The Securities and Exchange Commission has accused a San Diego-based financial planning firm of running a real estate investment scam that raised approximately $50 million from hundreds of investors nationwide.
On Tuesday the SEC obtained a temporary asset freeze against the firm, Western Financial Planning Corp., and its owner, Louis V. Schooler. The agency alleges that Western Financial and Schooler sold units in partnerships that Western had organized to buy vacant land in Nevada and hold for sale at a profit at a later date.
The SEC claims that Schooler, 61, of Solana Beach, Calif., and Western Financial failed to tell investors that they were paying exorbitant mark-ups on the land, and in some cases, more than five times its fair market value. Schooler also kept from investors that the land held by the partnerships was often encumbered by mortgages that Western used to help finance the initial purchase of the land.
The SEC's complaint filed in federal court in San Diego alleges that Western and Schooler have misled investors since 2007 by providing them with comparative prices or "comps" of supposedly similar plots of land that had sold for prices higher than those offered by Western. However, the real estate comps provided were not comparable to the land sold by Western. The SEC also alleges that since the spring of 2011, Schooler has paid out "hush money" to silence investors who discovered they had been defrauded, allowing Schooler's scheme to continue.
The SEC obtained a temporary restraining order and asset freeze against Schooler, Western, and all entities under Western's control from Judge Larry A. Burns for the U.S. District Court for the Southern District of California. Burns also appointed Thomas C. Hebrank as a temporary receiver over Western and the entities.
A court hearing to rule on the SEC's motion for a preliminary injunction is scheduled for Sept. 17.