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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 Karen Guth and her son and partner, Joshua Yaguda, EFI’s two principals, resigned early this week and have been replaced by new managers.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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By: Anonymous on 7/17/08

Paso Guy


I don't disagree with your estimate other than I too think it's probably optimistic. Probably very optimistic. My point was simply they were not going to bail anybody out and the longer they were in charge the less money anyone was going to get. Can you imagine the heartache that could have been saved had they just fessed up 18 mo. ago the disaster that had been created and allowed a liquidation at that time. Nothing was gained by trying to keep the elepahant under the rug.

By: Anonymous on 7/17/08

Jean….both insider and I know he did not post that….those were my sentiments, not his

By: Anonymous on 7/17/08

Insider — there you go again. (Imagine Ronald Reagan) Paso Guy was just wondering — no reason to suggest he needs a tin hat. You are quite the provocateur, aren't you.


PG — dunno. Those bank owned properties — is that suggesting the EFI owns them, or does Wamu, or BofA, and EFI is just second or third in line upon sale? Get's complicated fast, right?

By: Anonymous on 7/17/08

I'm beginning to think that you're a candidate for a tin hat. You don't know what I was thinking when I asked the question. I'm just curious what the investors think they are going to get back, if anything. Chill out.


On the other hand, what do you expect/think you're gonna get?

By: Anonymous on 7/17/08

Paso Guy


The question is what do you think you would have gotten had the situation had continued as was.

By: Anonymous on 7/17/08

Speculation


What dorsd any of you think you're going to recieve when this finally cashes out 3-5 years fron now. 100%? 75%? 15%?


I'm thinking around 40% and I'm considered by most to be an optimist.

By: Anonymous on 7/17/08

Hopefully the bankruptcies will be consolidated with one Judge who will appoint one receiver and that Judge will remove the cookie jar far far away and out of reach of the owners. Hopefully a restraining order keeping them 100 yards from the office.

By: Anonymous on 7/16/08

Again — please answer this question– someone


to: watching:


What does REO, Props and sfr mean?


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By: Anonymous on 7/16/08

You know, I'm just a dispassionate observer. Not an investor, builder, or anything — just a spectator. And I don't even live anywhere near SLO or PR. But it just seems to me that the few people chatting here are WAY TOO dramatic. There are so many assumptions being made left and right. Let me ask a simple question — who are the owners of EFI, Inc. If you're thinking it's the investors — no, I don't think so. I thought that the dispute between Charlie and Karen is what blew this thing up. Are they the owners? Now, it's one thing to say the managers have been replaced, it's something else again to say the owners have been replaced ! How exactly do you do that with a private company — in the U.S.A.??? So, if K & C still own the Corporation — wouldn't you expect either K or C to be involved in the business? Who owns the building? I'm not trying to contradict anybody here, but having a grasp of the basic facts is important before prognosticating about whether investors will recover any money. With all those REOs and SFR, that appears to represent a ton of dough, right? So, if that inventory was liquidated, wouldn't everyone get some money? Tell me why not?


Well, on second thought — I don't mind the drama. And, I'm not mocking the investors. My deepest sympathies to you. I'm just annoyed that some people keep making statements about things they clearly have no knowledge of– in particular the legal issues, which are complicated and require a real depth of thinking. So, I think it's the people who are spouting off without the full picture who are really being inconsiderate of the people who are afraid they've lost everything. As that dispassionate observer — who has some experience watching these things play out — I say, do not give up hope — you may be surprised. When I hear people calling each other names it just reminds me of the school yard. And we're all adults who've made mistakes.

By: Anonymous on 7/16/08

To Anonymous: You ask what Karen is doing in the office? Last I heard she was asking for 'payment' as a consultant to Reiss and Gould. As of yet, I don't believe she was approved. If anyone knows that she was infact approved, please post it. I'd say, Karen and Joshua are working for free. Free? If they are, one can only assume it is to further hide the facts! If Gould and Reiss are allowing them in the office, then these seems fishy. The credibility of Reiss/Gould is going down the toilet fast. It's apparent Karen/Josh need to be out of the office. Yet, they are still there? Whose interest is Gould/Reiss working in behalf of? May the BK courts help us and get all involved from Karen to Reiss/Gould gone. Sounds like Reiss/Gould are acting on Karen's behalf. Anyone have any background info on Gould and Reiss? Not promotional website info but real work performed in the past and the outcome of that work? Who are these people and why did Karen choose them?

