LOS ANGELES (CN) – Twenty investors say their property manager and general partner embezzled more than $20 million and covered it up by calling it a “loan,” or “interest.” Rancho Carlsbad Partners say William Geary then engaged them in phony property deals to make it look like he was straightening things out.
Rancho Carlsbad Partners say their partner Geary, a Los Angeles-based real estate manager, defrauded them by diverting for his own use money that belonged to the group when they needed it most.
In addition to being the partnership’s property manager, Geary controlled and maintained all financial affairs, bank accounts and records for the partnership.
The partnership needed to complete a 1033 tax-deferred exchange by a certain date. Geary allegedly shifted funds out of the partnership accounts when every penny was needed for a down payment on additional properties so that taxes would not have to be paid on the $48 million of property the partnership already had sold.
When the missing money was discovered, instead of paying it back, Geary gave the partnership 13 promissory notes. which he persuaded them to invest into his own properties and entities to make the 1033 deadline, the complaint states.
All the while, Geary was allegedly drawing money from the partnership’s accounts under false pretenses, calling it interest and loans.
The partners say Geary never recorded the deeds to the properties he sold to the partnership with the Recorder’s Office, and took out bank loans on those properties.
He told the partnership that recording the deeds would lead to a tax reassessment, then used the money to buy a movie theater and sustain his own properties, according to the complaint.
The partners say Geary’s frauds lasted for 7 years, from 2002 until 2009.
The partners seek accounting, an injunction and damages for breach of fiduciary duty, fraud, unfair business practices, breach of purchase agreement, breach of promissory notes, conversion, declaratory relief, and breach of good faith.
They are represented in Superior Court by David Bass.