EFI financial battle hints at new suspects

March 24, 2009


A third figure emerged as a possible suspect in fraud precipitating the collapse of hard money lender Estate Financial Inc. (EFI) during yesterday’s courtroom squabble over the remains of the once rich and influential entity.

San Luis Obispo County Superior Court Judge Jac Crawford said questions linger about one-time co-owner Charlie Applebaum’s possible participation in alleged EFI crimes. Crawford also pointedly wondered about the legitimacy of claims put to the court by a gaggle of claimants, including Heritage Oaks Bank.

Karen Guth and Josh Yaguda, the mother-son team that ran EFI, were arrested October 16 on 26 felony counts, after investors lost hundreds of millions of dollars in what is developing as this county’s most extensive financial scandal.

Following the arrests, the San Luis Obispo District Attorney’s office froze the pair’s assets, including the Bay Front Hotel, a gas station in Templeton and one in Morro Bay, the Pasolivio olive ranch, and their commercial property on Ninth Street in Paso Robles.

Applebaum, Guth’s ex-husband and former partner in EFI, bankruptcy trustees, Heritage Oaks Banks, and two creditors were jousting for a secure place in the asset line.

An informed Crawford sharply questioned the validity of allegations contained in the claims, as well as certain claimants’ possible culpability in EFI misdeeds. Crawford noted Applebaum’s failure to file his declaration under oath, his alleged financial interests in the assets, and his possible participation in the crimes of EFI. During a period prosecutors say Guth and Yaguda were committing their crimes – October 2002 through May 2008 – Applebaum was a partner with Guth in EFI. Applebaum lives out-of-state and was not present at the hearing.

“Some of this clearly happened during your client’s time with Estate Financial,” Crawford told Applebaum‘s attorney, Gregory Abel. “I need to determine his interest in assets you’re claiming, and if your client is innocent of the crimes.”

Prior to a February 2003 marital split that included Guth changing the locks on EFI’s offices, the couple had been business partners; Applebaum supervised the loans while Guth solicited investors.

Arguing for Heritage Oaks Bank, attorney and bank Vice President William Raver asserted the bank has rights to the assets due to an outstanding loan for more than $5 million.

Following news reports on this Web site that EFI was in financial difficulties, the bank placed liens on Guth and Yaguda’s personal assets to secure a previously unsecured loan.

Crawford noted the bank loaned Guth $5 million during a time when crimes were being committed. He then questioned bank officials’ motivations for securing the loans when they did.

“You need to prove… that the trust deeds were made in good faith and not in an attempt to get in front of investors,” Crawford added. “I would like to see loan documents, client statements, and when you made it a secured loan ahead of investors. EFI appears in collapse, and suddenly you become secured.”

An attorney representing trustees, Dave Juhnke of Sinsheimer, Juhnke, Lebens and McIvor, claimed that all assets should fall under the control of the bankruptcy court.

Nevertheless, a group of investors concerned with trustees’ charges — more than $20,000 per day against the estate – are planning to ask the courts to transfer the bankruptcy from Chapter 11 to Chapter 7 within the next two weeks. The investors also are concerned by trustee statements that the reorganization could take years. If a chapter transfer does occur, it could result in the removal of the current trustees and those agencies that contract with them.

Jeff Stulberg, an attorney representing investor Peter Behman, explained his client’s financial interests in the Bay Front Hotel in Morro Bay. Guth had defaulted on her mortgage payments to Behman, prior owner of the hotel. Crawford agreed that Behman appeared to be entitled to his claim.

Stephanie Barclay, an attorney with Ogden and Fricks, filed a motion that claims of her client, Consolidated Properties, against Guth and Yaguda should stand ahead of the trustees’ or the people’s claims.

Also, Barclay, Raver, Juhnke, and Deputy District Attorney Steve von Dohlen agreed not to oppose sales of the assets.

“From the people’s standpoint, let the sales go through,” von Dohlen said. “Then the court can sit on the cash while these other parties figure out the issues.”

Crawford delayed a decision regarding assets until Guth and Yaguda’s next arraignment hearing April 1.