By: Anonymous on 7/16/08

To Watching:

Did you get a sense of what the judge meant by delaying the appointment hearing til Friday to "get things in order"? What does that mean? Were there many people in court today? Were there many attorneys? What was said? I didn't realize that the public could attend. What time is the hearing on Friday? I called EF today and spoke with Laura. She said that both Karen and Josh were in the office today. I asked what they were doing. She said they were acting as consultants to Freddie Reiss and David Gould. I asked if Freddie and David were at the office and she said no, that they were in court. So my question is, if noone has been appointed as trustee/manager/CEO or whatever, who is supervising Laura et al? Laura also said that Mel, Don, Shauna and Pam are still there, but that Lupe was "gone." Is Karen planning to continue to act as manager whether a new manager is appointed or not? If she tendered her resignation, what the hell is she still doing there?

By: Anonymous on 7/16/08

What does REO, Props and sfr mean?

REO: Real estate owned

Props: Properties

SFR: Single Family Residence

By: Anonymous on 7/16/08

REO = Real Estate Owned. Properties they have taken back from builders. SFR = Single Family Residence. 1 house.

By: Anonymous on 7/16/08

What is the status of Reiss and Gould? Are they in or out? It only seems appropriate that a trustee takes their place. They were having interactions with Karen and Joshua months before the Funds BK. Working silently in cahoots with Karen prior to the announcement of the BK sounds suspicious. Also, how could they not be aware of Karen's promise to the public of Estate Financial's longevity? The media has made that promise evident. I feel there is dishonesty lurking and both Reiss and Gould need to go. Besides, it's crystal clear many or most properties are a mix of funds between the Fund and EFI. One trustee, one forensic accounting firm seems like enough for both entities. We need an unbiased, independent trustee. Period.


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By: Anonymous on 7/16/08

to: watching:


What does REO, Props and sfr mean?

By: Anonymous on 7/16/08

EFI's attorney asked for the appointment hearing to be delayed until Friday 10:00 to "get things in order."


Some info was relayed: The new managers have been at the EFI office all week trying to get a handle on things. There are 8 REOs in contract that will probably need a court order to get title insurance in order to close. There are about 630 props, all but about 10 sfrs.


I liked some of the things the judge said: "No business class flights", "Efficiency and economy are to be his (the bk trustee I guess)watchword."


By: Anonymous on 7/16/08

EFI is essentially frozen from transacting. They are in the process of a trustee being appointed. In the meantime there are several law firms and workout consultants going through the books trying to assess all the claims the DRE, DOC and investors have been saying. Once a trustee is appointed transactions will commence. We hope by Friday there will be a new trustee. Until then, Karen and Josh by law are not able to do anything. It is all in the hands of the courts know. I will not post much more, but things are looking better than a few weeks ago. I just hope we investors can get back a fair amount of money.

By: Anonymous on 7/16/08

Jean;


As soon as information is in it will be posted. We can't expect UCSLO to attend the meeting when they already doing all this work on a slim budget. You can give them hand by sending a check.

By: Anonymous on 7/16/08

Did anyone attend the hearing in Santa Barbara this morning? What happened? Did the BK Court impose a stay? Were any State Court's permitted to proceed? Why doesn't "UncoveredSLO" have a reporter on the scene? Was the case dismissed?

By: Anonymous on 7/16/08

Has anyone thought of looking into the fact that the financial statements, being what they are, do not disclose all the facts, such as how many loand are "matured', and if the auditors actually checked to see if the trust deeds were actually in first position, were the properties "owned" by the borrower? Were the first trust deeds properly recorded? Were title insurance policies issued, and identifies the Fund as the first trust deed holder?

Did the auditors physically observe the properties by verifying the exeistence of each property; that each property physically matches the description listed on the summary etc. etc. etc.


Is it possible that the auditors are culpable?

By: Anonymous on 7/16/08

To Paso Guy: You want proof. Aren't you a little curious about where the 2007 EFI financial statements are?— (the ones that are supposed to be available to investors within 90 days of the end of the year and filed with the state by the end of June, 2008). Yes, I know the excuses… EFI has been SO busy… yada, yada, yada. This is July 16th. Where are the financial statements for the the year that ended over 6 months ago??? The fact that these reports are not available is PROOF enough for me that EFI is irresponsible and is STILL delaying their day of reckoning for as long as possible.


