Another North County lending firm is facing charges of fraud, mismanagement and other wrongdoing from state regulators and investor lawsuits.
The state Department of Real Estate is accusing Creekside Financial Inc. — an Atascadero company owned by H. Wayne LaPrade — of failing to comply with requirements to notify investors of certain actions, failing to properly supervise loans and failing to comply with other regulatory reporting requirements.
LaPrade’s license could be suspended or revoked if he is found guilty of those allegations, according to state regulators.
In a lawsuit being heard in Paso Robles Superior Court, Pasquale and Karen Mastantuono of Templeton accuse LaPrade of running a Ponzi scheme and of negligent representation.
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LaPrade’s attorney denies any wrongdoing took place. LaPrade said he might not challenge the state’s accusation, though Creekside Financial defended itself against the Mastantuonos’ allegations at a hearing in Paso Robles earlier this week.
The charges come after similar allegations have been leveled at other San Luis Obispo County nonbank lenders that are now defunct, including Hurst Financial, Estate Financial, Real Property Lenders and 21st Century Financial Resources.
Some of those companies have filed for bankruptcy protection, and several of their executives are either under criminal investigation or in jail, facing fraud charges.
Like Creekside Financial, these so-called hard-money lenders made high-risk, high-interest loans to help finance real estate development, promising investors higher-than-average returns.
The Mastantuonos say they invested half a million dollars with Creekside Financial, and that LaPrade used their funds — as well as money from other investors — to pay them their interest, but never returned the principal.
LaPrade had promised to return their investment, plus 12.5 percent interest, within a year, according to the complaint against him.
The lawsuit accuses LaPrade of failing to tell investors in a timely manner that the borrower of a major construction loan had defaulted and that a home that was supposed to be worth $1.3 million on 6.5 acres in Templeton was just 80 percent completed.
“There is no fraud or money mismanagement or misappropriation of money,” said Chris Inversen, LaPrade’s Paso Robles attorney, adding that his client did not misrepresent what he was doing with investors’ money.The state alleges that LaPrade drew money from one of his trust funds without the required investor approval, according to an accusation filed by the Department of Real Estate.
Regulators also charge that Creekside Financial had a high-enough volume of business to trigger stricter reporting requirements that LaPrade allegedly did not follow.
The state also accuses LaPrade of allowing a borrower to draw money on a loan without verifying that needed work had been completed, and of failing to name investors as beneficiaries on real estate trust deeds before disbursing the funds.
LaPrade told The Tribune that he is not sure he would appeal the state’s allegations because he was already planning to retire from the hard-money-lending business.
He said he has already let his Creekside Financial license lapse, and said he is not sure whether he would continue to practice as a broker or real estate agent.
“I feel a responsibility to my clients if I let them down,” LaPrade said. “It’s just not worth it. I will say I made an honest effort, and did the best I could.”
Another of LaPrade’s investors, Marie Layaye of Paso Robles, sued him last year for alleged financial mismanagement and other wrongdoing.
LaPrade settled her lawsuit out of court, and Layaye told The Tribune that she could not discuss the details of the lawsuit or the settlement.