Robin Schild was happy with his investment that was $250,000, he sunk that also into Ken Casey’s real estate investment companies that came with much higher praise and promised yields and mortgaged his house for $400,000.
Considering investing in 2016, the Albany resident said he regularly got his monthly 9% interest payments without any issues withdrew $200,000 from his account at one point and deposited into his bank account. So he was shocked when he received a call from a fellow and friend investor who said interest obligations and all of investments had been suspended and Casey’s firms were being investigated by regulators for conducting an alleged Ponzi scheme.
“It is like, do I want this in the middle of the worst outbreak in 100 years?” Schild stated in an interview. “I believe I’ll be lucky to get half of it back… and I consider myself blessed because other people had everything they possessed invested and I have heard there are people moving on food stamps”
The 63-year-old is one of more than 1,000 investors trying to recover hundreds of millions of dollars involving Casey, who died in May from a heart attack. His admirers celebrated him as philanthropist, a Republican donor and adventurer who amassed an enormous portfolio of office parks and apartment buildings in Sonoma and Marin counties.
Shortly after his death at age 73, a law company and accountant tasked with moving his businesses — Professional Financial Investors Inc. and Professional Investors Security Fund Inc. — to his ex-wife discovered the allegations of fraud. They now wonder whether more officials from the Novato companies profited off the three years of a”Ponzi-like operation,” according to bankruptcy records reviewed by The Chronicle.
Forensic accountant Michael Hogan, who has been appointed chief restructuring officer for those companies, pored over the records and discovered the firms used investor funds to pay off investors’ interest obligations and debts, according to his bankruptcy announcement.
Hogan estimates interests were owned by the firms of Casey in roughly 70 real estate properties with an estimated value of more than $550 million. His companies owe more than $250 million to investors and those possessions have debt, he stated in court documents. Both firms filed for bankruptcy.
“Within a period of at least three decades, Mr. Casey appears to have worked a fraudulent scheme in which investors loaned funds to the Companies, with a substantial part of those funds being used to support the debt owed to existing investors and to enrich Mr. Casey himself,” Hogan explained. “Others connected to the Businesses also appear to have been involved and benefited from your scheme, and this investigation is continuing.”
The SEC initiated its investigation on May 28, he said. An SEC spokeswoman declined to comment.
Casey began his companies from 1983, serving as the officer until 1998. He maintained control of the companies Hogan said.
He divorced his wife in 1996, but left her the companies. In a statement to The Chronicle, Albanese said attorney Eric Sternberger was hired by her two days after Casey’s death to review the financing.
“Mr. Sternberger found a variety of improprieties, and I led the company to self-report into the SEC, which then started its evaluation,” she explained. “Funds were suspended to keep them for the shareholders, except those relating to bank debt and standard operating costs, and all officers were eliminated.
“Business operations are steady, Chapter 11 was filed, and I am resigning from the manager position so creditors and professionals can appoint an experienced independent manager,” she continued. “I’m heartbroken and sick to my stomach that all these investors, myself included, have been ravaged by Ken’s actions. Like all of the other investors, I hope to find out what can be preserved.”
Hogan reported in his recent bankruptcy announcement that the firms’ former CEO, Lewis Wallach,”may have also profited from the way Mr. Casey ran the Companies.”
Last month, the law company reached an agreement with Wallach to reunite $ 1 million from an LLC that he is waiting for him to return properties with a few million dollars in equity, and controlled, Hogan said.
Property records reveal Wallach owning an Encino (Los Angeles County) house with his wife bought over a decade ago for $3.5 million. They also indicate a month, a Malibu property that’s currently leasing for $30,000 was owned by Wallach.
A girl took a message for Wallach and answered the phone. He didn’t return the call.
In Casey’s passing, he was hailed by Marin County officials by the Marin Independent Journal, which first broke the stories of this scam. He had been regaled as an adventurer, who Herb Caen once wrote about in 1995 when he had been training to become the person to reach the North Pole and a philanthropist.
He had legal issues that are past. In 1997, Casey pleaded guilty to a single count of conspiracy to defraud the government, five counts of filing false tax returns and tax evasion, and 41 counts of bank fraud. He was sentenced according to court records.
Casey had recently become active in committing to Republican causes, such as a $300,000 donation from Casey’s firms into a committee made to advocate for the repeal of the nation’s gas tax. In addition, he contributed to John Cox runs for governor and Travis Allen’s.
In October 2018he loaned Marin County District Attorney Lori Frugoli $25,000.
“She asked me for a loan and I said sure,” Casey advised the Independent Journal at the time. “I’m not encouraging her to escape from any parking tickets.”
Frugoli told The Chronicle on Monday that in May she paid the loan in full”prior to some of the newly discovered information about PSIF Inc..”
“Mr. Casey was a friend of my late husband and I knew of Mr. Casey through his service on the Marin County Human Rights Commission,” Frugoli stated in an email. “Like others, I had been shocked to learn of the allegations that have surfaced. Mr. Casey never tried to’curry favour’ from me or my workplace.”
As for Schild, he said he had been introduced to the company by a friend and he spoke a couple of occasions to Casey and found him friendly. He said he would likely have to sell his Oakland condo to pay off his debt.
“It’s all dependent on getting fresh suckers,” Schild said. “And there is not an infinite supply of suckers.”