Pomona man accused of running Ponzi scheme has companies shuttered

A Los Angeles federal judge barred Ben-Wal Leasing Co. and Ben-Wal Management Inc., and the owner of the two companies, from doing business in response to a complaint alleging investor fraud filed by the Securities and Exchange Commission.

The civil complaint said the two firms, based in Pomona and run by Jerry E. Benson, ran a Ponzi scheme that took nearly $6 million from about 125 investors, many of them elderly, from mobile home parks throughout California.

The court ordered a halt Wednesday to the alleged fraud and also froze the assets of Benson and his Ben-Wal companies. “Mr. Jerry Benson has and will continue to cooperate with the SEC’s efforts to recover investor funds,” Benson's lawyer, J. Brian Watkins, said in a statement.

“Though cooperating with the SEC, Mr. Benson disputes any allegations of fraudulent conduct and notes that the continuing shift from print to electronic media combined with the economic downturn resulted in a failure of the business,” Watkins said.

In the complaint, the SEC said that since about 1990 Benson had been offering and selling investments in Ben-Wal Leasing through promissory notes. Investors were lured with guarantees of 12% annual returns, and Benson told potential investors that others had earned returns as high as 18%, the commission said.

Ben-Wal Leasing raised at least $5.7 million from about 125 investors from 2004 to April of this year, court documents said. Mobile home parks across the state were specifically targeted with circulated advertisements, the complaint said.

Investors were falsely told that financiers had never lost money through Benson and that their money would be used to buy printing equipment that would be leased out with the lease payments producing the promised 12% returns, the SEC said.

Instead, much of the funds were transferred to a company owned and operated by Benson’s son, Scott W. Benson, known as CTR Web Printing Inc., court documents said.

CTR Printing also was the only company leasing printing equipment from Benson, though CTR failed to make regular lease payments to Ben-Wal Leasing, the complaint said.

New investor funds were used to make principal and interest payments to previous Ben-Wal Leasing investors, the SEC said.

In May 2009, Benson and Ben-Wal Leasing received a desist-and-refrain order issued by the California Department of Corporations, which demanded the man and his business stop offering or selling securities in California in violation of state law.

The SEC’s complaint said that Ben-Wal Leasing stopped making interest payments to investors in June 2009, but then started up a new company, Ben-Wal Management Inc. to continue selling notes.

When Benson stopped paying investors, he told them it was because of an audit; later investors were told they weren’t getting paid because the SEC wasn’t approving his payments, but that he was working with the commission to “expand business,” the complaint said.

The court order also froze the assets of CTR Printing and appointed a temporary receiver over the two Ben-Wal companies and CTR. Investors are asked to contact the SEC’s Los Angeles Regional Office by telephone at (323) 965-4574 or by e-mail at ben-wal@sec.gov if they have questions about the commission’s actions or future court hearings.

-- Nathan Olivarez-Giles

Are loan modifications merely postponing default?

Consumer advocates expressed some skepticism today about a Fitch Ratings study predicting a high redefault rate for mortgages that are restructured to avert foreclosure.

The study, which I wrote about in today's Times, looked at mortgages bundled up on Wall Street during the housing boom to back debt securities. It projected that 65% to 75% of subprime mortgages in these loan pools would be at least 60 days delinquent within a year of when they were modified.

Center for Responsible Lending officials said the study doesn't adequately account for the more drastic lowering of payments expected as Obama administration loan-mod programs kick in. The buzzword here is "sustainability" -- getting the loan payment to a level at which the borrower can realistically be expected to afford it over time.

The Obama programs aim at persuading lenders and loan investors to reduce payments on first mortgages to 31% of a borrower's income. The initiatives include financial incentives for mortgage customer-service firms to accomplish this by lowering interest rates, extending loan terms and sometimes suspending interest payments on part of the principal of the loan.

"The Fitch report applies to non-Obama plan mods," Center for Responsible Lending spokeswoman Kathleen Day said in an e-mail. "So this just shows the need for real sustainable mods."

Any thoughts on whether Fitch was overstating the potential problems?

-- E. Scott Reckard

Owner of downtown L.A.'s Marriott Hotel files bankruptcy

L.A. Hotel Venture filed for Chapter 11 bankruptcy protection today in an effort to stave off creditors, access cash and to keep its Marriott Hotel in downtown Los Angeles open for business.

 

The filing lists about $500 million of debt and about $100 million in assets for the company owned by businessman Ezri Namvar.

 

But today's filing isn't the only bankruptcy efforts Namvar is facing.

 

Court records show Namvar declared bankruptcy for his investment company, Namco Capital Group, in January and for himself in March as a result of petitions filed against him and his company in December by investors who say they are owed more than $400 million.

 

The 469-room Marriott Hotel at Figueroa and 3rd streets was purchased by Namco in 2007. Namvar didn't say how much Namco paid for the 14-story hotel at the time, but real estate experts valued the sale at about $115 million.

