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Thursday, May 23, 2024 | Back issues
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SEC Calls Father & Son Fraudsters

SAN FRANCISCO (CN) - A father and son team and a pediatrician pal skimmed millions of dollars from an $85 million real estate fraud they used to prop up another failing venture, the SEC claims in court.

The SEC sued Walter J. Ng, 83, or Lafayette, Calif.; Kelly W. Ng., 56, of Orinda; Bruce A. Horwitz, 75, of Orinda; and The Mortgage Fund, which the Ngs created in 2007. None of the defendants would answer the SEC's questions, the agency says in its complaint.

The SEC claims that "for years" the three men managed a real estate fund called R.E. Loans, LLC, which raised "hundreds of millions of dollars from thousands of investors" from 2002 to 2006. In 2006 alone, it took in $308 million and paid out $177, the SEC says in its complaint.

But when it was unable to pay investors in 2007, "Rather than tell investors about R.E. Loans' precarious financial condition, Walter Ng and Kelly Ng in late 2007 decided to form a new real estate fund, Mortgage Fund '08 LLC ('MF08') to raise investor money to prop up R.E. Loans," according to the complaint.

"The Ngs and Horwitz pitched MF08 as a new, conservative investment vehicle that would replicate the success of R.E. Loans by investing in commercial real estate loans secured by deeds of trust. In reality, MF08 was simply a way for the Ngs to get money into R.E. Loans to continue the illusion that R.E. Loans was profitable. The Ngs and Horwitz from December 2007 through June 2009 raised more than $85 million for MF08, a significant percentage of which the Ngs promptly paid out to investors in R.E. Loans," the complaint states.

The whole house of cards crashed in 2008 but the Ngs and Horowitz kept lying to their customers until both R.E. Loans and MF08 went bankrupt in 2009, the SEC says.

Along the way, the three men withdrew $2.3 million from the failing companies, the SEC says.

It seeks disgorgement, penalties and injunctions.

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