Heritage Oaks Bank loans ‘fed the monster’

September 23, 2011

By KAREN VELIE

An appellate court denied Heritage Oaks Bank’s latest attempt to obtain assets of Estate Financial Principal Karen Guth, noting that the bank’s actions had harmed investors.

Earlier this month, the Second District Court of Appeals upheld a San Luis Obispo County Superior Court ruling rejecting Heritage Oak Bank’s claim to Guth’s assets because the bank “tried to put itself above everybody else in the priority line with this conversion of an unsecured loan to a secured loan at the time when the Estate Financial Inc. house was caving in.”

The court said the bank’s actions “fed the monster” and “but for Heritage Oaks Bank’s willingness to continue its business with defendant Guth and Estate Financial Inc. the defendant’s crimes most certainty would have been detected far earlier.”

In 2008, Guth and her son Joshua Yaguda were arrested on multiple counts of securities fraud involving thousands of investors and more than $300 million in losses.

Guth and Yaguda fraudulently sold securities without the proper licenses, lied to investors, and operated a Ponzi scheme as they took more than $300 million from people, companies and non-profits such as Meals on Wheels.

The fraud was uncovered, the two were arrested and eventually pled guilty. Part of the process in San Luis Obispo Superior Court Judge Jac Crawford’s court was to look for and recover money and other assets that could be used to reimburse the victims.

Properties to be sold to reimburse the victims included a Morro Bay gas station, a Templeton gas station, an office building in Paso Robles and the Pasolivo Vineyard Drive in Paso Robles, property that includes a business, olive orchards and residences.

On November 17, 2008, Heritage Oaks Bank filed a third party claim to the properties claiming they had trust deeds on the assets.

In 2006, Heritage Oaks Bank lent Guth a $5 million unsecured loan. Following reports of possible fraud by EFI on CalCoastNews, the bank placed liens on numerous properties, collateralizing their loans to Guth.

By February 2007, Estate Financial had stopped making payments on the loan and Heritage Oaks Bank extended the loan maturity date three times.

In April 2008, less than 90 days before the Estate Financial Inc. bankruptcy, Heritage Oaks Bank advanced $1.1 million on the open line of credit, increasing the loan balance to $5,866,100. At that time, Guth gave the bank a $5,866,100 deed of trust on the Vineyard Drive property.

On November 17, 2008, Heritage Oaks Bank filed a third party claim to the gas stations, the office and the Vineyard Drive property claiming they had trust deeds on the assets.

However, Judge Crawford denied their claim and voiced his concerns about the bank’s actions.

“You loaned large sums of money when crimes were being committed,” Crawford said.

In another twist, an entity owned by one of the bank’s board member’s husband John Lacey was the single largest investor in Estate Financial Inc., with more than $3 million invested in Guth’s company.

Dee Lacey, is a shareholder and sits on the board of directors of Heritage Oaks Bank.

A former federal bank examiner said that federal banking rules prohibit board members from voting to lend monies to companies in which they are invested in, or in some cases investing in companies in which the bank is involved.

An ex-employee of Estate Financial Inc. told CalCoastNews that Guth and Yaguda used the bank loan to fund escrows, and to make interest payments to extend the life of their Ponzi scheme.

The appellate court agreed that “Heritage Oaks Bank third party claim did not pass the smell test. The same smell lingers on appeal. Heritage Oaks Bank makes no showing that it had clean hands when it attempted to collateralize the EFI loan, that the trust deeds are legitimately acquired security interests, or that the trial court abused its discretion in denying the third party claim.”


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TacomaRose

Remember back when Lacey wrote this endorsement in the Fibune…..


“I ask your readers to join me in voting for Ian Parkinson for sheriff. The Sheriff’s Department needs someone with Ian’s interpersonal skills and political acumen. He will bring his enthusiasm, communication skills, personal integrity, law enforcement professionalism, and leadership to the position.


Ian has served since 1984 in virtually every role from patrol officer to captain. The endorsements of the deputy sheriffs association say a great deal about the respect and trust his peers have in him. The other candidate for sheriff is now retired, but Ian is in his professional prime. He understands that being county sheriff isn’t just a job, it’s a way of life, 24 hours a day, seven days a week, 365 days a year. It is time for a positive change in local law enforcement by electing a man who will restore trust, transparency, and accountability.


Please support Ian Parkinson in the November election.”


Was she hedging her bets, looking to serve her sentence at home in case things went south or are they all simply thick as thieves?


cheseburger

Let the guy do his job,

he won the election, this county voted him in, and he’s not a bad guy, even nice enough to be friends with a creep like me!


slo_born

did you read the article? Lacey is out $3million personally + whatever loss of share price caused by voting to loan money to someone they loan money to directly.


bigger part of the story (which seems to have flown right over your head) is that lacey has a HUGENORMOUS conflict of interest when they voted to loan money as a boardmember at HOB to a person who owes you money personally.


tl;dr the point is you missed the point, and what’s your problem w/ parkinson?


