on the value of the underlying asset rather than borrowers’ credit rating. It works if the lender finances no more than 60 to 70 percent of the project, secures licensed appraisals, and makes payments as the work progresses. Numerous investors claim Guth failed to follow through on these promises.

“If she had followed these rules, she would not be in trouble,” Childers said. “It’s a good business, but if people get greedy, it goes to hell. She made the loan to value, not an appraisal by a licensed appraiser.”

A San Diego investment firm in 2004 failed to disclose information regarding investments, and used new investment capital to pay off existing investors, which resulted in the U.S. Securities and Exchange Commission filing an emergency action to halt the ongoing fraud. Authorities froze finances and set up a receivership.

(Editor’s note: Contact information should be included in comments if individuals want to share information in more detail.)

Where else to look for help:

Call Rene Esquarel, California Department of Real Estate, 559-445-5009, touch “O” when recording comes on, and ask operator to connect you.

(See initial UncoveredSLO.com article on Estate Financial and its investors.)