Paso Robles lenders arrested for fraud and embezzlement
April 8, 2011
Real Property Lenders (RPL) of Paso Robles principals Rod Jarmin and Tammy Jordan were arrested this week for seven counts of fraud and embezzlement in connection with a scheme in which they allegedly swindled more than 700 investors out of about $30 million.
Jarmin, 72, plead not guilty Thursday in a San Luis Obispo courtroom to seven felony counts of the sale of securities by means of false statements and omissions. His bail was set at $5 million.
On Tuesday, a San Luis Obispo District Attorney investigator ordered Jarmin, who was at his country club Palm Desert home, to turn himself in by midnight or face arrest. He drove to San Luis Obispo County Jail and turned himself in late that night.
His partner, Jordan, 49, is currently incarcerated in a Montana jail awaiting a slated extradition to San Luis Obispo County Jail later this week on the same charges.
The former Paso Robles lenders stand accused of fraudulently selling securities to hundreds of investors, primarily seniors. Under their company, RPL, the duo would entice locals to invest in projects that they knew were failing, under false assurances that investor monies were secure, according to the investigation.
The misrepresentation or the omission of facts when offering or selling securities is a felony punishable by up to five years in prison and up to a $10 million fine, per violation.
Enticed by the promise of 12-percent interest on property-secured investments, approximately 700 investors entrusted their nest eggs with RPL in the form of hard money loans.
Jarmin said “people were lined up outside his door to invest their money with RPL,” according to a District Attorney’s office September 2010 interview.
Jarmin said his company’s portfolio contained more than $55 million, much of which is still owed to investors, according to a 2010 deposition.
In 2007, the California Department of Corporations (DOC) began an investigation into RPL. The state revoked RPL’s license to sell securities in June 2008.
The San Luis Obispo County District Attorney’s office began its inquiry into RPL in December 2008 following the DOC investigation and pressure by numerous local citizens who filed complaints with the county alleging lending fraud.
The company had allegedly distributed inaccurate circulars that disclosed an outdated track record which only noted a history of four loan foreclosures, when in fact it had already foreclosed on 50 projects. The “offering circular” also claimed not a single investor had ever lost money invested in RPL.
Meanwhile, investigators say Jarmin and Jordan fraudulently used the erroneous circulars to lure 80 new investors to make 105 new deals in the amount of $9,223,000 from Feb. 22, 2007 through Dec. 31, 2007.
One of the more egregious investigation findings says that while the lending duo claimed a sound history, they managed to lure some investors into leveraging their retirement funds into projects that unbeknownst to them were days away from foreclosure, according to court documents.
For example, Jarmin and Jordan provided James Pope a property profile flyer that described the builder, Todd Evenson, as an “excellent borrower with excellent credit.” Pope said Jarmin personally told him the project he later invested in “was moving along without any problems and should be completed in a short amount of time,” court documents say.
On August 10, Pope invested $45,000 into the project. He received one partial interest payment before Jarmin and Jordan told him Evenson was in eminent danger of defaulting on the loan.
Pope soon discovered RPL had sent letters on Aug. 1, 2007 to the other borrowers on the loan explaining Evenson’s financial difficulties, nine days before Pope had invested his money into the project.
The lead investigator says he believes the RPL owners intentionally misled Pope into investing so they could use his money to pay other investors’ monthly interest payments in a “Ponzi-like” scheme.
When asked by the county’s lead investigator about Pope’s claim, Jarmin said, “I’m not going to dispute any of that.”
In her October 2010 interview with the lead District Attorney investigator, Jordan said, “that was an oversight.”
Investigators also accuse RPL principals of not properly qualifying borrowers and of misleading developers into believing the project loans were fully funded.
For example, RPL approved $1.3 million in loans for developer Jeff Martin. Even so, Martin said he did not have sufficient collateral to make the payments and that RPI failed to verify any of the information he listed on his loan application.
In her defense, Jordan described these loans to investigators as yet another “oversight.”
Martin told investigators that Jarmin and Jordan pressured him into starting his three projects which were nowhere near completion when he was informed by RPL that no funds were available to finish construction. Martin said he was deceived into believing the loan was fully backed and would not have accepted the $1.3 in loans otherwise.
Another RPL borrower, Tony Gaspar, financed a go-cart track at his Templeton home by having the asphalt contractor change the work address so it would be covered by a group of RPL project investors, according to work orders and Clint Osborne, the contractor who did the work.
These types of misuses of funds were possible because RPL failed to provide adequate oversight.
Jordan and Jarmin assured investors they would dole out money to contractors in progress payments as the properties were developed. However, they did not inspect projects as promised.
When borrowers failed to make payments, instead of foreclosing as required by their loan servicing agreements, RPL instead would cover the costs by bringing in new investors selling out more than 100 percent interest in properties.
Jarmin’s attorney, Ilan Funke-Bilu, argues that Jarmin’s $5 million bail, which is one of the largest in county history, should be reduced.
“Bail is not about guilt or innocence,” Funke-Bilu said noting that bail is supposed to be set according to issues of public safety and the probability that the defendant will flee.
District attorney officials seized Jarmin’s passport, bank accounts and assets with the exception of a truck and a fifth wheel.
“He is not a threat to anyone,” Funke-Bilu said. “What’s the likelihood of a 72-year-old man fleeing this country without a passport?”
Funke-Bilu is also questioning why a District Attorney investigator searched Jarmin’s wife’s purse and seized $5,000.
“They left her with $4,” Funke-Bilu added. “She is not charged with anything.”
Jarmin’s bail hearing is set for April 14 at 8:30 a.m. and a preliminary hearing is scheduled for April 19 at 10 a.m. Jordan will face charges following extradition.
As for the investors, even though a search is still underway for all assets and accounts owned by the defendants, it is uncertain whether investors will ever recoup their losses.
“It is my belief that aggravated white collar crime, as defined in Penal Code section 186.11, has taken place and the amount of restitution and fines will exceed $10 million which exceeds or equals the net worth of the defendants’ assets,” said District Attorney investigator AJ Santana.