Wednesday, June 11, 2008

Lawsuits Against Real Estate Developer James Koenig

James Koenig, CEO of Asset Real Estate and Investment Co. (AREI) in Redding, is facing four lawsuits that claim he bilked investors in a tax-shelter scam and defaulted on loans used to help finance the alleged schemes.

According to one of the lawsuits, Koenig and his associates had promised investors in Reddings' Oakdale Heights and Sierra Oaks senior care centers an 8 percent annual return plus equity if the property was sold. But these investors, who bought tax-shelter shares in the care homes last spring, have lost hundreds of thousands of dollars in unpaid rent. Now the facilities face foreclosure. Meanwhile, Koenig and his partners systematically and deceitfully bought back these senior care home shares and sold them to other investors, keeping the commissions and equity for themselves. This suit is seeking restitution, returns of Koenig's allegedly ill-gained profits and triple damages.

Another suit alleges that Koenig and associates used the same scheme and defrauded investors in a group of Southern California senior care homes, a San Joaquin Valley golf course and a $55 million corporate note. Meecorp Capital Markets in New Jersey filed the third and fourth suit, seeking to recoup from Koenig and his associates $7.9 million in loans they had used to finance the purchase of senior care homes and other property. Together, the four lawsuits have some 30 individuals and family trusts names as plaintiffs.

One of the suits claim Koenig's business is a complex system designed to funnel money into Koenig's and his associates' accounts without paying a dime to creditors.

AREI buys senior housing communities through so-called “1031 exchanges,” a minimally regulated tax-deferral strategy for investors named for the IRS code that defines it. These exchanges allow investors to sell commercial property without paying capital gains taxes on their profit so long as they buy another similar property within 180 days.

Sierra Oaks investors sank $10.24 million into the northeast Redding assisted living and memory care campus.. Oakdale Heights investors put $12.3 million into the west Redding assisted living home. These investors had no idea that AREI, or a firm under their control, managed every aspect of their investments, including the firm that would profit from selling their property to other investors looking for a tax shelter.

Investors bought “tenant-in-common” interests in the care homes through AREI which meant they owned the property with others, and each was supposed to get a share of the cash generated by the rent. Under their agreement with AREI, investors leased their property back to the firm, which managed the care homes and paid investors their share of the rental income.

However, the suits are alleging that AREI was less interested in giving investors rent payment and managing the properites and was more interested in buying back these properties so it could sell them to someone else at a much higher price and profit from the brokerage commissions and equity.

Koenig is not unfamiliar with defrauding investors. In 1986, Koenig pleaded guilty to mail fraud in a gold-selling scam and was sentenced to 2 years in prison and ordered to pay $5 million in restitution to investors.

2 comments:

Just said...

This story states: "Koenig's business is a complex system designed to funnel money into Koenig's and his associates' accounts without paying a dime to creditors". The complex business system included not only “tenants in common” transactions and 1031 property exchanges, but complex business arrangements involving various entities established to allow Mr. Koenig to charge investors fees whenever possible. This included investor processing fees, brokerage fees for putting deals together, real estate fees for purchasing properties, loan origination fees, loan collection fees, property management fees, property operating fees etc. The name of the game was investor fees! This money raised was used to pay for exorbitant executive salaries, private planes, lavish vacations and parties, expensive homes and cars, and to make investor payments (the Ponzi scheme). Mr. Koenig, as the “visionary”, lived a very lavish lifestyle that included personal maids, personal chefs, private tutors of his children, private secretary/chauffer for Pam his wife Pam, horses, boats, etc. He also frequently hired his older children (and in-laws) at high salaries to work for his various companies even though they were unqualified or did little if any actual work. Mr. Koenig “associates” who provided him the means to perpetuate this hugh multi-million dollar fraud include Gary Armitage (E-Planning/Aga Financial Services-Owner), Peary Wood (AREI –President), Adam Petersen (AREI-CFO), Rick Jensen (Oakdale Heights Senior Living-President), Jeff Slitca (Oakdale Heights Senior Living-COO), Brian Uhlir (Oakdale Heights Senior Living-CFO), William Webster and Paula Lewis (Lakeside Financial Group-President) and Placido Canta (Lakeside Financial Group-CFO).

Anonymous said...

Koenig - convicted criminal in a past case and now (2009) in jail again seeking a taxpayer funded lawyer so he can once again turn state's evidence against his associates and cooperate with the state in this Ponzi scam victimizing widows, retirees and orphans. What a guy! I certainly hope to recover some of my $800,000 from his buddy lenders who have profited greatly from the lies he told via a PPM and Addendum.