  1. ccn_debate says:

    Member Opinions:
    By: WineTemp on 4/14/09
    As an investor who lost (though I have to say I made more than I lost overall in the past 5 years with EFI), I want to see the people in charge held accountable. But, that said our focus should be on getting the most back for our dollar first.

    Reading the comments below, I find myself agreeing more TempletonPilots. Several months ago I had a different take but now I realize these did serve me well for many years. I think they got in over their head as the whole country did and started shuffling money around — not to get rich quick themselves but to try and save the whole business and investors from going under. The market kept falling and here we are. All money taken fraudulantly should become their personal liability. However, I don't see jail as serving anyone at this point. Put them out on 10 year probation and bar them from ever selling any real estate ever again. Also take a portion of their future earnings and put them in a monthly check to investors who lost due to fraud.

    I think we would have lost 70-80% of our money just from the market downturn alone (we were invested in the worst type of real estate — construction). Unfortunately some lost more than they should because things were not recorded properly and because of mismanagement by the current trustees.

    I and, I hope and think, the rest of the investors, do not wish ill upon the wife and children of these families and don't want to keep them apart. 'FedUp' speaks for himself — not the investors.

    This was clearly not about saving the business not about maintaining a Madoff style lifestyle — we are all aware of that.

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  2. ccn_debate says:

    By: Black_Copter_Pilot on 4/5/09
    wel, well
    By: outsider on 3/27/09
    There was incredible GREED on all sides and the final result is terrible…Lessons should be learned from this but they wont..Its happened for years and years and there are people advertising right now for hard money investors with some new hype…GREED GREED GREED….
    By: hotdog on 3/27/09
    Hard to believe there are still those out there who think this is all a 'downturn' issue. As with the crooks at Hurst Financial (who have admitted mismanagement and fraud), I think the EFi people are the same. If the appraisals had been valid, if the money had been spent where it should have been, if the business had been run transparently and honestly (such as filing the trust deeds etc)-no one would have lost too much or had any reason to complain. Jim is right on, adult members of these crooked families benefitted from the crimes and must have known.
    It is obvious to all that the money they would have made in honest pursuit of these enterprises would have been more than ample compensation-but they got greedy (and way stupid-how could they think they would get away with it?). Hubris, greed, and pathological lying on their part drove us to ruin and them to jail. Burning in hell is too good for them. My heart goes out to all the 'Jims' out there.
    By: Nameless on 3/26/09

    My understanding is that Josh's wife wants to buy the name "POSOLIVO" not the ranch. I could wrong so correct me if must. The name has value only to her. She should be able to purchase it with clean money or let her borrow it from you at 12% secured.

    However, you still think the EFI situation was just a bad economy. Think twice. The quate below from the Trustees not my words. Market downturn is one think. Theft and embezzlement are a crime. Let Jim cry if it makes him feel better. Not having a license at the time still wouldn't have caused this mess. So you just go and get a life. Be happy that you were so wise not to invest with EFI.

    "It appears that the Estate Financial situation will qualify as a Specified Fraudulent Arrangement. If all the requirements are met there may be the potential for direct investors, as well as EFMF to take deductions for theft losses in 2008. The first issue that must be resolved is whether or not 2008 is the Discovery Year. Discovery year is defined to be the taxable year of the investor in which the indictment, information, or complaint in which-
    (1) the lead figure (or one of the lead figures, of more than one) was charged by indictment or information (not withdrawn or dismissed) under state or federal law with the commission of fraud, embezzlement or a similar crime that, if proven, would meet the definition of theft for purposes of Section 165 of the Internal Revenue Code under the law of the jurisdiction in which the theft occurred; or
    (2) the lead figure was the subject of a state or federal criminal complaint (not withdrawn or dismissed) alleging the commission of a crime described in (1) above, and either –
    (a) The complaint alleged an admission by the lead figure, or the execution of an affidavit by that person admitting the crime; or
    (b) A receiver or trustee was appointed with respect to the arrangement or assets of the arrangement were frozen.
    is filed."

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  3. ccn_debate says:

    By: beachlady on 3/26/09
    Fedup…you have a nice day, okay? Go to the beach, let the sun shine on your face and take a deep breath.

    My conservative investments are down over 50%. I don't blame my broker's wife and children. You shouldn't either. Even still, I didn't give him all of my money.

