EFI investors, creditors planning participation

July 9, 2008

By DANIEL BLACKBURN

Investors, builders, and creditors misled by Paso Robles hard money lender Estate Financial Inc. (EFI) are forming a pair of “advisory” committees to participate in an upcoming series of bankruptcy hearings and related actions promising to be both complex and convoluted.

Meeting privately Tuesday at the Carlton Hotel in Atascadero, 53 people financially entwined with the sinking financial institution laid plans for keeping abreast of, and contributing to, future federal court proceedings.

Chapter 11 bankruptcy filings – one voluntary, one not – have stopped the once successful EFI in its tracks. Karen Guth and her son and partner, Joshua Yaguda, EFI’s two principals, resigned early this week and have been replaced by new managers.

“You have now been heard,” developer Ron Cooper told the assembly, attempting to reassure those in attendance that their views would be articulated, and their presence felt, as the pair of bankruptcies wind through the courts.

Cooper organized a group which pushed the Estate corporation into involuntary bankruptcy in late June. Guth and Yagunda followed that action by voluntarily placing the EFI Mortgage Fund LLC under Chapter 11 reorganization protection last week.

Guth and Yaguda “did the smart thing” by resigning from EFI: “They gave up. They really had no options,” said Cooper.

Cooper said he expects three to six months to pass “before we all have a clearer picture of what happened and where our money went.” He told the crowd, “I borrowed from a crook, you invested with a crook. And we all know what happens then.”

EFI’s new chief executive is M. Freddie Reiss, said to be an expert in restructuring companies. Bankruptcy attorney David Gould of Calabasas will be the mortgage fund’s new manager.

The investor-builder-creditor committees — one monitoring the fund bankruptcy and the other the corporation – will each have five to 10 members and each will have legal standing during all upcoming proceedings.

Tags:, EFI, Estate Financial


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Stefan

By: Anonymous on 7/10/08

Just a thought but won't the new management supply the APNs on the properties? Aren't they suppose to be ethical managers and forthcoming? Let's put them to the test. Someone get down there and ask for the list!

By: Anonymous on 7/10/08

An idea about obtaining the APN's of the properties in the mortgage fund…..I have two first trust deeds. In each property, the mortgage fund is also invested. I believe that a majority of EFI's holdings are funded by both first trust deeds and through the mortgage fund. So, if the first trust deed holders can convey the address and APN's of their properties, this would help identify the properties in the mortgage fund more precisely.

By: Anonymous on 7/10/08

Associated Press article on Estate Financial – short but to the point


http://www.sacbee.com/114/story/1052341.html

By: Anonymous on 7/10/08

freddie.reiss@fticonsulting.com

By: Anonymous on 7/10/08

Does anyone have Freddie Reiss' email address?

By: Anonymous on 7/10/08

Think how much money could be saved by eliminating the whole group and slowly building back at a necessary rate with trusted individuals.

By: Anonymous on 7/10/08

To Mike Knecht:

Can the APN #'s be obtained from property addresses? If so, the addresses are listed on the lendersview website.

By: Anonymous on 7/10/08

I recommend that we all submit e-mails to

Mr. Freddie Reiss as soon as possible. I was absolutely speechless after reading Mel McColloch's pleading. It would be laughable if it weren't so pathetic. I can only wonder, who do these people think they are?


Mr. Freddie Reiss:


I am responding to the letter posted on uncoveredslo.com by Mel McColloch last night. If you are to have any credibility at all, I urge you to distance yourselves completely from Karen Guth and Joshua Yaguda as well as any and all “consultants” that she may have on her staff. I also strenuously object to retaining any of the support staff . I fear that your management, work results and recommendations will be tainted by association with former management and staff. I look forward to transparency in accounting and clear communication from you in your position as new manager of EFI.

By: Anonymous on 7/10/08

Jean


Sorry, wrong, I'm not Charlie. The bigger question is not who am I but who and what are you?


Stefan

By: Anonymous on 7/10/08

Karen, Josh and the entire staff need to be removed and brought before the courts. We need new management not the same! Currently EFI is still run by people hired by Karen.

