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Law reported closing in on EFI principals

July 20, 2008

By KAREN VELIE and DANIEL BLACKBURN

Local and federal law enforcement agencies are investigating Estate Financial Inc. (EFI) and a criminal case is said to be “moving forward” even as a battalion of interested parties scrap over control of the failing hard money lender in federal bankruptcy court.

Federal Secret Service agents, who had commenced a parallel probe into the Paso Robles’ company’s practices, apparently have decided to halt their examination of alleged fraudulent management of EFI. The Secret Services’ interest in the case stemmed from the agency’s charge to protect U.S. financial institutions.

“This case is being worked diligently by the Paso Robles Police Department, the FBI office in Santa Maria, and the San Luis Obispo District Attorney’s Office,” Secret Service agent Mike Parker wrote in an e-mail July 17 to an investor and builder he previously had interviewed. “It is my understanding the case is moving forward and any involvement on my part would only slow the progress.”

And in federal bankruptcy court, Judge Robin Riblet ruled EFI’s leaders’ proposed trustees were tainted and ordered new trustees brought in to manage EFI. In the interim, Freddie Reiss will oversee EFI and David Gould will oversee the mortgage fund.

Early last month, creditors forced EFI into involuntary Chapter 11 bankruptcy proceedings. About a week later, EFI owners Karen Guth and Joshua Yaguda voluntarily placed EFI mortgage fund into Chapter 11.

On July 16, U.S. Trustee Marjorie Erickson filed a motion to object to Reiss and Gould, Guth’s choice of trustees.

More than 3,000 investors have placed more than $300 million into EFI construction projects, creating a financial gold mine for future trustees. With much at stake, emotions ran high at the July 18 hearing. Gould and Reiss presented their experience and qualifications, but Judge Riblet determined prior contact with Guth had “poisoned” the pair.

Even before Guth announced in June to hundreds of investors at the Madonna Inn that she was “in for the long haul,” she had huddled with liquidating specialists Gould and Reiss at the suggestion of Lewis Landau, her attorney.

Judge Riblet noted Department of Real Estate allegations of fraud and mismanagement as a compelling reason to prohibit those “tainted” by Guth from having authority over EFI.

Judge Riblet also refused to permit a stay to allow San Luis Obispo County Superior Court Judge Barry T. LaBarbera appointed attorney Hanno Powell to finish his evaluation of EFI’s mortgage fund.

Investigations have provided information that Guth wrote checks for insurance payments, merchandise, and employees’ salaries for her Pasolivo Olive company from EFI accounts.


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By: Anonymous on 8/27/08

Roxanne says:


I checked and it's true. Uncoveredslo.com's blog is highly searchable. Due to this, I'd like to post the below.


If you are searching for information about Karen Guth, Joshua Yaguda, and Paso Olivo, you should read the statements below.


Karen Guth and Joshua Yaguda have allegations against them supported by the Department of Real Estate and Dept of Corporations for defrauding investors in their other company Estate Financial, a hard money lender.


The ongoing allegations which are being investigated by the FBI, DOC, DRE, DA include fraud, dishonest dealing, co-mingling funds, failure to secure loans, negligence, and more. Thoughts are Guth and Yaguda swindled over 2500 investors, many elderly, from their savings by misrepresenting their company. Guth and Yaguda misappropriate many funds in the 300 million plus investor-built portfolio and then walked away claiming bankruptcy. Yes, they flew away in their 'golden parachutes' with much money unaccounted for. Paso Olivo employees were paid by with Estate Financial checks. Karen and Joshua have willfully disregarded or violated state real estate law and investors have suffered immense losses due to their activity. Trustees are currently sorting out the mess. However, Karen and Joshua are free to roam. That is, until they are tried criminally in court. Most concur they will serve significant prison time, not for a mistake but for purposely breaking the law for their own personal financial gain. What a wonderful way to make money to do what Karen and Joshua love best – olives. Please learn more before you support their olive ranch! Please read the below link:


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By: Anonymous on 8/6/08

Tiffini Hughes investment was originally B106-06 (first trust deed position), now is B155-06 (second trust deed positlion.)