    I haven't heard that Fraud was proven yet, has it?
    By: outsider on 3/25/09
    its amazing what greed will do to people..
    By: Fedup on 3/25/09
    It is hard to believe that there are still some idiots out there that don't know fraud from a risky investment. What do you think about all the wives and children whose lives were ruined by this pair of crooks. I personally hope that yaguda's wife and children burn in hell, and I have never had any financial dealings with EFI.
    By: TempletonPilots on 3/25/09
    Jim whines at every new news article and to the DA about what a victim he is. What a disservice to all the real victims out there in this world. "I was solicited by so & so when their license was not in compliance", "the real estate market plunged and I lost money on my real estate investments"

    Good grief. If your whining was limited to some online postings it might be tolerable. But you have put a living breathing human being in a cage and deprived children of their one and only father. For What?

    Why on earth are we the taxpayers supposed to be bailing you out of your high risk investments. I received investment information from EFI a few years ago. In big bold letters right on the front page it said that the Entire Investment was At Risk. It also said not to invest more than 10% of your net worth.

    What more do you need? If you want to gamble with your entire savings that's fine. You win, you keep it. You lose, you lose it.

    Most of us have lost in real estate over the past few years but we don't go calling for putting loving family and community members in a cage at the public's expense.

    Get a grip. Get a heart. Get over your money. We've all lost money. If you bet everything and lost then you lost — it's not our job to bail you out.

    People in this community and the majority of investors are beginning to recognize that you and your small band of get-rich-quick hopefuls are doing real people real damage. The EFI investors and the SLO community are being hurt by you. Try doing something positive and building up savings by working and saving and stop tearing the rest of us down.

    No, I don't know Joshua or his mother but I do know injustice when I see it.

    Not having a license in compliance or failing to fill out forms correctly etc are all things that people need to be held accountable for but what you are calling for is nothing other than self-serving vengeance at everyone else's expense.

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  4. ccn_debate says:

    By: SMOKEY on 3/25/09
    If Joeli Yaguda would like to buy the Pasolivo Olive Business, where would the money come from? Would she also like to buy the 100 acre Olive Ranch too? How about posting bail for Josh?
    By: Riley on 3/25/09
    Oh sure grasshopper-ratpatrol – you can be trusted – 'the family knew'. Like tics on a dog I keep waiting for the gossipy ones to fill up and fall off, but no, you return to vent some more. Politics, gossip and the anger at the economic mess have played a huge role here and it's difficult to be objective. It's just too easy to pass judgment and demonize people…on both sides of this issue. Stop the gossip and do some good…
    By: RatPatrol1967 on 3/25/09
    Who wrote the rule about 'not going after wives and children'…the Mob. Oh, yeah, I am definitely following their lead. So, no wives or children..but ex-husbands are fair game? Trust me when I say…the family knew. They know where the money comes from. People usually brag, as they did in this case.
    By: Sally on 3/25/09
    There are at least some groups that are winners in this whole mess. The Lawyers and Trustees as usual come out on top. I bet there will be nothing left after all the fees are paid.
    By: beachlady on 3/25/09
    I just think if they had anything on the wife she wouldn't have been able to purchase anything. I don't like people throwing names out there to incite stuff. If you have something concrete alert the DA.
    By: Nameless on 3/24/09

    Agree, Leave the kids out of this mess. However, prior to the wife's purchse of Guth's interest the funds should be veryfied as clean.
    By: beachlady on 3/24/09
    Listen dude…even the mob doesn't go after wives and children. It sounds like you are just grasping at straws..eg.."May have had personal knowledge about this fraud." That is an awful lot to hang out there. Please man up and stick to the facts. I agree that this judge seems to know what he is doing, let him do his job.
    By: Jim on 3/24/09
    I'm glad the judge is considering all of the damage done to investors before reaching a decision… and not allowing Joeli Yaguda to take personal assets out of the mix (who by the way, may have had personal knowledge about this fraud)…
    Also… I am surprised… that Darla Hansen (Funding Coordinator at E.F.) has not been named as a co-conspirator… inasmuch as she solicited/accepted $$$ from me when their license was no longer in compliance… Perhaps the District Attorney isn't finished arresting suspects…!

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