Sunday, January 31, 2010

California investors keep eye on Chandler Elevation case

California investors keep eye on Chandler Elevation case

by Luci Scott - Jan. 25, 2010 12:00 AM

The Arizona Republic

A group of investors in California is paying close attention to the saga of Elevation Chandler, especially a lawsuit by a man who claims he won the property at a trustee sale for $1 million, a fraction of what the site is worth.

Elevation Chandler is developer Jeff Cline's bankrupt 10.6-acre property near the intersection of Loops 101 and 202, containing the eyesore of a partly built, abandoned hotel.

The million-dollar bidder, Tom Peltier of Phoenix, is due in Maricopa County Superior Court today in an attempt to persuade Judge Bethany Hicks to let him take possession of the property.

Developer Cline received a $24 million loan from Point Center Financial of Aliso Viejo, Calif.

The California investors own a stake in Elevation Chandler because they invested in Point Center Financial. Now, they are suing Point Center, its president, Dan Harkey, and Harkey's wife, Diane, a California assemblywoman.

The more than 50 plaintiffs allege a number of problems, including breach of fiduciary duty, fraudulent conveyance, intentional misrepresentation and elder and dependent-adult abuse.

The lawsuit was filed in Orange County (Calif.) Superior Court.

Plaintiffs are unhappy not only with the Elevation Chandler loan but also with a number of others.

"Mr. Harkey represented to his investors that he was doing a great deal of due diligence in an effort to make sure our investments and loans were safe, and that there was acceptable and minimal risk. That is not what he did," said Lloyd Charton of Dana Point, Calif., a Point Center investor and a retired lawyer who specialized in litigation.

"In order to enrich himself, he took tens of millions of dollars in commissions and fees from failed loans," Charton said. "The loans failed because in most of them there was no reasonable expectation that they would be paid back upon maturity. . . . (Harkey) made extremely risky loans, and the only person he benefited was himself."

Charton said there was "inadequate, improper or a complete lack of due diligence."

Harkey declined to discuss the lawsuit or his investments.

"I cannot make any comments because of the ongoing litigation," he said.

One of the plaintiffs is Kurt Sipolski of Palm Desert, a retired publisher who lives on a Social Security income of $612 a month.

Sipolski said he invested most of his life savings with Harkey.

"I asked for it back two years ago, and at that time, he said he wasn't able to do it; however, shortly afterward, he bought a Lear jet and made another multimillion-dollar bad loan," Sipolski said.

"I explained I was handicapped by polio, that it was hard for me to walk, and that was my life savings," he said. "It fell on deaf ears."

Charton, a neighbor of Harkey, said after Harkey asked him to invest, he questioned him at great length. Charton invested $1.3 million.

The plaintiffs in the lawsuit include about 55 investment entities, usually family trusts.

Charton said when the Elevation Chandler loan was made, investors assumed Harkey was providing construction funds to continue to build the project. "There was no money provided for construction," Charton said.

Furthermore, the loan was made in November 2006, when the housing market and hotel industry were cooling substantially. "The loan should never have been made," Charton said.

He does not blame Point Center for mistakes made at a public auction on June 15 in Phoenix. At that auction, conducted by T.D. Service, Peltier bid $1,000,001 and was awarded Elevation Chandler, even though the bid is a fraction of what the site is worth. The next day, Peltier was told he couldn't have the property because T.D. Service had erred, making the sale invalid.

Point Center had been expecting to take back the property from Cline at the trustee sale with a $25 million credit bid.

"I'm not blaming Point Center for the mistake at the auction," Charton said.

Charton said Harkey does not recognize he has devastated the lives of many good folks.

Other investors in Point Center and plaintiffs in the lawsuit are Les and Ev Corzberg, a retired couple who live in the Bay Area and who invested tens of thousands of dollars. "It's a nightmare for so many of us," Ev Corzberg said.

The Corzbergs are eager to hear what happens at today's hearing. "We're one of the investors very concerned about Chandler and what's going to happen with the judge's ruling," Les Corzberg said. "But we're also very concerned about all our investments with Point Center Financial."

Corzberg wants his money back. "If this gentleman gets this property for $1 million, it will be one of the biggest mistakes," Corzberg said.

Posted using ShareThis

Real Estate News

HootSuite - Social Media Dashboard