By: Anonymous on 7/10/08

I like Mike! Maybe he would consider taking Mels job temporarily and we could find out whats really happening down there.

By: Anonymous on 7/10/08

My first suggestion is to get the APN's on any properties that the mortgage fund has money in. A posting of pictures and locations of those properties needs to be made available to all investors in the fund. Secondly, after all the properties are identified and the equity estimated in those properties is calculated, auction off the least worst of the properties. With that money, pay the insurance and taxes on the remaining properties to cover liability and tax penalties. At that point some of the half built property needs to be finished and marketed. How rapidly those properties need to be sold would depend on the overhead incurred by the new managers at Estate Financial i.e. how much money are they using up while we wait. That is all I have for now because Mel McColloch is on the phone wanting to talk about setting up office space in the White House for Dick Cheney and Don Rumsfeld so they may advise whoever is elected President on how to win the war in Iraq.

By: Anonymous on 7/10/08

Good letter, Mike. What is your suggestion for moving forward and getting out of this mess?

By: Anonymous on 7/10/08

To Mel McColloch

Dear Mel

In regards to your E-mail to investors begging investors pay Joshua and Karen to come back to work at Estate Financial, don’t you think you ought to answer the allegations that your investment money was returned to you ahead of all the investors so you would act as a hired mouth piece to sing the praises of Karen Guth? That would be the first thing to address before you plea to keep your job.


I have sent you several requests and you have never answered any of the questions I have asked. Most of the time you don’t even respond. In my experience and the experience of the people I communicate with, you have served no purpose. I do not see any evidence of “the work you have been doing for the last ten months”. The only work I am aware of that you did was to get your money out that you had invested ahead of everyone else and draw a paycheck for telling people you don’t have the answers and Karen will get back to them, which of course rarely happens. Please Mel, if you did any of the appraisals, show me the paper work. I did sit in a meeting with you once and you lied directly to my face about Karen being there for the long haul but I don’t know if that counts as “work”.


I have no doubt that Karen and Joshua would work hard if the investors hired them back after Karen bankrupted the firm. They would work hard to obfuscate and confuse the paper trail that shows illegal removal of investor’s names from the trust deeds and work hard to keep the appraisal parcel numbers from ever coming to light.


If there weren’t so many hard working people whose lives and financial security have been devastated by Karen Guth’s predilection to promise money to projects when she didn’t have the money available, your letter would be hysterically funny. As it stands, Mel, what you are involved in is a massive tragedy, one of the largest ever perpetrated in the State of California.. If you don’t believe me, give me a call and we can take an automobile ride around the county and look at the carnage of unfinished properties that Karen Guth’s lending program created.


You advertise yourself as a consultant. If I were you, my friend, I would “consult” with the DRE complaint and then I would get out of town.

d


Stefan

By: Anonymous on 7/10/08

I see all your posting, yet i see or hear NO ONE reporting to the proper Authorities. Financial Crimes Division (FCD) Wire Fraud, Loan Fraud, Bank Fraud, Investor Fraud etc. are ALL handled by the US Secret Service, the office for this area is in Ventura, CA so stop blogging and if you have evidence or want to report fraud call them at 805-339-9180 and file a formal complaint until you do they can NOT step in to help and stop the scams or fraud. Go on the record. As some one noted several developers are in fact moving monies (Your Monies)into other peoples names and phony LLC's so do something and quit complaining on the web. Remember it is a Federal Crime to file false reports to any Federal Agents and it is also a Crime to apply for loans and lie on the application ie. Title 18 Section 1014 one of your listed developers has already done that and is under a Investigation so step to the plate.

By: Anonymous on 7/9/08


More Questions for Mel…

(And please Mel…forward your answers to Mr. Reiss, he needs as much information as he can possibly be provided)


1. What happened with your EFI investments?

a) Which remain unpaid?

b) Which have been paid?

c) When were (b) they

paid?

2) What are you currently being paid by EFI?

