It’s too early to say what led to the recent sudden closing of a Marin County real estate investment and finance company.
The Marin County District Attorney’s Office said that it is looking into the complaints of some of the more than 100 investors of Pacific Private Money who said that since December they could not receive the money invested in the company. The company, which has funded more than $2 billion in real estate loans over its nearly decade-long history, is now being run by a San Francisco restructuring firm, and the Novato office has closed.
Others who have been involved in pursuing hundreds of millions of dollars in lost money from several high-profile North Bay real estate scams over the past two decades say that whether this is a simple business failure or fraud, it’s a reminder of the painful lessons learned in these cases:
In the PFI case, Oakland attorney Linda Lam was part of the Gibbs Mura team that filed a 2022 lawsuit against what was then Umpqua Bank, alleging that employees at the Novato branch ignored 146 warnings from the agency’s fraud detection system and handled 179 transfers of $5.2 billion in PFI accounts to PFI’s private account. Wallach.
The show came after Casey’s death in 2020. These companies were forced to date. That led to a $145 million recovery from the sale of 70 apartment and office buildings and about $40 million recovered from early investors under the Ponzi bankruptcy law. The main profit from this type of fraud is derived from skimming funds, while returns to previous investors are paid using money from new investors.
“The message that investors should remember when they are approached about any kind of private investment opportunity is that they should approach it with skepticism, no matter what or regardless of their proven track record, what they have heard from other investors who are happy with that investment,” said Lam.
The average pitch in the PFI program, Lam noted, is guaranteed to return above market norms, for some, up to 10% per annum. Lam urged investors to monitor their investments and seek transparency.
“There is no evidence that the income that the investors are getting was generated from what they were told there should be – rental income from those properties,” said Lam.
His group’s lawsuit against Umpqua, which was merged with Columbia Bank in 2023, highlighted the role banks can play in detecting fraud and what happens when internal warnings are ignored. Lam said banks are able to see through trade flows that individual investors don’t, and that automated monitoring systems often flag suspicious activity that requires human review.
“For example, if there is a certain amount of money entering the account and then leaving the account in a very short period of time that triggers an alert, and that alert has to be reviewed by someone,” he said.
A spokesperson for the bank said it was transparent in its dealings.
Few of Pacific Private Money’s investors have so far reached out to Gibbs Mura to see if there could be a lawsuit to follow, Lam said.
When AGA Financial in Santa Rosa closed suddenly in 2008, inflation spread across the North Coast, leaving many Fireman’s Fund Company retirees who had been sold the promise of safe, high-yield real estate investments facing huge losses.
San Rafael attorney Val Hornstein, who represented the plaintiffs in the subsequent case, said it remains a cautionary tale of how real estate trusts and attractive sales tactics can be dangerous — and in some cases criminal.
Hornstein described how promoters used asset visibility to convince investors.
“Everybody knows what real estate is. It’s dirty. You can touch it. You can go there, look at it,” he said in an interview.
Hornstein flagged a few warning signs he often sees in conditions like AGA. In addition to scrutinizing the promised unusually high returns, new investors must enlist the help of accountants and lawyers whose private placement memoranda can be dense and filled with dangerous boilerplate language that most people don’t pass.
Due diligence for investors includes checking the credentials and regulatory history of those involved in the business, according to the California Department of Consumer Protection and Innovation. That means checking the professional and firm’s registration with the Securities and Exchange Commission (adviserinfo.sec.gov) and the investment broker trade group FINRA (brokercheck.finra.org).
