Marin County Ponzi scheme victim, investor gears up for class-action hearing in June
While masterminds of what authorities say was a $330 million Ponzi scheme in Marin County were living the good life buying celebrity estates and other lavish luxuries for years, Tina Benson was looking forward to her own good life in retirement.
Instead, the Sausalito woman is hoping a class action suit will help her gain back more than $500,000 she says she lost at the hands of Professional Financial Investors and Professional Investors Securities Fund, based at 350 Ignacio Blvd. in Novato. Casey’s two firms have declared bankruptcy, and the courts approved the selloff of millions of dollars in property.
However, Benson has since only recovered $121,000 as one of 1,267 investors bilked by the late Kenneth Casey, the investment firms’ founder, and the companies’ CEO, Lewis Wallach, an Encino man who started out as a bookkeeper there. Casey died of a heart attack in May 2020, and Wallach was convicted of fraud last year.
“I’m 60. I’m supposed to be preparing for retirement. Now I can’t retire, and I’ll be working full time. This is not the future I planned,” Benson said, adding she’s not alone. “Many investors have declared bankruptcy. Some can’t pay their utilities. It’s been devastating.”
Both she and her ex-husband had invested and lost money in Casey’s real estate firms from the sale of their house they owned together before their divorce.
The real estate magnet has been accused of running the investment scheme alongside Wallach, who was sentenced to 12 years in prison. An audit conducted by Armanino LLP, a San Ramon accounting firm, and overseen by Ragghianti Frietas, a San Rafael law firm, found accounting irregularities dating back to 2015. Benson testified against Wallach. At trial, prosecutors showed the scheme enabled him to buy Judy Garland’s $3.54 million Malibu mansion, luxury vehicles, expensive jewelry and coin collections.
Benson’s indoctrination to the PFI and PISF operations, of which the boards have since dissolved, started with an initial investment of $100,000 in 2010.
“Ken and Lewis brought out binders. It all looked very impressive, very legitimate. And Ken, he was a larger-than-life character,” she said of the introduction to PFI.
Timely interest payments as well as glossy charts and graphs piqued her interest in investing more when she could.
But two weeks after Casey died, and following Wallach’s letter promising investors a succession plan was in place, she talked to Wallach to check in to ensure he and the company was OK.
“He sounded very weird. He told me: ‘We’re being investigated by the (U.S. Securities and Exchange Commission), and I can’t talk about it.’ Lewis took $28 million, and he acted like he didn’t know anything. That was a troubling conversation that day,” she said. “I’ve been through all five stages of grief.”
“From September 2015 through May 2020, Wallach and Casey raised more than $330 million by falsely telling investors that their money would be used primarily to invest in multi-unit residential and commercial real estate managed by PFI,” according to the SEC complaint filed in September 2020.
The investment companies have been embroiled in a two-year legal battle in bankruptcy court — with more than $20 million in attorney fees.
The $436 million in sales of the 1.4 million square feet of the companies’ commercial and multi-family space netted a “disappointing” amount for investors like Benson, she said.
In August 2020, a handful of other investors sued Umpqua Bank. The Oregon-based financial institution is accused in the complaint of “aiding and abetting” the fraud, plaintiff attorneys claim in the proposed class action filing.
“They should have known,” Benson said, especially since Casey, who once worked as an accountant, lost his CPA license in 1997. He was convicted of 21 counts of bank fraud; five counts each of tax evasion and filing false income tax returns; and another count of conspiracy to defraud the U.S. government. He was sentenced to 18 months in prison.
Despite his previous legal troubles, Casey built up a reputation as a prominent businessman and philanthropist, managing 70 properties with a value exceeding $550 million before his death.
“This class action pending is the only remaining significant hope to make us whole again,” Benson said.
A hearing to determine its class-action status will be heard June 9 in U.S. District Court in San Francisco.
In this case, four other investors — Shela Camenisch, Dale Dean, Luna Baron and Eva King — are suing the bank for allegedly not living up to their fiduciary responsibility while funds from new investors were crafted to pay existing ones — hence, a rob-Peter-to-pay-Paul Ponzi scheme. Some of the money found its way into the PFI corporate executives’ personal accounts, the suit alleges. The document also states Umpqua Bank officer June Weaver assisted in the transactions. The bank did not confirm whether Weaver still works at the Novato branch.