3) When did you obtain a real estate license?


I don't know the answer to these three questions…so I'm looking forward to your responses….Obviously, in light of the abundance of good faith we're dealing with here, you'll have no problem with these will you? (Don't make me guess!!)

By: Anonymous on 7/9/08

Mel… You can post your response to these questions….if you'd like.

1. Who, right now, is the licenced broker for EFI….?

2. Who, right now, is in charge of the (debtor in possesion under Chapter 11)

EF LLC?

3. Isn't it true that the involuntary EFI Chapter 11 petition means nothing until the court enters an "order for relief" and that the preliminary hearing isn't set until mid-September?

4. Isn't it true that the LLC's Chapter 11 effectively put a stop to (H.Powell) the examiner's review of the EF Fund books and records?

5) In other words……nothing has really changed?

6) So everyone is getting excited about nothing?


In case Mel doesn't respond here's the answers:

1) Josh Y.

2) The existing managing members (i.e. Karen and Josh)

3)Yes

4) Yes

5) Yes

6) Yes


Party on Garth!


Stefan

By: Anonymous on 7/9/08

These guys just don't want to get off the teet. The only good news is they think there's still milk. What the hell are they all doing. The business is done you can only rearrange the deck chairs so many times before its time to bail. They could only obstruct any real progress. Off with thier heads.

By: Anonymous on 7/9/08

Mel: What job exactly were you doing for us investors. Every time I called you, you did not return my call, did not return my emails, and the one time we did talk you didn't have the answer and never got back to me with the information.


Mel, why don't you resign just like Karen and Josh did!!!!!

By: Anonymous on 7/9/08

I would only be in favor of hiring Karen & Josh if you can't get the old execs from Enron.

By: Anonymous on 7/9/08

Mel: Are you fuc_ing craze. You want us to let the wolf guard the hen house.

EFI-your not just crooks, you're crazy.

By: Anonymous on 7/9/08

You've got to be kidding.

By: Anonymous on 7/9/08

July 9, 2008


Dear Investors,


Karen and Joshua have resigned as managers and officers of Estate Financial, and Estate Financial Mortgage Fund. New managers will be deciding which employees and consultants they need or want to keep.


I would like to continue with the work I have been doing for the last ten months, representing investor interests. I would also strongly suggest that the remaining Estate Financial employees remain, as they are an important asset in the day to day operations of the business and the new managers will need their help.


Karen and Joshua should be hired as independent contractors because of their detailed knowledge and history of the company.


If you agree with any of my observations and suggestions, I suggest that you email

the new manager, Mr. Freddie Reiss, at:

freddie.reiss@fticonsulting.com and voice your opinion to rehire those of us currently working at Estate Financial who want to continue working for the company and all of the investors.


Personally, I want to finish the job I was hired to do for all of you.


Thank you.


Mel McColloch

Consultant for Estate Financial


Stefan

By: Anonymous on 7/9/08

Insider ? It has been a while that you were insider, right? I mean, you don't work for EFI, do you? Why do you think I'm threatening anyone — when all I'm saying is that people should only be careful.


Are you Charlie????


Wow, that would be something if the absent Apple came back to make a stink. Insider, you've been outted !!!!


By: Anonymous on 7/9/08

To No Stay…. an involuntary BK does impose a STAY unless the case that was filed falls into a particular category. The case that was filed does not meet the exceptions, so THERE IS A STAY.

By: Anonymous on 7/9/08

Outsider, have you gone to the authorities with your info? Either way, don't hold back. Blog all you know! Agencies like the FBI watch this site so please spill all. These greedy scammers are hurting very needy elderly people and others. i know of people who can't afford their meds. Another who can't afford a life saving operation. Another words, the fact these investors can't get at least some of their money back is causing physical damage and/or killing them. Please do what is right and tell all!

By: Anonymous on 7/9/08

Here is more information for you who have missing investments. The other firm is called SLO-VERDOT, LLC uses front address as 2111 Golden Hill Rd. Paso Robles. You all better get smart real fast the LLC are changing owners on paper real fast to avoid a Court order to stop.