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By: Anonymous on 7/16/08

Don't fret. There should be major changes at Wednesday's hearing. Wait to hear about the outcome. The results should be in favor of everyone except for Karen and Josh. The changes will be for the best!

By: Anonymous on 7/15/08

Why is Karen having Mel and Laura campaign on her and Josh's behalf? Could there possibly be anything left in her office that will incriminate them? Does she think that by staying in the office she will be able to maintain control, form her sought-after LLC's and borrow under our names? What is wrong with this woman? The question that begs answering is WHY IS SHE STILL HERE? She's like the indestructable cockroaches – nothing can destroy her!

By: Anonymous on 7/15/08

It seems like some advice from the "Godfather" would be useful here. "Keep your friends close, but your enemies even closer…" Or something like that.


By: Anonymous on 7/15/08

here is what I send :


To: freddie.reiss@fticonsulting.com; dgould@davidgouldlaw.com; marjorie.erickson@usdoj.gov

Subject:

Date: Tue, 15 Jul 2008 13:48:25 -0700


My Name is Paso Guy and I'm an investor at EFI in both TDs and the mortgage pool. Please do not take Karen or Josh on as consultants. Neither has been forthcoming or willing to communicate with me or my wife when things went down the toilet. To keep them on the payroll would be a mistake in my opinion.


Sincerely,

By: Anonymous on 7/15/08

I looks like it is time for us to start an e-mail campaign

to our new managers and let them know how we feel about having K&J and the old staff still in the office.

It appears the new manager will be appointed by the court this week but they have been in charge for a couple of weeks now and have

not replaced anyone.

Since Paso Guy went to the EFI office today and was told that no one from the new group has shown up we should be alamed. If you are as unhappy about this as I am start e-mailing

Gould and Freddie and voice your opinion.

By: Anonymous on 7/15/08

The list of recipients (listed below) of the email from E.F. yesterday is only a partial one… I received the same email and attached to it were the email addresses of another 30 or so investors…

I emailed every one on both lists… and received quite a number of replys…

So far… not one investor is interested in allowing either Karen of Josh to remain in any postion at E.F.

By: Anonymous on 7/15/08

Make that complaintants

By: Anonymous on 7/15/08

Paso Guy


I think he has a truck load of compaintants.


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By: Anonymous on 7/15/08

to insider


It is obvoius to me that a case has to be made to the DA by a complaintant before he acts on it. Obviously that hasn't happened

By: Anonymous on 7/15/08

I spoke to Laura at EFI this AM..she said that none of the appointed saviors have been to the building as of yet to do any work and that the hearing tomorrow will dictate what is what. So, I have big doubts that anyone is busy uncopvering anything. I hope I'm wrong. Am I?

By: Anonymous on 7/15/08

The most rare commodity for all of us is patience. I am running out of it for some time and I know most every one is in the same shoes.

My understanding with Karen and Josh being rehired is a mute issue. As David Gould getsmore into the books, part of his responsibility is to report any irregulaties transfers, payments to other affiliates etc. to the US Trustee. Those are the hard evidences we need. Having the DOC and DRE is a great help along with Hanno Powell's report.

They do need the time to gather information and it will take time. In the mean time we all must work with the Trustee to get to the finish line.

By: Anonymous on 7/15/08

to Paso Guy


Apparently you haven't been paying attention. The DA was on Dave C. radio several months ago. His responce to questions regarding Estate was they WERE investigating it and they WERE waiting for the conclusion of the DOC and the DRE prior to completing thier investigation. So since the DRE has not yet completed thier work until the hearing has happened the DA cannot complete thier investigation. Once the DRE has made a final ruling the DA will with the information from the DOC, the DRE and the FBI complete thier investigation. I seriously doubt out local DA will just leave a open file on something this big so I do expect some type of statement from them or them and the FBI soon. Don't you?

By: Anonymous on 7/15/08

Why all these failed real estate related companies? Is the central coast really in such bad shape? I wonder if the DRE is overwhelmed with people complaining right now? By the time they complete their investigation? Maybe some time in the next century? And what can the DOC do, besides suspend… and execute! No, perhaps not.


And what happened in the BK hearing?

By: Anonymous on 7/15/08

Just because one "believes it" dosen't mean it is. If the abuse, fraud and theft is so large and obvious, where is the proof. Where are the arrests and DA action? You're the "insider". You should deliver.

