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Securities and Exchange Commission Charges California Man in Alleged Fraudulent Real Estate Investment Scheme

Over the course of 2 years, 2014 and 2015, Paul A. Garcia and Caliber Capital Management, LLC (“Caliber”) allegedly schemed to raise over $670,000 in fraudulent securities.  One of the investors was an 82-year-old retiree.  Garcia allegedly used his position at Caliber as the conduit to defraud investors.  Investors thought they were investing in a company that would use their money to purchase an unfinished golf course.  Garcia also allegedly stated that Caliber would invest $2.7 million into the course.  The SEC also claims that Garcia told investors that Caliber would join a Real Estate Investment Trust (“REIT”) after the purchase of the golf course was complete and that the REIT was on the brink of publicly trading its securities.  The complaint alleges that this was a ploy to make investors think their investment was secure and would prosper.

In fact, according to the SEC’s complaint, neither Caliber nor anyone else had committed to a $2.7 million investment in the golf course.  Nor was the nature of the REIT fully disclosed, as its key assets were not owned by Caliber.  They were allegedly owned by third parties who had no intention of joining the REIT.  Even though Garcia allegedly knew this information, the marketing materials drafted at his direction did not disclose it.

After receiving investor money, Garcia allegedly diverted $130,000 of the proceeds to his other financial interests, Relief Defendants Acer Capital Group, Inc. (“Acer”) and Greeneone.com, Inc. (“Greeneone”).  The complaint alleges that Garcia also had another pipeline of ready cash when he used Caliber’s assets as collateral for a $1.2 million loan.  He gave that money to a company called Partner Medical Solutions (“Partner”).  It is alleged that Partner then gave roughly about half of the $1.2 million to Greeneone.  Both of the monetary transactions involving Partner and Greeneone are alleged to have occurred without consideration.

Eventually, Caliber filed for Chapter 11 bankruptcy and the secured investors were paid off, but none of the investors received any return on their investment.  Garcia is not accused of using any of the money for personal gain.  However, he is alleged to have lied to his investors and used their money for purposes other than those represented in the offering materials.

Because this complaint was only recently filed, we may not know the outcome of the case for quite some time. You can read more about the case at https://www.sec.gov/litigation/complaints/2017/comp23738.pdf  This case provides a good example of the very serious nature of the fiduciary duties owed to investors.  If you have any questions about whether your actions comply with these duties, then please contact Tomlinson & Shapiro at (312) 715-8770.

This post was written by Michael Tomlinson

Michael Shapiro
(312) 715-8770
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