Typoqueen

OT Alert! Karen V., I didn’t know where else to tell you this. I can’t wait until monday, spill the beans!


Cindy

What’s an OT alert? I’m sure I’ll probably laugh at myself for not getting it once I find out! Seems like 6 people know what you’re saying so I know I should too, but I’ve pondered it both times that I saw it and I still don’t know , so I give up. :)


danika

Bless you for asking, Cindy! We both are in the same unknown boat. I was thinking OT is Over Time?? That makes no sense. TQ, please enlighten us…thanks much!


bobfromsanluis

OT alert = Off Topic


Cindy

Ah ha, I never would have thought of that……. OT = Off Topic, OKIE DOKIE.


Well it sounds like she gave Karen a HOT TIP ! Either that or she got wind of a HOT STORY that CCN is working on. I guess we will have to stay tuned for tomorrow, who knows, it could be anything. There isn’t much that would surprise me but if TQ is this anxious for Karen to “spill the beans”, it’s gonna be good! :)


Typoqueen

Bob’s right, off topic. It’s good to put that if you’re off topic so people can figure out that you’re not adding to the conversation.


I heard Dave C. on his radio show last Friday mention that Karen was going to break a big story on Monday. I’ve been curious, can’t wait to see what it is.


danika

Thanks, TQ. I await the new story with equal curiosity.


Typoqueen

Well Dave made it sound like it would be a huge breaking story,,,hmm so far I don’t see it.


fat chance

Hang em high!!!


Mr. Holly

Someone ought to check out the Lacey’s and see how well they have also done with the agriculture welfare payments from the governments. Paso Robles may be surpassing ATown with all of the criminal activities that are now coming out.


pasoparent5

As a long-time PR resident, I wish I could say you’re wrong about Paso…but facts are facts.


Stories like this are disheartening. Not because I don’t believe ’em. But because they’re true.


Another “thank you” to CCN for a thorough investigative report. Lord knows we don’t get articles like this from the Trib or local TV news.


rallyraid

If it wasn’t for Karen and the crew at CCN do you realize how in the dark we’d all be about what really goes on in this county? why is this? KSBY claims “we ask questions that make people uncomfortable” Like what? how many glasses of wine somebody drank? I don’t recall one word about Gearheart, the recent DA / Pasolivo scandal,this article, nada, never.. Just more of Trumpeter and no place like hells green acres. Piss poor excuse for a news coverage.


obispan

So some people stole half a billion from a bunch of old folks leaving many destitute. The Trib has been busy preparing their huge expose’ about trash cans.


Cindy

I laughed so hard when I saw the Trib’s headline and read the story. My first thought was that they were attempting to compete will CCN and show the public that they also investigate high level officials and they aren’t afraid to “trash them”, I almost wondered if it was some sort of spoof but it wasn’t and they did have a point. … Well they made it through kindergarten with that one for sure.


BeenThereDoneThat

Let us not forget that H.O.B. was involved (for those who were around) in the Block and Bower debacle in the ’80’s. Now not only are they involed here in shady things but also they are involved in the Gearhart mess!!


It was nice to see the court come back and basically say SCREW YOU to H.O.B.!!!! I, as I assume most, are glad to hear it. Execs of H.O.B. you should ALL be ashamed of you B.S.!! You should rot with all the others, as you are just as culpable as them to this whole mess!!


korie

Can you elaborate for those of us who weren’t around?


BeenThereDoneThat

Oh my where to start. Craig Block and Paul Bower, where a couple young 20 somethings in about ’83 when they started building a lot of tracks over off of Scott St. in Paso. They built from Scott clear over to and including the Apts. behind Senior Sanchos. Just like Kelly it started small. Also like Kelly where it went south was right after B & B got their personnel airplane. Then the cash couldn’t come in quick enough to support their life styles.


Near the end they were building the area in and around Rambulete (sorry for spelling of) acrosss from the High School. This is when it all started to implode. They where robbing Peter to pay Paul for their life style.


The aftermath was a DISASTER!! They put Cal Coast Painting, who was a large painting contractor out of business. They left at the back of the tract a 50 foot drop off in grading. The grading contractor who got stiffed for 70k was nice enought to come back and finish (for free I might add) at the pleading of the City of Paso Robles.


The first culdesac on the right off Rambulete, the streets and gutters where not complete. The city of Paso picked up the tab to finish. It is because of this that you now have to put up a bond before the start of a project in Paso, guaranteeing completion of these.


Now here is the part that H.O.B. and B & B REALL SCREWED people. About 6-8 families (roughly I am doing this off memory) lost their houses to the I.R.S. because of this. What B & B was doing at the end, was asking people who wanted to buy a house (now mind you this is tract not custom built) to go to H.O.B. take out a loan and put B & B on the loan so they could use the funds to build the house. Yes I know this is BEYOND ludacris!!! This doesn’t happen. They take the loans build THEN you get loan and buy. Anyway because B & B was on the loan when everything went south, the I.R.S. came calling to B & B wanting back taxes. Guess what? Those people that had B & B on the loan, well the I.R.S. took the houses (after they were already living in) back!!! This is true look it up.


