Troubled Paso Robles Inve stment Company

Biz Buzz: SLO law firm rounds up Estate Financial investors

Ten percent of those who placed money with Estate Financial must agree to a meeting

A prominent San Luis Obispo law firm is calling for a formal meeting of investors in troubled Paso Robles lender Estate Financial’s mortgage pool fund to discuss the status of their investments.

“We are responding to significant concerns raised in the local community about the way the mortgage fund has been handled,” said Roger Frederickson, an attorney with the law firm pursuing an Estate Financial meeting, Sinsheimer Juhnke Lebens and McIvor.

According to the mortgage pool fund’s rules, 10 percent or more of the estimated 1,650 fund investors must agree to the meeting before it can be formally called, Frederickson said.

Since disclosing to investors last fall that the firm was in financial trouble, Estate Financial has been under heightened scrutiny by vocal investors and state regulators.

The firm’s leaders blame its troubles on the real estate downturn and have asked for investors’ patience to get their principal back until the market turns around.

The law firm’s proposal focuses only on the Estate Financial mortgage fund and its investors, Frederickson said. About $170 million, half of all Estate Financial assets, are in the fund.

Many investors put their money into individual real estate projects.

The law firm’s effort differs from a developer’s unrelated proposal to ask a court to put Estate Financial into receivership, where a judge would appoint a lawyer or accountant to take over the company.

It also does not require investors to go through a court to gain control of the fund.

The fund is a limited liability corporation, so its investors are members that actually own the fund and can work as a group and through their votes to control the fund’s assets.

Estate Financial President Karen Guth said she is aware of the new proposal and acknowledged that there was nothing she could do to prevent such a meeting. If organizers get the needed 51 percent of investors to choose such an action, Guth said she would abide by the decision.

However, she warned that separating management of the mortgage fund from Estate Financial’s control, when it still manages the individual projects that the fund is partially invested in, would prove extremely complicated.

“Our loans are almost all funded with a combination of the fund and (Estate Financial’s private, individual) fractionalized note holders,” she explained. “My concern is who would they get (other than Estate Financial) with enough level of expertise to manage that?”

Frederickson also said mortgage fund investors have the option to vote out Estate Financial and its officers, Guth and Vice President Josh Yaguda, who is her son, as the fund managers.

“This is the most efficient way to protect and maximize recovery of their investment, without incurring significant legal fees,” Frederickson said.

The state Department of Corporations has suspended Estate Financial’s securities license, based on a number of investor complaints, including the company’s alleged lack of full disclosure to investors.

The company has appealed the suspension.

—Melanie Cleveland

Peter Fonda to emcee Avila music festival

Peter Fonda, the acclaimed actor who was recently honored by the San Luis Obispo International Film Festival, will be the master of ceremonies at this year’s Avila Beach Music Festival.

Fonda is well-known for starring roles in films such as “Easy Rider” and “3:10 to Yuma.”

The Avila Beach Music Festival will feature Crosby, Stills&Nash on June 10.

The concert benefits Options, a Morro Bay-based nonprofit group that helps people with disabilities.

Festival organizers hope this year’s lineup will raise as much as $100,000.

—Dawn White