State regulators cancel EFI sales permits
June 9, 2008
By KAREN VELIE
Estate Financial Corp. (EFI) of Paso Robles can no longer solicit nor accept investor money because the troubled lender’s state permit to do so has been revoked.
Specifically, regulators from the California Department of Corporations (DOC) have stopped the firm from selling mortgage fund securities and part interest in real estate investments. The revocation follows on the heels of an earlier suspension.
“We revoked their permit to raise funds,” said DOC Director of Communications Mark Leyes. “They can continue to service existing funds and investors. It does not shut them down.”
San Luis Obispo County’s District Attorney’s Office is investigating numerous complaints from county residents and others who believe their principal investments with EFI have been misused. Local prosecutors are working with DOC investigators to examine the allegations.
“We are doing what we can to make sure the district attorney has what they need to do their job,” Leyes added. “The revocation is just one piece of the puzzle. If there is malfeasance that rises to the level of criminality, it will be up to the prosecutors.”
A top county prosecutor agreed.
“The DOC is also looking at more aggressive or criminal acts they can refer,” said Deputy District Attorney Steve Von Dohlen. “Then we review and decide whether or not to file criminal charges or more investigation.
Prior to taking funds from an investor, the permit required EFI’s owners, Karen Guth and Joshua Yaguda, to provide prospective investors with a questionnaire regarding their individual financial standing. The DOC concluded Guth and Yaguda failed to fill out the required forms. Guth also failed to disclose that she was a partner in more than 15 percent of EFI funded construction projects as stated in a circular distributed by the EFI.
Sources contend Guth knew she was over her allotment and had started to dump properties. A check of county records for properties having “EFI” listed as the grantor or the grantee showed 267 records changes in 2008.
Yaguda declined to comment on the state agency’s permit revocation and referred a reporter to EFI’s Web site.
EFI is one of a number of hard money lenders currently under fire in SLO County. Hard money lenders specialize in real estate-backed short-term bridge loans. These high risk loans are based on the value of the underlying asset rather then the borrower’s credit rating. EFI, during better times, paid investors approximately 12 percent interest on their investments.
On April 28, the DOC suspended EFI’s permit while the agency investigated an onslaught of charges. In response to the allegations, EFI requested a hearing to challenge the suspension, but later withdrew the request.
EFI stopped making interest payment last fall and numerous investors concerned about their money filed complaints with the regulatory agency.
In response to allegations Guth and Yaguda failed to protect investors, the San Luis Obispo law firm of Sinsheimer Juhnke Lebens and McIvor has invited more than 1,600 investors to attend a meeting June 17 at the Alex Madonna Expo Center to discuss replacing the $170 million fund manager.
Guth and Yaguda fired back with a letter last Friday claiming the law firm, required to have 10 percent of fund investors interested in the meeting, represented only a half dozen investors. The mother-son duo claimed the law firm dis not have the expertise to manage the fund. In the letter, EFI did not mention that permits had been revoked the previous week.
Tags:, district attorney, EFI, Estate Financial, San Luis Obispo County