By: Anonymous on 7/15/08

to Rumor Mill


HaHa. Then Karen and Josh can go run his failed company. Musical ponzi the new game in town.

By: Anonymous on 7/15/08

to Paso Guy


Did you read that thing. Mickey Mouse violations. How do you think the money was lost if not by those Mickey Mouse violations. When they transfer moneys to projects with no security that is no Mickey Mouse violation in my view. How do you find the real stuff when they fight every attempt to disclose the books to a forensic Audit? In fact it appears they are trying to now use the bankruptcy courts to thier advantage. The DA said all along that he was waiting for the DOC and DRE to complete thier investigations so that he would have that information prior to completing his investigation. We will see if he is a man of his word soon.


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By: Anonymous on 7/15/08

Any thruth to the Rumor of Rod Jarmin of Real Property Lenders being brought in as a manager?

By: Anonymous on 7/15/08

Gotta side with the Paso Guy here. How do we know that the DRE didn't just slap together its standard complaint? What are the penalties for violation of DRE Regs? Would they be exclusively against the broker? What's the point of proceeding now? Does not equate to money, right ?


What happened at the BK hearing?

By: Anonymous on 7/15/08

edited


"You've got to be kidding. Do you think the DRE just made up their accusations out of thin air? "


I'm looking for the "BIG SMOKING GUN", not a bunch of micky mouse violations like circulars and such…show me the theft and fraud..hard evidence of. I have no use for K or J, but accusations without proof of wrongdoing is a wasted effort. So, if anyone has the goods on these two, bring it to this forum and be specific

By: Anonymous on 7/15/08

"You've got to be kidding. Do you think the DRE just made up their accusations out of thin air? "


I'm looking for the "BIG SMOKING GUN", not a bunch of micky mouse violations like circulars and such…show me the theft and fraud..hard evidence of. I have no use for K or J, but accusations with proof of wrongdoing is a wssted effort. So, if anuone has the goods on these two, bring it to this forum and be specific

By: Anonymous on 7/15/08

What a small little email list Karen sent out for support. That's all that's left who believe in her? What a joke! And she wants to be paid! Are there any crumbs for her to pluck off the cake platter anyway?

By: Anonymous on 7/15/08

Someone told me yesterday Joshua was at the BK hearing. He came last and left first. Hardly anyone knew he was there. He had no need to be there. The analogy given to me was "He's like a serial killer coming to watch the funeral of his victims" What a sicko!

By: Anonymous on 7/15/08

"At this point, however we have no hard evidence of any wrong doing"


You've got to be kidding. Do you think the DRE just made up their accusations out of thin air?


By: Anonymous on 7/15/08

Jean


There are many unanswered questions and will be much more to come. The ranch is the PASOLIVO she owns and operates. Many of the hired hands were paid by EFI checks that means "embazzlement" of investors money. Why is she hanging around? She may beleive her innocennse as she proclaimed so often. At this point, however we have no hard evidence of any wrong doing so we must thread with caution.

As the investigation of the books continue, there will be "or not" wrong doings uncevred. Suspicion on any one's part is not a proven evidence. Stay tuned until next time.


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By: Anonymous on 7/15/08

Pardon me, but I keep coming up with these questions. Some people here seem to have lots of answers. First, doesn't Karen still own the building? In fact, isn't Karen an owner of the whole company? Along with her former spouse, of course. It's an LLC, right? Is anyone arguing that the investors own the LLC? This is all very confusing… right? Perhaps it should be left to the BK attorneys. They can explain it to all of you… later.


I'm a little surprised that Karen isn't in Cabo– especially if she's the guilty party everyone here assumes she is. Instead she wants to hang around and help? From my experience crooks tend to "take it on the lamb," when things go wrong. What's up with that? And what's this ranch thing all about? Does she raise cattle? Olives? Is that operation self-sustaining? Maybe olives will be the next bio-fuel?


Insider, straighten me out please.

By: Anonymous on 7/15/08

Okay boys and girls, some of you still haven’t passed the test so I’ll go over it again.


A bucket is filled with money to be used to build a house. As the house goes up, the money in the bucket goes down.


PROBLEM: The bucket is empty and there is no house.


QUESTION: What happened?


ANSWER: SOME THIEVES RAN OFF WITH THE FRICKIN’ BUCKET MONEY!!! DON’T MAKE ME EXPLAIN THIS AGAIN!!!