By: Anonymous on 8/6/08

Tiffini Hughes, I'm afraid, is in cahoots with Karen. I called and left a message for Ms Tiffini Hughes who never returned my call. Subsequently, however, I was able to contact a sales person involved with Tiffini Hughes condo sales, when I told him I was interested in purchasing a condo in Bakersfield and that the website for Tiffini Hughes looked like what I was looking for, I was told that it is incomplete, there are no salespeople on site, that it is in a "bad neighborhood with gang activity", that properties surounding Tiffini Hughes are selling for considerably less and couldn't he interest me in another piece of property? So, after Karen convinced us all that we had to subordinate our first trust deeds to a second position in order to obtain funding to complete the project, we now most likely will see no return of our investment. By the way, interestingly enough, Ms. Tiffini is selling property in Costa Rica – a country which does not have an extradition treaty with the U.S. Wonder who her investment partners are?????

By: Anonymous on 8/6/08

Does anyone have information on the Tiffini R. Hughes Investment loan B156-06 in Bakersfield, corner of Fairfax Rd & Eucalyptus Dr? I have called her and she doesn't return my calls.

Thanks

By: Anonymous on 8/4/08

insider says:


The heats on in Atascadero what a break for Karen and Josh. Maybe they can slip away while no ones watching.


One has nothing to do with the other. If and when the FBI has gathered enough evidence, the'll make their move. Until that, its all speculation.

By: Anonymous on 8/4/08

The heats on in Atascadero what a break for Karen and Josh. Maybe they can slip away while no ones watching


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By: Anonymous on 8/3/08

Office condition

I assume all documents records will be transferred to the trustee's office. It is more cost effective than having bean-counters lodged in Paso Robles with the extra expnes vs. work in thei own offices in LA.

Lets see all the developements

By: Anonymous on 8/3/08

Does anyone know the condition of the files/information/computers left behind at EFI? Did Karen and Josh sabatoge any of this? If so, most likely to prevent the trustees from finding facts faster.

By: Anonymous on 8/2/08

insider says:


I beleive all investigation is on hold for now. We really want action from Federal agencies vs. State agencies. The Feds can unwind Interstate Transaction and International wires etc.

A little patience is in order for now.

For now, let the process work its our best chance.

By: Anonymous on 8/2/08

I wonder why the DRE is taking so much time to conclude thier investigation. You would think the information from the DOC was adequate. Maybe Josh and Karen are stringing it out to the leagal limits to soften the blow of the continuous negitive press.

By: Anonymous on 8/2/08


Further Information;


Under the Bankruptcy Reform Act of 1978, which says so-called preferred creditors are required to return any payment made by the debtor 90 days before filing bankruptcy. For company insiders like family members and directors, the look-back period is a full year.


By: Anonymous on 8/2/08

One provision.

Its up to the Trustee. If Fraud or Embezzlement is shown on their books, you can bet this will be persued with full force.


According to the previuos Trustee (Gould) Karen made payments on her own personal investments and the Olive grove. That is clearly Embezzlement in the Criminal codes.


A company that voluntarily files for bankruptcy is allowed two years from the time it files its petition to launch a preference claim, explains Bill Creim, a bankruptcy attorney with Creim, Macias & Koenig. For much of that time, the trustee of the bankrupt company is usually working hard with creditors to negotiate the most favorable terms possible and isn't inclined to sue creditors for preference payments.


By: Anonymous on 8/2/08

Invested? says:


To all,


I am with you on that. I was pointing out their incredible audacity when it comes to investors money. Also, if she took any money out as part of her own investment in the FUND, it will be looked at very closely, likely must be returned. Including Darla and and others who received payments within a certain time. The Trustee can go back for a year and some cases longer. I can see Charlie Karen's "X" to be on the list. He might be on the list as a co-conspirator if Fraud is proven.

We must be vigilant all the time.


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By: Anonymous on 8/2/08

To all,


The way I understand it, Karen will never see a penny of that money. If she and Josh honestly believe they are getting one cent then they are even nuttier than we thought! The trustees will find fraud and because of this Karen and Josh will NOT get compensated. It's that easy. Who cares what the circular says. She has no rights once fraud is announced. Consider that 3 million now belonging to the investors!

By: Anonymous on 8/2/08

Anonymous says:


Has anyone spoken to the new trustees? Are they on board yet? Has an oversight committee been appointed yet? Any clue as to what is going on?


