(CN) – Investors in Northern California say a scam artist with a prison record swindled them of more than $15 million in a Ponzi scheme involving senior housing projects. They claim that James Koenig, through his Redding-based Asset Real Estate & Investment Co., sold shares in the project without revealing that he had been convicted and jailed for fraud in 1986, and that he let the project go into default and kept the money for himself.
Koenig and others ran the scheme for more than a decade, defrauding more than 1,000 investors of some $200 million, according to the California Attorney General’s Office, which filed criminal charges against Koenig in May 2009.
The long list of plaintiffs in two recent cases in Shasta County Court say Koenig and his cohorts set up dozens of affiliate companies through which bought assisted living and senior housing facilities. The company then sold shares to investors, while another Koenig company was hired to manage the property. In a classic Ponzi scheme, investors’ money was not reinvested but was used to pay interest to other investors, the complaint states.
The plaintiffs say they went through a similar experience investing in a facility in Pennsylvania called Wood River.
Koenig promised annual returns of more than 10 percent, but the property was ignored and soon fell into disrepair and default, the investors say.
“Despite continual promises from Koenig that the Wood River investors’ funds and income would be used to maintain and improve the Wood River property, the facility’s infrastructure fell into disrepair, licensure lapsed, vendors went unpaid, and complaints were issued by the Commonwealth of Pennsylvania for regulatory violations,” the lawsuit states.
The investors, organized as Wood River Capital Resources LLC and 30 other LLCs, sued Koenig and more than 30 others on a litany of charges, including fraud, misrepresentation, negligence, breach of fiduciary duty and breach of contract.
They are represented by Jeffery Swanson of Redding.
A Sonoma County woman filed a similar case against Koenig in the same court, alleging that he scammed her out of $750,000 in the same way. She is represented by David Edwards of Redding.