Litigation Release No. 22476 / September 10, 2012
Securities and Exchange Commission v. Louis V. Schooler and First Financial Planning Corporation d/b/a Western Financial Planning Corporation, Case No. 12 CV 2164 LAB (JMA) (S.D. Cal. September 4, 2012)
SEC SHUTS DOWN SAN DIEGO-BASED REAL ESTATE INVESTMENT FRAUD SCHEME
The Securities and Exchange Commission today announced an asset freeze against a San Diego-based firm and its owner accused of running a real estate investment fraud that raised approximately $50 million from hundreds of investors nationwide.
The SEC alleges that Western Financial Planning Corporation and Louis V. Schooler sold units in partnerships that Western had organized to buy vacant land in Nevada and hold for sale at a profit at a later date. Schooler and Western failed to tell investors that they were paying an exorbitant mark-up on the land, in some cases more than five times its fair market value. Schooler and Western also failed to tell investors that the land held by the partnerships was often encumbered by mortgages that Western used to help finance the initial purchase of the land.
The SEC’s complaint filed in federal court in San Diego alleges that Western and Schooler misled investors since 2007 by providing them with comparative prices or “comps” of supposedly similar plots of land that had sold for prices higher than those offered by Western. In reality, the real estate comps that Schooler and Western provided were in no way comparable to the land sold by Western. The SEC also alleges that since the spring of 2011, Schooler paid “hush money” to silence investors who discovered they had been defrauded, allowing the scheme to continue.
The Honorable Larry A. Burns for the U.S. District Court for the Southern District of California yesterday granted the SEC’s request for a temporary restraining order and asset freeze against Schooler, Western, and all entities under Western’s control, and appointed Thomas C. Hebrank as a temporary receiver over Western and the entities. Judge Burns has scheduled a court hearing for Sept. 17, 2012, on the SEC’s motion for a preliminary injunction.
The Commission’s complaint alleges that Western and Schooler violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and seeks preliminary and permanent injunctions, appointment of a permanent receiver, disgorgement of ill-gotten gains with prejudgment interest thereon, and financial penalties, against each of them.