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Wednesday, July 24, 2024 | Back issues
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Coldwell Banker Failed to Stop $55 Million|Ponzi Scheme, Bankruptcy Committee Says

SANTA ANA, Calif. (CN) - A Coldwell Banker franchise defrauded 1,600 investors of $55 million through a Ponzi scheme that Coldwell knew about but did nothing to stop, a committee of investors claims in Federal Court.

The Joint Equity Committee, a 9-member group of investors, claims the Coldwell Banker Commercial American Spectrum scammed investors across the nation out of $55 million in unregistered securities. The committee and related entities are debtors in a bankruptcy case, In re Real Estate Partners Inc. and its Related Entities, pending in Santa Ana, according to the complaint.

But David Siroty, a Coldwell Bank spokesman, described American Spectrum as a "former franchisee whom we terminated from our franchise network in April 2003. We believe any claims against our brand are wholly without merit, and we will vigorously contest them."

From January 2003 until August 2006 the Coldwell Banker Commercial American Spectrum franchise used "the Coldwell Banker household name in 'cold call' scripts, promotional literature, e-mails, e-mail addresses, e-mail groups, dividend checks and other written correspondence to sell unregistered securities," the complaint states.

The investors say they "were lured with promises of substantial returns and little (if any) risk."

The committee says investors put money into seven funds they believed were being used to invest in real estate throughout the United States. They got dividend payments, giving the impression that the investments were profitable. But the real source of the money was a bank account "funded almost entirely by victims' money," the complaint states.

The plaintiffs claim the operators of the scheme claimed they bought property with investors' money, then renovated and sold it. But the committee claims that the defendants stripped profits for their own benefit, in a process they repeated at least 20 times.

The committee claims that Coldwell Banker ignored what was going on, and profited by collecting franchise fees and commissions.

The investors seek an injunction, disgorgement, restitution and damages for negligence, fraud, misrepresentation, unfair business practices, untrue advertising and unjust enrichment.

Named as defendants are Coldwell Banker Real Estate Corp. dba Coldwell Banker Commercial Affiliates, and Coldwell Banker Real Estate LLC.

The committee is represented by Michael Newhouse with Newhouse Seroussi of Los Angeles.

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