LOS ANGELES (CN) - Fifteen hundred people, many of them elderly, claim in a class action that they were defrauded of $600 million in a real estate scam.
Fifteen people and 25 businesses are named as defendants in the 136-page lawsuit in Superior Court.
Lead plaintiff Lorelei Mooney claims that lead defendant ARI-DFW West & West, et al., induced elderly investors to invest their retirement savings in a real estate deal - the so-called "TIC Interests" -involving more than 30 real estate transactions.
Mooney claims the defendants pushed the TIC securities as a safe, long-term investment. Along the way, she claims, defendants realty broker ARI Commercial Properties and Argus Realty, an allegedly unlicensed broker, and their affiliates helped themselves to illegal commissions, fees and costs.
Then the defendants dumped their elderly investors "in a hopeless, fraudulent investment structure that had no chance of providing a reasonable return," according to the lawsuit.
"The TIC Interests were not investments in any sense, but a rigged game in which the sponsors made millions in illegal fees and commissions while taking the life savings investors had earned over a lifetime as well as inheritances that had been built over generations," the complaint states.
Mooney claims that Argus Realty and its affiliates used investors' money to buy properties, liquidating the defendants' investments while taking illegal fees and commissions by marking up the price of the properties - despite promising in marketing materials that no investor funds would be used to pay commissions.
The defendants locked elderly investors into the structure of the offerings to "capture significant future revenues and profits," the complaint adds.
Reeling in investors with the promise they could defer their long-term capital gains taxes with 10.5 percent of their net proceeds from the offering, the scammers knew that their own net proceeds from the offering were at least 15 percent, according to the lawsuit.
"Plaintiffs allege that had they and the class been told the up-front costs of entering into the recommended TIC Interests were in fact more than 15 percent of their cash, their offering proceeds, they would never have considered the TIC Interests and would not have suffered the damages here alleged," the complaint states.
Another defendant, Chicago Title Company, should have informed investors that ARI Realty was not licensed a real estate broker, the class claims.
Mooney seeks class certification and punitive damages for fraud, intentional misrepresentation, fraud by concealment, elder abuse and 16 other counts.
She is represented by Kenneth Catanzarite of Anaheim.
Plaintiffs include six other people and 11 LLCs and businesses.
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