Las Vegas Sun

March 28, 2024

Players in Vegas mortgage case remain frustrated

At the age of 74, Jerry Levinson is looking for work.

His life savings is tied up in Global Real Estate Investment Fund I LLC. Since the fund -- run by Las Vegas lender Connie Farris -- was seized by the Securities and Exchange Commission on Dec. 4, his disbursement payments from the fund have stopped.

On Dec. 18, a permanent receiver was placed in charge of the fund, freezing all assets and halting the disbursement payments many investors had been counting on.

"I'm not able to live. I have to go to work," Levinson said on Tuesday after a U.S. District Court hearing on the case.

At that hearing, Judge Kent Dawson did not act on a motion filed by investors to have the receiver dismissed and the fund placed in the control of fund members.

Other investors who packed the courtroom also claimed hardship since the fund was seized. Arlene and Eugene Wagner said they have taken out a home equity loan on their Henderson residence in order to pay bills since the checks stopped.

"(The fund) is the last half of our life savings," Arlene Wagner said. "We had to refinance our house."

About 600 investors contributed about $48 million to the fund, court records show. Many have complained that they should be allowed to manage the fund themselves and have access to their investments. They also claim the receiver is wasting the remaining assets by spending money on expensive legal and financial advisors.

The receiver's first bill for fees and expenses was $150,000. Dawson on Tuesday said he will wait 10 days to rule on that bill, allowing time for other parties to comment.

In his December order appointing the permanent receiver, Dawson found credibility in the allegations made against the defendants -- Farris, Global Express Capital Real Estate Investment Fund I Inc., Global Express Securities Inc., Global Express Capital Mortgage Corp., and Global Express Securities President Dawn Reese -- in the lawsuit filed by the SEC.

In its lawsuit, the SEC claimed that the companies were operating a "Ponzi-like" investment scheme.

The lawsuit claimed that the fund was promising returns to investors of at least 12 percent. The fund, however, was not generating enough income to support those returns and was instead using personal funds from Farris and financial contributions from new investors to make payments to existing investors, the lawsuit claimed.

Between March 2003 and September 2003, the fund paid out $2.3 million to investors but it only earned $154,000, the SEC said in its initial lawsuit. On Tuesday the SEC said the fund earned just $1,100 in December and January.

Bryan Clark, an attorney working for the investors, said his clients are not being heard as their assets dwindle. Clark has not yet been granted formal standing to appear on behalf of investors in the case.

"The court has yet to recognize any attorney representing any investor or investor group," he said. "There has to be a way to represent the investors."

Following the hearing, the receiver, James Donell on Los Angeles, said he can appreciate the concerns of the investors. He added, however, that the investors are oversimplifying the process of managing the fund.

"I have a lot of empathy for them," Donell said. "My job is to recover as much money as I can for them."

His attorney, Byron Moldo, added that there are far more parties than the fund investors seeking to recover money, including landlords, vendors and trust-deed investors.

"It's extremely complicated," Donell said.

In a 60-day report on the fund Donell submitted last month, he said preliminary indications show about $10 million in assets remaining in the fund. He also said that a lack of cooperation on the part of Farris has made the process difficult.

Donell said he is "starting from scratch" in tracing the fund's assets.

Charles Clawson, an attorney representing Farris, said the receiver has not allowed Farris access to the company's documents, preventing her cooperation.

"The SEC has found her guilty and now we are trying to prove her way back to innocent," he said.

Clawson, however, has asked the court for permission to withdraw from the case. After the hearing he said the request was based on Farris' inability to pay the legal bills. Dawson said he will not act on Clawson's motion for at least two weeks, giving Farris time to obtain new representation.

Also in Donell's report, he said at least 16 other companies controlled by Farris and her husband have ties to the fund and should be controlled by the receiver. He said those companies operated from the same location and "transferred funds without regard to attempting to maintain any separate identity."

He also said "substantial funds" were transferred from the fund to Global Express Capital Corp. and then to Farris "for no apparent consideration."

One of the properties the fund invested in was a home Farris was building as her own residence. The price of the 9,600-square-foot home in Henderson was initially expected to be $2.3 million, Donell's report said. The price, however, swelled to $2.8 million and has yet to be completed.

Farris was not in court on Tuesday. Her husband, Rex, attended the hearing but declined to comment.

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