The Trustees are in place since Monady of this week. Already in process of work.

Creditors comittee is expected to be approved first part of next week. I have no information about the investors comittee. We want everything done yesterday, but we are dealing with a Government institution and they have their own schedule. Despite all of that the US Trustee is working hard on the case despite the 8 am to 5 pm working hours.

By: Anonymous on 8/2/08

To BC Claim by Karen:


Her claim is listed on the BC filing. Its for unpaid mngt.fees she supposedly didn't get from the FUND last year. I assume she based it on the $150,000,000

FUND value after reducig it from $175,000,000.00.

According to the offering circular (prior to making any distribution to investors, all cost expenses shall be paid including management fees). That claim could be based on 2% fee for all defaulted loans she and Josh managed so competently.

Later on I will clarify the nature of her claim and the status if it would be secured or unsecured claim.

Secured claims have priority over unsecured claims, so it is an important item in Bankruptcy.

By: Anonymous on 8/2/08

Has anyone spoken to the new trustees? Are they on board yet? Has an oversight committee been appointed yet? Any clue as to what is going on?

By: Anonymous on 8/2/08

To BC Claim by Karen:

Are you saying that Karen claims that the Fund owes her $3,000,000? Where can we find that document? What does she base her claim on? Uncollected fees on defaulted loans (her own?) This is ridiculoous, but she has probably covered her sorry ass somewhere in her operating agreement.


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By: Anonymous on 8/2/08

BC CLAIM BY KAREN


Karen has a $3,000,000 crditor claim in the EFMF BC. Incomprehansible after causing all this mess, she has the audacity to keep her hands for more money at the expense of investors.

Any one with information of her other assets through different names should post it. The Trustees will have someplace to look for assets taken to her benefit.

While we were loosing everything she was accuimilating properties and assets and paying expenses on them from EFI.

I may be assuming too many things here, but the fact that she was able to divert all these funds at the same time borrowers couldn't get their funds paid on time and inestors were denied return of their money, should make us wonder.

Actually, stop wondering get to work!!


She had so many loans in default with loan numbers dating back to 2002. The questin still remains, if all those borrower defaulted at the same time after so many years, who was navigating the ship? If there were only a few loans in deafult, it could be blamed on the borrowers, but alll loans at the same time?

Projects could have been completed ansold long time ago if they werefunded on time. Losses would be minimal and contained.

Same time her own personal investment portfolio kept growing.

By: Anonymous on 8/2/08

Correct that last entry – Mel had $319,000, Karen $797,000 and Josh and wife $189,000.

By: Anonymous on 8/2/08

Darla only had peanuts invested – 0.4294 – in the fund. Mel McColloch had $806,000 in the Fund. Karen had $291,000 and Josh $132,,000. Bet there was no problem when these guys asked for their money back.

By: Anonymous on 8/2/08

insider says:


If Darla had $750,000 in can you imagine the tension when she told Karen she wanted to remove it or else.


It will interesting who got paid off and when. Also what relationship they had with Karen and what information came to them to be able to force Karen's hand to their advantage. The Trustees will bedigging through documents having a field day.


If you search on Google, the treatment of preferential payments when Fraud is involved, can be devestating to the 'EARLY LUCKY ONES". Specially with the ones who had inside knoledge the operation. The way I see it, Charlie will be brought into the investigation and will have to cough up a nice chunk to the investors.

Lately Karen and Charlie been selling assets they own togaher while fighting over the proceeds in court.

Good job, both of them!! Leave a good trail of public information.

By: Anonymous on 8/1/08

If Darla had $750,000 in can you imagine the tension when she told Karen she wanted to remove it or else.

By: Anonymous on 8/1/08

Wonder when did Darla get paid off on her investment? Did she know about the ongoing problem? Or was it just by good Fortune that she was able to get her money out before anyone else.

I am only thinking aloud, since she must have had inside information on the entire operation.

By: Anonymous on 8/1/08

Im sorry, I meant DARLA (not Karen), told me she was invested in the Mortgage Fund in Aug. 2003.


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By: Anonymous on 8/1/08

I think someone told me Karen had 750,000 in it but she most likely paid herself off.