By: Anonymous on 7/9/08

To Anonymous – The actual paper filing of the BK petition may not state the 5(a)(3) part but it does state the petitioner are filing under 303(b). You need to look at USC 362 and then find the (b) section which explains the 303(b). The paper filing such as Ron's involuntary BK won't spell out the details of the stay, it'll just say, for example 303(b). The lawyer and judges have to figure it out.

By: Anonymous on 7/9/08

A stay is like a freeze on all ongoing law suits against a debtor. An INVOLUNTARY has NO STAY because this particular type of BK petition can be imposed on any company by any creditor at any time. BUT if that creditor is wrong in petitioning the involuntary BK then that debtor can sue the living life out of the creditor. That's why involuntary BKs are so rare. The involuntary BK creditors better be absolutely right! Involuntaries make up less than 1% of all BKs out there so many paralegals, lawyers, judges, etc get confused and assume an automatic stay is in play but there isn't one on Estate Financial Inc. In an involuntary THERE IS NO STAY IN PLACE (it's as though the debtor is innocent until proven guilty)! There is a 20 day period after serving the debtor for the debtor to prove themselves solvent to the BK court. Or they can not contest (not fight it). After these 20 days, provided the judge believes the company is insolvent, the judge will then allow for the BK to move forward. So urge your lawyer to take further action on Estate Financial Inc!


Stefan

By: Anonymous on 7/9/08

Jean


I'm not sure who you are but your comments seem to be along the lines of threats to bloggers. Now I don't know if you are an investor or an investor who was lucky enough to get out at the right time. I do think without accusing anyone specific of any act or crime that there will ultimately be questions of acts and or crimes that will need to be flushed out. Only you or the people who acted in certain ways know who they are however I'm sure the authorities and injured parties will stay on this until all is known. I do not find it surprising that someone who has lost thier entire lifes savings might toss around a few accusations and any potential damages I'm sure have been offset by the millions lost.

By: Anonymous on 7/9/08

The lawsuit doesn't say anthing about 5(a)(3) of the Securities Investor Protection Act of 1970…so wouldn't that mean there is a stay??

By: Anonymous on 7/9/08

Karen and Josh had to go and it took this long because it takes this long to process things legally. Ron Cooper is not a friend to us investors. And the more of us that climb on his bandwagon the higher and harder your fall will be. Do your own homework – and talk to a professional you paid for.


By: Anonymous on 7/9/08

What is a stay? And why is the first involuntary BK by Cooper any different than the voluntary by Karen on the Mortgage Fund? An involuntary is treated different from a voluntary?

By: Anonymous on 7/9/08

There is NO automatic stay in place with the INVOLUNTARY BK petition on Estate Financial INC. This is important as suits against Estate Financial Inc can move forward! If this was VOLUNTARY there would be a stay but it was an INVOLUNTARY under 303(b) and that changes everything! Here are some facts-


On the recent Chapter 11 BK filing itself against Estate Financial Inc. it states "Petitioners are eligible to file this petition persuant to 11 U.S.C.& 303(b)" According to this and many other legal web sites, the stay in NOT in place.


http://www.lawdog.com/bkrcy/bkcp7e1.htm


Look at 11 U.S.C. Section 362 and read first paragraph. Then scroll down to section (b). Ron's group filed 303(b) and as this code states "does not operate as a stay"


Longer version – (b) The filing of a petition under section 301, 302, or 303 of this title, or of an application under section 5(a)(3) of the Securities Investor Protection Act of 1970, does not operate as a stay!!!!


This is a big deal! March forward with your law suits! Joshua wrote many lawyers telling them there's a stay in place and it's a lie. Estate Financial Inc has NO STAY because of the way it was filed under 303(b)!