 

-- Nathan Olivarez-Giles

Investors fuel Detroit's 'Landlord Nation'

If you think things are bad in Southern California, Detroit's emergence as a "landlord nation" may give you an idea of how much worse things could get. From the Associated Press at latimes.com:

Welcome to Landlord Nation, where foreclosure notices are plentiful and for-sale signs offer at least 1,800 homes for under $10,000 that once were worth at least 10 times more.

In extreme cases, homes are on sale for $1 or less, which has enticed investors to Detroit from as far away as the United Kingdom and Australia.

Hmm, you would think the film "Money Pit" would have made it to those parts of the world.

Detroit now has the lowest ownership rate for single-family detached homes of the 20 largest cities in the country, according to data analyzed by longtime Detroit demographer Kurt Metzger.

Even the sale of U.S. Housing and Urban Development homes has been impacted by the poor housing climate in Detroit. The average sales prices of such homes plunged from $46,702 in 2003 to $8,692 last year. Through the first month of 2009, average sales were $6,035.

Still, not all of Detroit's real estate market has bottomed out. Listings include a seven-bedroom, 11,580-square-foot Tudor in Detroit's historic Indian Village neighborhood for $849,900, and a $765,000 penthouse condo in the city's Albert Kahn Building.

One person's disaster can be another's "investor's dream," as the story says. In this case, though, I don't see it. But it does put the Southland housing situation in perspective. We've still got a long way to go before we'll be vying for the title of landlord nation.

--Lauren Beale

Thoughts? Comments?

Photo: Local investors Anthony Pierson, left, and Henry Suell look over the house they purchased for $8,500 in Detroit in early February. Credit: Carlos Osorio / Associated Press

Cash purchases by investors on the rise

One point mentioned in Tuesday's L.A. Land post about investor Bruce Norris buying up homes in the Inland Empire was the use of all-cash transactions in making these purchases.

Is all-cash buying a trend? It certainly seems to be on the upswing. From Wednesday's Wall St. Journal article, "Bargain-Hunters Descend, Cash in Hand":

Falling home prices are spurring an increase in all-cash home sales in markets that have been hardest hit by the foreclosure crisis, an indication that bargain hunters have descended on the markets looking for deals.

Homes financed with cash comprised one-third of sales in Phoenix last month, up from 19% one year ago, according to a report by Raymond James & Associates Inc. In Sacramento, Calif., all-cash sales accounted for 24% of total home sales last month, up from 8% in January 2008 and 3% in January 2007, according to the Sacramento Association of Realtors. Sacramento and Phoenix have each seen home prices fall by one-third in the past year....

In some cases, cash buyers are finding that they can get a deeper discount by making an all-cash offer.

All-cash investors will surely be less likely to walk away than their heavily leveraged counterparts from the boom years. Seems like an upside for the neighbors to me.

--Lauren Beale

Thoughts? Comments?

Photo: A foreclosure sign blows in the wind in front of a home under foreclosure in Antioch, Calif. Credit: Paul Sakuma / Associated Press

Related post:

Southland investors revisit buy and hold strategy

Southland investors revisit buy and hold strategy

"Dealers, dreamers see gold in California housing bust" from Reuters looks at the investment potential of Southland houses:

"This is the buying opportunity of our lifetime," said Bruce Norris, who heads an investment group that expects to purchase about 100 homes this year in Southern California's Inland Empire region....

Norris Investment Group looks for homes built between 1980 and 1990, typically under 2,000 square feet (186 square meters). Older houses come with too many maintenance "surprises," Norris says, and larger places can be tough to sell or rent in hard times.

Last month the group paid $55,000 for a foreclosed home that was worth $360,000 at the top of the market. Norris expects to spend $30,000 on repairs and rent it for $1,200 a month until the market turns around.

The group also hopes to minimize risk by owning the homes free and clear, thus accruing little debt.

"You cannot have this [low] level of pricing be permanent because it costs too much to build a home here," Norris said. "That's how you know you're making a logical decision when everything is falling around you. When you can buy a finished product someone will want to live in for $55,000, that just has to make somebody pretty wealthy someday."

Some investors in previous cycles did find success with the buy and hold. The late David Schumacher, author of the book "Buy & Hold: 7 Steps to a Real Estate Fortune," did well buying in the South Bay. But, he notes in his book, the single most important factor is "finding the right location where it is possible to conservatively predict potential growth." He picked the South Bay decades ago because it was close to an expanding LAX and had a number of engineering jobs when he was shopping. And the Inland Empire...?

-- Lauren Beale

Thoughts? Comments?

Photo: Homes in hilly East Hermosa are a distance from the beachfront scene but still have ocean views. Credit: Allen J. Schaben / Los Angeles Times