In the end the I.R.S. tried to go after Paul Block. Conveniently he had no money in his name. All his family had quite a bit of money. The I.R.S. suspect he moved to them but could never prove.


Craig Bower settled and last I knew was paying the I.R.S. from now till the day he dies. Last I knew he was still living in an Apt. off of Vine St. in the late 90’s.


H.O.B. was investigated (yea I know and here we are 20 years later all over again) by the F.B.I. and put on some kind of banking probation for five years. Yea lot of good that did.


The information I provide was from the Tribune in the late 80’s early 90’s, a friend of mine that got screwed out of their investment and also knowing quite a few of the players and their family and friends.


Cindy

I’m a bit (actually a lot) confused here. You said because B&B were on the loans, the IRS took homes from the owners who financed the construction of their property. First that makes no sense because B&B would not have been on the property deed that was filed with the County Recorder. Unless HOB never filed the grant deeds ?


If B&B was actually a joint borrower (weird) then once B&B completed the property, they surely would have wanted the loan converted into the sole name of the purchaser and the purchaser would have wanted the grant deed of trust in their name. There must have been a contract somewhere that detailed the intent of B&B and the purchaser. It would have been in the best interest of both parties to execute that contract and they surely would have done that. The contract should have backed the IRS off. Did these people seek the advice of a tax attorney when this all occurred and who got stuck with the loan for the mortgage?


BeenThereDoneThat

On the loan and B & B being on paper, I got that info. form someone who had worked for H.O.B. at that time. Also as I mentioned the taking back by the I.R.S. did happen and was not directly the fault of the homeowners but B & B. Like I said go back to the time frame between 89-91. It was in the Trib that I read it. I can remember the article but not the exact time. I believe it was in the time frame of years stated.


Is the whold thing weird? YES. Does this usually happen? No but it did happen and a lot of innocent people got caught between B & B and the I.R.S.


korie

Thanks for the overview. Trying to make sense of another SLO County style senseless situation.


Citizen

What, if anything, do you know about the builder Bunnell and the houses he built in North County around 1992. Bunnell is the one who put the roof on Ross in SLO that fell in.


The City of Paso had a woman building inspector that approved Bunnell’s houses that had many defects. She later went to Atascadero.


BeenThereDoneThat

Only thing I ever heard about Bunnell was them having to reroof all the houses off off Las Tables by Horstman. In fairness to them it wasn’t their fault. At the time 3F had a HUGE manufacturing problem with shingles all over the U.S. They wound up paying for most reroofs in the end. It wan’t totally free and clear though as the homeowners had to pay for the permits to reroof.


The inspector you mention sounds like Sheryl. She went from Paso, to Atas. then the County. Not sure if she is still with county. Yea she screwed a friend of mine on an inspection when in Paso. Approved his siding, then came back realized her mistake and he had to pull it all off and redo. Yea in my opinin Sheryl is nice but not the sharpest knife in the drawer.


Mr. Holly

One of the bigger scandals involving B&B and Heritage Oaks Bank is that they were releasing funds to B & B when there was no work being done. Full amounts were released when only footings had been dug. B&B even moved property corners in some sub divisions and “created” additional lots. Some of the “players” or Board members of HOB were in the hot seat then and evidently didn’t learn anything since appears they are in the hotseat again.


Citizen

Dee Lacey, who voted on a loan for her husband’s company and for the unsecured Guth loan needs to be charged. I’m glad this info has finally come out, as Dee Lacey is still on the Board of Directors of Heritage Oaks Bank, and is still being treated as the upstanding citizen that she is not. She is the one who spoke for loaning the money to Guth after the HOB staff disapproved the loan.


R.Hodin

She’s the board president of the SLO Community Foundation. Apparently she can do no wrong, as well as walk on water.


smartmouth

Disgusting . . .


Wangdoodiler

I heard that Guth suffered and heart attack last weekend in prison. Do you know about this ? Did she survive ?


Cindy

If she had died , it would have been reported by everybody…. Guth dying in prison would be BIG NEWS in SLO.


Hummmm, on second thought, maybe they are keeping a lid on it, for fear that there may be a whole lot of embarrassing cheering!


No, she didn’t die of a heart attack, she doesn’t have a heart.


hotdog

Last sentence is right on!


halice

Cindy, Shame on you. You will be judged too. Remeber that.


cheseburger

halice shame on you, remember judge thee not or thy will be judged. REMEBER, cult word or something?


danika

In dishing shame to Cindy, aren’t YOU judging??


cheseburger

Exactly my point!


calvertworthington

Evidence of the ‘job creators’ at work.


smartmouth

You said it . .


racket

You must mean because Guth is a real piece of work.