By: Anonymous on 7/9/08

FYI, The the transfer of verdot et al is a move to get assets out of the bad boys pockets one local developer is soon filing BK so he is moving all assets to other LLC's and friends names thus to say he is broke and has no assets. He already has a hard money lender after him for defaulting on $21,000,000.00 by Point Center Financial, Inc and I was told he is now defaulted on $7,000,000.00 loan with Hertiage Oaks as well with more to come every LLC and LP seems to come to the same two owners Ron Hertel and Robert JS Fowler go check the records .


Stefan

By: Anonymous on 7/9/08

Of course fraud is not an insurable risk, is it? If you're looking for money, you better be looking for insurance policies. Those who want people in jail are truly misguided. Revenge won't bring back your investments. Of course, I can't say I'm convinced that too many of the bloggers are former investors… merely people on the sidelines throwing gasoline on the flames.


Has Mr. Blackburn researched whether Cooper has a debt sufficient to give him standing in BK court? No matter, apparently he has alligned himself with others who may have legitimate debts. There are many legal questions yet to be resolved. Those who want blood may be very disappointed.

By: Anonymous on 7/9/08

Well, it seems that the DRE must have some proof of fraud. From their document filed on 6/27 "Respondents GUTH and YAGUDA … acted FRAUDENTLY AND DISHONESTLY…" add to that the fact that the DOC REVOKED THEIR PERMIT, and, now, it WASN'T Karen's idea! It is mind boggling to think that there are still to this day some who will defend them!

By: Anonymous on 7/9/08

anonymous is right… You better have your ducks in a row before you go accusing people of crimes. You might find yourself on the wrong end of a civil lawsuit… No one knows what's going to come out. But I for one, think people should not anticipate the process. It will take a long time.


One question:


How is it that a borrower, like Cooper, has standing to file BK? Did he get a judgment against EFI? My recollection is that in order to have standing to file an involuntary petition you have to have an undisputed claim against the debtor.

By: Anonymous on 7/9/08

Ooooh, sorry Josh, hit a sore spot, did we?

By: Anonymous on 7/9/08

Every one of you loud mouth finger-pointers need to post your condemning evidence. I not, shut up and/or go away!


If I had it I would post it.

By: Anonymous on 7/9/08

What is wrong with our system? These people should have been put away a while ago. And now they have a chance to escape? Wow, this is such an encouragement to contiplating future white collar criminals! If anyone has the key to lock them up now, speak up to the authorities! Even if it's a temporary lock up. At least the authorities will be inclined to keep a closer eye on Karen and Joshua.

By: Anonymous on 7/9/08

The smoking gun is there. I'm sorry you can't see it. Or have investigated deep enough to find it. Wait and see.

By: Anonymous on 7/9/08

Kevin,


Are you saying our money may have been channeled through these other companies?

By: Anonymous on 7/9/08

Good Riddance is an idiot. I been asking for the "smoking gun" and no one has come forward..words are cheap…I don't like Karen or Josh, but want to see the fraud and theft evidence


Stefan

By: Anonymous on 7/9/08

Watch the firm of Small Business Consulting, Inc. they are in pretty deep. Terry Guy is one of her culprits

By: Anonymous on 7/9/08

Kevin, in today's legal notices in the Tribune,

"NOTICE TO CREDITORS OF BULK SALE Escrow No. 116168-MGS UCC Section 6105 NOTICE IS HEREBY GIVEN that a bulk sale is about to be made. The name(s), business address(es) of the Seller(s), is/are: Verdot Group LP, a California Limited Partnership c/o Templeton Wine Services, 45 Main Street, Templeton, CA 93465 Doing Business as: 5 Mile Bridge Winery All other business name(s) and addresses used by the Seller(s) within the past three years, as stated by the Seller(s), is/are (if none, so state) : None …."

By: Anonymous on 7/9/08

Careful. While a newspaper has the freedom to print libelous comments — do blogger?


And even reporters need to use the words, "allegedly," and "alleged" wrongdoing.


And lastly, don't confuse incompetence with illegality. Because if you do, you exclude any possibility of recovering for claims of negligence.


Insider, is that you?

