Estate Financial principals Karen Guth and Joshua Yaguda sentenced to prison

Karen Guth wipes away a tear while she and her son, Joshua Yaguda, listen as their attorneys argue on their behalf during their sentencing hearing in San Luis Obispo in December 2009.
Karen Guth wipes away a tear while she and her son, Joshua Yaguda, listen as their attorneys argue on their behalf during their sentencing hearing in San Luis Obispo in December 2009. jjohnston@thetribunenew.com

Superior Court Judge Jac Crawford on Monday sentenced Karen Guth to 12 years and her son, Joshua Yaguda, to eight years in state prison for their roles in defrauding investors as the principals in Estate Financial Inc.

Guth and Yaguda had pleaded guilty on Oct. 5 to 27 felony counts involving their management of the now-bankrupt lending company that was based in Paso Robles. At its peak, Estate Financial oversaw a $340 million real estate portfolio on behalf of about 3,000 investors.

The sentencing came after lengthy testimony by about 30 Estate Financial investors who told of devastating personal losses they suffered by trusting Guth and Yaguda with their money.

In his opening remarks to the courtroom crowded with more than 100 people, Crawford said he had gained “a clear impression of the criminal nature of Guth and Yaguda,” adding that the mother and son had made many deceitful representations to investors and misdirected many payments that they received while showing a “contemptuous attitude toward investors.”

Crawford also cited Estate Financial’s “sloppy business practices” that showed Guth and Yaguda spending their time selling investors on their real estate projects rather than protecting the investments with proper diligence, such as monitoring construction of the projects and evaluating whether or not an investor was actually qualified (by having enough of an asset base).

“I have received heart-wrenching letters that placed trust (in Guth and Yaguda) is now betrayed,” Crawford said. “Far too many victims … made investments that changed their lives. They have been forced to sell homes, give up retirement to take jobs, and have lost college funding for their children.”

One of the victims speaking to the court included Sherri Bell of Cambria, who said that she and her husband believed Guth’s sales pitches for high-interest returns, and trusted what they thought was her professional experience as a banker.

They discovered instead that she and Yaguda were “adept at lying and stealing,” Bell said. “We never imagined that such evil people existed … in our backyard.”Many of the investors stressed how much they had trusted Guth and Yaguda, who assured them they were making a safe investment, and often gave their entire savings to Estate Financial after 25 or more years of work.

Most who spoke were elderly or disabled, and won’t be able to re-earn the dollars. Others said the experience of losing their money contributed to or caused poor health or depression.

“Our trusting nature made us fair game for these predators,” said 77-year-old Ruth Smith, whose husband suffers from Alzheimer’s disease. “… It’s very humbling to have to receive help from our children.”

Still others spoke of the fallout from the financial collapse of Estate Financial to the community at large: churches that invested with Estate Financial could no longer afford their pastor, and people who had lost so much they could no longer make charitable donations to orphanages and other nonprofit organizations.

Defense attorney Dyke Huish believed the judge exercised “tremendous wisdom” in the case, adding that Guth and Yaguda will leave the process penniless and with huge debts.

After the sentencing, Joeli Yaguda, Josh Yaguda’s wife, said she hoped the resolution will give people some peace, saying “we have all suffered, the investors, this community, everyone in this country is suffering.”

“I know his intent was never to defraud anyone, and that’s why today I am proud to be Josh’s wife,” Joeli Yaguda said.

Another friend of the family, Amos Beason, said the fault lay with the real estate downturn, and stressed that people’s money would be recovered as the property values began to improve.

Deputy District Attorney Steve von Dohlen expressed disappointment that the judge had not given Guth and Yaguda more time (the prosecution asked for 20 years for each).

“We believe investor money was stolen, whether or not it ended up in defendants’ bank accounts or was used to perpetuate their Ponzi scheme,” von Dohlen said.

Guth will be taken to state prison in Chowchilla, and Yaguda to Wasco, where they will stay for four to six months before they are assigned permanently there or to another state prison. They will receive credit for the year they have already spent in county jail while they went through their court proceedings.