(Forward to left over Karen supporters….and law enforcement officials.)


By: Anonymous on 7/15/08

Take a look at teh mortgage fund portfolio on lendersview.com. Every single loan is in default. Now, tell me, would anyong in their right mind hire the people responsible for this?

By: Anonymous on 7/15/08

Everyone better get e-mailing fast to offset Karens campaign. How could she not realize this would not slip out. I'm sure several on her most trusted list have seen the light by now. Wow the huevos. How could she be trusted to slither around the office now?

By: Anonymous on 7/15/08

is this a joke


How long will Karen be able to operate the ranch without EFI paying its expenses including payroll. what about expenses that were paid to Karen other business by EFI? Folks, we have a lot more diggng to do.

BTW BC filing by the cerditors against EFI is in place as of today.

By: Anonymous on 7/15/08

Smooth move, Karen and Josh. How much an hour do you think we'll be paying for these new guys to talk to your handpicked group? Let's see, three attorneys at what, $400 or $500 each an hour? Another good thoughtless self-serving move. Why can't you just leave? We don't want you anywhere near the office. Consult at the olive ranch if you can afford yourselves.

By: Anonymous on 7/15/08

The new begging letter went to a very select group. I guess that after the pounding that Mel McColloch got when he posted on uncoveredslo they decided to try a new route to get some support. Guess some of her former supporters have seen the light. No, Mike Knecht was not on the e-mail list. Neither was Jim Scott. Neither were any of the people who have filed lawsuits against her. Hope the new manager throws out the old regime and changes the locks on the dooors as the firt order of business. The thought that there is a possibility of those two being hired and paid for by us turns my stomach. The DOC and the DRE have given enough reason to have Karen and Josh and all the current employees removed.


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By: Anonymous on 7/15/08

Who got these e-mails. Just the people Karen thought were her supporters? Did Mike Kneckt get one.

By: Anonymous on 7/15/08

To Karen and Josh –

First Mel begging to keep you on and now you. You guys are pathetic. Get a real job. You've done enough damage here. Do you really think that you're going to be allowed to manage the new manager? How do you think he'll respond to your foul mouth when you don't get your way? What do you think he'll do when you throw him out of your office? Do you think the new manager will be working for you? Think again. He's going to be working for us. What a concept, huh? Pack your coffee cups and get out, all of you.


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By: Anonymous on 7/15/08

SLO Hard Money Lender, PCF ( Point Center Financial, Inc.) has several defaults against RW Hertel & Sons and many of their LLC's yet another loan # PCF 405095 is in default for about $40,000,000.00 add the other $21,000,000.00 and others with HOB the amounts are big. There web site has been shut down and numbers disconnected sounds like chapter 7 is coming.

By: Anonymous on 7/14/08

It's still the same. This just makes it easy to check on to see if it's changed to a revocation.

By: Anonymous on 7/14/08

I got noticed this morning the about 7 new law suits have been filed against troubled Builder/Developer RW Hertel & Sons aka Atascadero Ventures, LLC and Robert Fowler in Paso Courts SC-088246 SC-088248 thru 252 according to the Modest Bee and several other Papers Hertel is facing massive complaints for Fraud and Theft

By: Anonymous on 7/13/08

You betcha. Can do, and will probably do. Good news is…your getting serious…

Step One.


Seriously

By: Anonymous on 7/13/08

Looks like no one will be in the possition of committing perjury. Nice. Isn't America a wonderful place. Can you take the 5th at a Bankruptcy hearing?

By: Anonymous on 7/13/08

As to the LLC Chapter 11:


Who ever shows up as the authorized agent/officer of EF LLC at the 341a hearing will answer the questions asked at that hearing. If you think its going to be Karen and Josh…..You may very well be wrong…..probably going to be the new guy …F.R…who will likely answer lot's of questions with something like…"I don't know, but I'm looking in to it". Creditors who want to ask specific individuals questions (other than who shows up at the 341a hearing) will have to utilize the Rule 2004 procedure, and get an order allowing such specific individual examinations….


As to the "Involuntary" proceeding:


No one presently needs to "show up" and answer any questions in the involuntary proceeding,…..because it's not really a bankruptcy until the court says so.


Don't confuse the two proceedings, (involuntary/voluntary) they are completely separate.


It's only confusing if you don't keep things straight.


Seriously


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