By: Anonymous on 8/1/08

Karen did tell me that she was invested in the Mortgage Fund when I was in her office August 2005 deciding which fund to invest in.

By: Anonymous on 8/1/08

I do not believe Darla had any money invested in EF. She was also fired by the everlovin Karen. Watch the Devil Wears Prada. Karen is worse then the Ice Queen Boss on that movie.

By: Anonymous on 8/1/08

Darla is responsible for calling and urging investors to send in their money even after she knew the firm was sliding downhill. She was still doing it in September of 2007, the same time as interest payments stopped. Shame on you, Darla. Don't claim you are an innocent party who didn't know what was going on.

By: Anonymous on 8/1/08

It will be interesting to see if Darla changes her Karen lovin' tune when she realizes that she won't be seeing her money back. Or perhaps, if she did get her money back, that's why she loves Karen. Either way, Darla will have to regurgitate her profits in the long haul back to the investors. Way to go Darla. You made nothing, no friends and your money will have to be returned. Smart.

By: Anonymous on 8/1/08

May I ask what happened to Darla? Did she get her own money out of the Mortgage Fund?

By: Anonymous on 7/31/08

I read speculation on this site about potential claim against Karen and Josh individually and drag their insurance company into the fray.


Admittedly, I am not a legal expert, so I will comment about it as I understand.


When EFI was first served with summon(s), they were to turn the claim over to their insurance company if there was any policy in force at the time. Apparently there was no Insurance or it was cancelled or not renewed. I would have to re-read the circular offering of EFMF if it was obligated to carry liability and or E. & O. policy. Someone can find out please. Same applies to EFI since it is a separate entity.


Insurance would be obligated to defend, but likely they were not liably when and if FRAUD is proven. Fraud is a difficult item to prove anyway so likely there would only be civil judgment if successful.


Besides, what do we want? Do we want them go to jail or get our money. I know my preference. A little revenge would be in order, but always remember what the scripture says;

“REVENGE IS MINE, GOD SAID” He can do a better job without us doing any extra effort toward that goal. Most people will get what they deserve, so let it be.


After the Trustee had the chance to examine the books, when and if they’ll discover fraud, it must be forwarded to the US Trustee who in turn will report to the Judge. It will be up to the Judge to press charges. What I understand of Judge Riblett, she is a no non-sense person, who takes the law seriously. She is independent being a Federal Judge, appointed for life so no worries about public opinion.


Additionally, the Secret Service, FBI, DA and other agencies are looking into EFI, Karen and Josh’s activities. They will pick up speed once the Trustee had a chance to work for some time. They will put a case together and press criminal charges if it’s warranted. We all must keep in mind that until there is enough evidence we can only speculate. Again, loosing money is not a crime!!

Steeling investor’s money, embezzlement Ponzy Scheme willful misrepresentation is a crime.

Let the proper authorities handle that part, while we must focus on the price; our money if there’s any left.


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By: Anonymous on 7/31/08

Iif EFI had E & O insurance, it was cancelled long time ago for non-paymentof premium. Besides, if there was any, Karen wuld have turn over any complaint filed against EFI. Obviously that is not the case.

By: Anonymous on 7/31/08

Yeah, I was thinking more about officers and directors insurance. But I don't know who could make a claim under that kind of policy — maybe only shareholders? Perhaps anyone who alleged any negligence in the corporation's dealings?

By: Anonymous on 7/31/08

One thing I know about E&O insurance is that if and when the policyholder smells trouble, they must notify the insurer and let them handle any/all complaints. Not doing so violets the contract. This is way too far down the road for any E&O to come into play…I doubt they had any to begin with

By: Anonymous on 7/31/08

People may swing we have no say at this point one way or the other. As to taking all and any civil actions against the princibles thats allways been on the table. Are you ready to put up the money to hire the investigators and attorneys? Maybe Karen will tell you where to file the claim.

By: Anonymous on 7/31/08

Assuming all you say is true… Should all avenues of recovery be pursued, or not? Are you the same insider? If you had your choice of recovering your investment or seeing people swing, which would it be? How do you think the average investor feels? For one, I think it's better to pursue every possible route to recovery. And the DA? They do what they do.

