SEC to probe deceased Marin County investor Ken Casey’s businesses

The late Ken Casey’s two investment companies are being investigated by the U.S. Securities and Exchange Commission after the death of the prominent Novato businessman and philanthropist prompted an ownership transfer.

Last month, a San Rafael law firm, Ragghianti Freitas, was brought on by Casey’s companies — Professional Investors Security Fund Inc. and Professional Financial Investors Inc. — to review business records. The law firm conducted an audit of the real estate holdings and debt financing then discovered irregularities that raised “legitimate questions involving the structure and investment history of Mr. Casey’s companies,” according to a June 4 letter to investors by law firm partner Eric Sternberger.

Since significant questions arose about the business dealings, the companies through the assistance of the law firm approached the SEC to perform a “non-public, fact-finding inquiry,” the letter stated. The SEC initiated an investigation into the matter on May 28. At this point, the probe represents no conclusion that the firms “or anyone else has violated the law.”

Starting June 4, the law firm sent out three letters to investors, obtained by the Business Journal, declaring the audit and subsequent probe, while providing additional information. At this point, payments to note holders have been suspended, along with withdrawals of investments. It’s unknown whether normal distributions will be doled out or how long the investigation will take, according to the letters. A “full understanding of the status of each category of investment” may take between 60 to 90 days, the law firm stated.

The law firm said it will be rifling through boxes amounting to three decades of materials relating to commercial and residential deeds of trust, promissory notes, limited partnerships and limited-liability companies. It has hired Michael Hogan of Armanino LLP, a San Ramon accounting and business consulting firm, to oversee daily financial and operational duties of the companies, according to the most recent letter, dated June 14.

A receptionist reached by phone at the Professional Investors Security Fund declined to comment on the company, and the website for Professional Financial Investors was taken down.

Casey died at age 73 on May 6 of a heart attack, according to the Marin County Coroner’s office.

An avid outdoorsman and active community member, Casey’s death then the subsequent business investigation has stunned some of those in local government who knew him.

“First, his death was totally unexpected. I know he was very worried that he owns so much property and has so many renters. I think that’s what did it to him,” Marin County Supervisor Judy Arnold told the Business Journal Monday.

Arnold, who knew Casey well and appointed him to the Marin County Human Rights Commission, wonders if the economic downturn related to COVID-19 contributed to his death.

“People couldn’t make their payments,” she said, referring to the renters. “His big thing was that government needed to help developers.”

The county supervisor recalled how “very forthright” Casey was about his life and business dealings, including the time he was faced with 41 counts of bank fraud, five counts of tax evasion and an additional count of conspiracy. He was convicted in 1997 and served 18 months in jail, according to the Marin Independent Journal.

“He told me what it was like in prison and that he learned a lot and now really wanted to work in the community,” she said.

Arnold was enthused about Casey’s new acquisition of Dollhouses, Trains and More, a hobby store and entertainment venue in Novato.

Novato Mayor Denise Athas also expressed being shocked by the announcement of the investigation.

“That came as a complete surprise. I’ve known him for years. He’s the biggest landlord in town,” she said. “I don’t know how his businesses were run.”

Athas was convinced Casey was ill with medical issues that continued after surgery on his knee.

“The Ken Casey that I knew, and (his wife) Charlene as well, was involved in children’s foundations around the world that gave opportunity and did a lot of good,” she said. “It’s shocking to all of us. He was a bigger than life kind of person.”

A New York City native, Casey became a certified public accountant in 1975 and later moved to California, where he opened a tax and accounting firm before delving into real estate, according to his personal website.