By: Anonymous on 7/9/08

Think of all the damage that Karen and Josh have done. How are they different from the worst thieves and liars? Not only have they damaged the investors, many too old now to make any financial recovery, but their criminal behaviour reaches far beyond us. The County Tax Collector must have an interest in EFI's demise. Most if not all of EFI funded developments are in default on their property taxes. This will impact SLO's county budget as well as other counties throughout the state. There will be more personal bankrupcies, lower philanthropic donations, more home foreclosures, less money spent in our communities. Karen and Josh should be prosecuted to the full extent of the law and sent to prison. But you know they will skip before then with our monies that they have been stealing for years. A beautiful legacy they leave for their children/grandchildren. Hopefully the cycle will be broken and they kids won't end up working the same frauds as Karen and Josh. Good riddance, you common thieves.

By: Anonymous on 7/9/08

FYI, Verdot Group, LP dba 5 Mile Bridge Wines and Flycatcher Wines have in order to hide the money trail have transfered there holding into there wine makers name Vance Rose of Rose Wine Group, LLC of 45 Main St. Templeton CA if you have information on this and the others financial scams email me so i can get it to the Agents we are dealing with in SF. kellm17@yahoo.com

By: Anonymous on 7/9/08

I've obviously upset someone. Was it the discussion on personal assets or criminal charges?

By: Anonymous on 7/9/08

to EFI…EFI…EFI…EFI


Yes, this is a big county, and this meltdown is going to cause a financial ripple throughout the state.


This is a national story, just check the AP.

By: Anonymous on 7/9/08

Who ever it is who's performing the 'freak show' for insider, would you stop! Did your mommy not give you enough attention when you were a child? Go away, you are not wanted here.

By: Anonymous on 7/9/08

One of the biggest problems a lot of people have with newspapers is a lack of follow-through on important stories. This hard money story and its inevitable trickle-down fiscal disaster is perhaps the biggest economic story in this county's history. Read and learn, oh impatient one.


Stefan

By: Anonymous on 7/9/08

SO TYPICAL


Enough people like you, what allowed Karen to do what she did.

I have a deal for you.

By: Anonymous on 7/9/08

No! I'm the real insider!

By: Anonymous on 7/9/08

That second comment was not from me but from an impostor.

By: Anonymous on 7/9/08

Test

By: Anonymous on 7/9/08

That first comment was not from me but an impostor. What happens with EFI may become the blueprint for going after other hard money lenders and borrowers in the county.

By: Anonymous on 7/9/08

Welcome to the EFIuncovered.com.

This is getting to be a north county gossip site. Spread out! It's a big county.

By: Anonymous on 7/9/08

Food for thought:

There have been 60 recordings for Estate Finl Mtg Fund between 03/12/02 and 06/23/08.

41 were recorded under EFI Mtg Fund LLC, and 19 were under EFI Mtg FUND LTD.

Of the 19, (LTD), 4 listed "Baron" and 2 listed "Signature Homes,(Al Damico)" Several listed "Fetyko". Do you think Karen got sloppy and forgot to file the recordings under the correct Fund name?

By: Anonymous on 7/9/08

A day late and many dollars short. Why don't people take care of their money before they get ripped off?

I will never understand that.

All this is an exercise in futility. A huge waste of time. It will take 10 years and I doubt anyone will see a jail cell.

Really, why waste the time and energy and money?

By: Anonymous on 7/9/08

Sorry you have ill thoughts about Ron. What's done is done. He's looking at the overall picture. If you are an investor, you could have taken this to the Federal level yourself, but it appears you didn't. Of the few investors who chose to make a move, unfortunately it was on a state level. Their lawyers should have informed them Karen could have BK on the Federal level which would squash all their state level effort. Don't kick Ron, he investigated, spoke to many, many professionals and did his 'homework.' And he did it in the nick of time – only 5 days before Karen. It's just too bad that group couldn't place the mortgage fund under BK fast enough. I say 'Good job Ron et al!'

By: Anonymous on 7/9/08

I for one do not trust Ron Cooper…don't have any particuliar reason, just don't


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