By: Anonymous on 7/31/08

The DA is not going to proceed or not proceed based on your best civil recovery. The DA will proceed on his judgement of whether a criminal act or acts have been committed and whether he feels he can get a verdict. As to the insurance company they are not at all concerned about a suit and in fact would likely fight any attempted recovery without a suit. They have many attorneys on the payroll just waiting for something to do. Its most unlikely the investors would ever sue the insurance company since they have never sued Estate, Karen, or Josh with one exception and when those individuals did sue no one stepped in to help them, showing an obvious lack of commitment in that regard . So whatever game you are playing to get the heat off of the principle players will most likely produce little in getting a greater return if thats your goal or reducing the heat on certain individuals which it seems is more likely your goal. The local DA is not a tool to use at your will. Nice try though. Keep up the good work.

By: Anonymous on 7/31/08

Well, I think that under Ca law an insurer has a duty to defend a negligence claim. It doesn't matter if a plaintiff has all sorts of claims, such as fraud, it's the negligence that triggers coverage. So, if you want to pursue a claim and get insurance money then you allege negligence. If you just want revenge, then you don't bother with the negligence. Of course an insurance company would try to avoid paying claims, but at the risk of being in bad faith. I've seen cases where there was no way that insurance coverage would apply, but the insurer paid anyway to avoid being sued. Amazing, really. I'm just saying…


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By: Anonymous on 7/31/08

Grover Beach Lawyer named Kurt Berger has filed a fishing lawsuit under the name of Alan Little's partner Ed palmer they are trying to scare and threaten those who post information on the local problems

By: Anonymous on 7/31/08

If they had any insurance do you think they kept the payments up. If they had any insurance do you think it covers fraud. If they had any insurance don't you think the many private investigators and high dollar attorneys the insurance companies have would descibe these activities as fraudulent and or criminal and go a long way to prove it rather to pay you back? THINK!

By: Anonymous on 7/31/08

No.


I'm just trying to think of ways to recover. If the money is gone, how can you get other money? Insurance seems to be one source. Do you have another idea?


From what I understand the bankruptcy court can reverse any transactions. Even if it does, aren't insurance dollars going to make the difference between 20 per-cent, and say 70 per-cent recovery. Just a thought.

By: Anonymous on 7/31/08

To Assuming Your Right


Josh? Is that you?

By: Anonymous on 7/31/08

It seems like a fairly elaborate plan. How do they inflate the value of properties ? Do they depend on cohorts in the business to make false appraisals? Or do they simply say X is worth millions, without any substantiation? Did any of these folks consider the possibility that we'd have a credit crunch and economic downturn, or were they just planning on skipping town even if the markets continued to rise? To what degree are people involved really criminals, with all these elaborate schemes, or were they simply incompetent boobs? Looking at Charlies' divorce filings, it looks like Karen just exploded the business after he left. She just raced ahead without regard to the increasing risks, and outran her knowledge of how to handle such a big business. This could be good. If the managers were just incompetent, then their negligence might lead to insurance dollars. How much insurance did the managers have? They must have had millions! Maybe instead of fraud, people should be thinking of labeling all that's happened as pure negligence ! That's only if you want to recover more than 20 per-cent of your investment. Again, not trying to start a fight. Just my point of view.

By: Anonymous on 7/31/08

Were any of these companies, groups, individuals you mention below doing business with Karen? If not, this sounds like what Karen may have been doing with her LLCs. If so, I assume by her rediculous failures that she's in on it.

By: Anonymous on 7/31/08

The money trail is being fully investigated by those who have the proper Authority and Powers. It goes like this, obtain a fraudulent loan, inflate the property values, move monies into many different LLC's Holding Companies, LP's etc Off Shore accounts in trusted names of friends in the scam, sell off all your assets to make it appear your in trouble and trying to fix the problem. Then default on the Hard Money Loan's since they are NOT insured nor are likely to get the Feds involved with banking. Then belly up the various companies who took out the bad loans and you walk away with Millions. Last week Cuesta Title did a bulk sale transfer of Verdot Group, LP & Hertel Group, LLC who owned 5 Mile Bridge Wines they gave it on paper to their friend and wine maker Vance Rose to avoid creditors and those filing liens against Hertel and Fowler. You will notice the early post by those gals were 100% right on, I suspect more fraud in the very near future.


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