Judge ices EFI fund property sale proceeds
August 6, 2008
By KAREN VELIE and DANIEL BLACKBURN
A federal judge presiding over Estate Financial Inc. (EFI) bankruptcy hearings declined Tuesday to authorize disbursement of funds from a pending sale of investment property from the troubled lender’s portfolio.
U.S. District Court Judge Robin Riblet instead ordered proceeds from the sale placed in a segregated account to allow trustees time to weed through a mountain of documents.
The Paso Robles lender’s corporation and investment fund have been placed in voluntary and involuntary bankruptcies.
A group of investors had asked Riblet to disburse the proceeds of the Base View Court Estates project in San Marcos, currently in escrow. Thomas Jeremiassen, the trustee of Estate Financial Inc. (EFI), however, asked the judge to delay distributing the funds.
Riblet, on vacation in Canada and speaking to attorneys by telephone, agreed with Jeremiassen, who was appointed to manage the trust only nine days earlier. At the same time, Riblet appointed Bradley Sharp to watch over the Estate Financial Mortgage Fund.
“It is like an orderly liquidation,” said Steve Gardility of Encinitas, a builder who did significant business with Guth. “It is a better chance to get money back than a Chapter 7. She (Judge Riblet) had the records and knew the subject; she is sharp.”
Utilizing a number of hard money strategies, EFI principals Karen Guth and Joshua Yaguda enticed investors with the promise of high interest on their investments, which funded short term construction loans. Last fall, the company stopped making interest payments, and Guth and Yaguda blamed a downturn in the real estate market for catapulting EFI into a temporary financial funk.
More than 3,000 investors placed more than $300 million into EFI construction projects. Guth and Yaguda received a one- to two-percent monthly fee for fund management, along with mortgage servicing fees on the fractionalized loans. Sources claim the pair was using funds slated to build projects to fund other businesses they own.
While at the helm of EFI, Guth and Yaguda accumulated a wealth of holdings, including gas stations in Templeton and Morro Bay; a winery and Pasolivio Olive Ranch in Paso Robles; and numerous condominiums, homes, and commercial properties scattered throughout the county. They also own a stable of expensive automobiles.
Even during the bankruptcy proceedings, a bevy of regulatory agencies and criminal investigators continue to probe allegations that Guth and Yaguda misled investors and comingled funds in a Ponzi-style scheme.
Within the next few days, U.S. Trustee Marjorie Erickson is expected to announce approval of a creditor committee comprised of creditors and investors to serve as an advisory body to the trustees and the court.
“The committee will meet with the trustees, look at properties and their stages, and suggest which properties should be finished, and which to sell out,” Gardility said.
Gardility, along with Dennis Klassen, Arroyo Grande; Jordana Cooper, Calabasas; Jim Scott, Rancho Palos Verdes; and Andrew Berwick, Santa Barbara, have applied to the court for membership on the committee.