Dear Fellow Investor,
Part 1: Bankruptcy Court Nullifies Management Change Vote
On August 2, 2013 Bankruptcy Court Judge Albert ordered: "Any ballot, letter or
correspondence received, in response to a solicitation from the Debtor, that casts a vote in favor of replacing PCF as servicer and/or manager under any Agreements, is of no force and effect and PCF shall not be removed or replaced, as the servicer and/or manager, unless and until further order of this Court".
Have you received a call or letter urging you to cast your vote since the Bankruptcy Court's order? Did you vote "Yes" unaware that it is illegal to transfer the assets of a bankruptcy estate without the expressed permission of the bankruptcy court; and that our Agreements with Point Center to manage our investments are considered assets of the Point Center estate?
If you received a call, the US Trustee, who was appointed to protect our investments and manage Point Center Financial, would like to know about it. If you voted yes we ask you to reconsider and and expressly rescind your vote. Here's why:
Dan Harkey sent a letter at the end of July to all Investors asking us to vote to "approve the replacement of Point Center as Servicer under the Loan Servicing Agreements and as Manager under the Operating Agreements of the real estate owned limited liability companies ("REO LLC's)." An emergency hearing was called for by the Creditors Committee that was heard by the bankruptcy court on July 31st and the Judge found that there was "good cause to grant the Committee's motion" and ordered that the Office of the United States Trustee to "immediately appoint a Chapter 11 Trustee" to manage Point Center Financial, National Financial Lending, the REO LLCs, and all related assets.
Judge Albert further ordered:"Any ballot, letter or correspondence received, in response to a solicitation from the Debtor (Harkey), that casts a vote in favor of replacing PCF as servicer or manager under any Agreements, is of no force and effect and PCF shall not be removed or replaced, as the servicer and/or manager, unless and until further order of [the] Court."
In recently filed motions and briefs in support of the emergency hearing it was disclosed that in 2012 Harkey appeared to have transferred $2.3 million of investor trust funds from National Financial Lending to a company called "Cal Comm Capital" (another Dan Harkey entity) and paid his attorney, Jeff Benice, over $1.2 million from NFL for representation in the Charton lawsuit - even though the NFL LLC was dropped as a defendant long long ago. Harkey also appears to have endorsed a check to Jeff Benice in 2012 from the borrower of the Preserve loan for $302,000.
We subsequently learned that proceeds from the sales of the Palm Spring Country Club and Georgetown assets were apparently paid to Cal Comm Capital. Palm Springs Country Club was sold on March 4, 2013. To date, no information about the $1,000,000 sale, nor cash-call reimbursements have been received by members of the Palm Springs Country Club Investments REO LLC. Neither has any timely information or reimbursements been received by investors on the sale of the Georgetown asset. To date, none of the sale proceeds have been returned to Point Center.
Rather than opine about the above we prefer to let the information speak for itself. We do, however, recommend investors who have not sent in their ballots to vote "No". If you already mailed in your vote and wish to rescind it, we urge you to do so promptly. According to the Court's Order, your vote rescissions can be emailed directly to Harkey's bankruptcy counsel, Robert Goe, at rgoe@goeforlaw.com. If you would like us to forward your rescission to the new Trustee and related parties, feel free to copy pcfinvestor@gmail.com and we will see that they promptly receive it.
If you were contacted by Point Center or called and were urged to cast your vote after the August 2nd Court Order we would like to hear from you. Contact us at pcfinvestor@gmail.com or simply reply to this message.
We believe that the appointment of a Trustee is in everyone's best interests and will ensure an orderly and ethical management of the Point Center estate while protecting the remaining value of our investments. In time a clear picture of what happened to our investments and why should emerge. We recommend patience and cooperation with the new Trustee who will have his hands full for a while until he can get his feet on the ground.
In the mean time, every document filed with the bankruptcy court can be found online at the following URL:
Part 2: The Charton v PCF Civil Trial
Many investors are unaware that the jury in the Charton v Point Center civil litigation decided in favor of Charton and awarded $11,000,000 to the plaintiffs in damages in this first phase of a four phase trial.
On July 11, 2013, after nearly three months of trial, the jury reached a verdict and found "by clear and convincing evidence", that Point Center Financial and Dan Harkey "breached their fiduciary duty to their investors acting with malice, oppression or fraud and engaged in acts and omissions that constituted gross negligence, intentional misconduct or a knowing violation of law without the utmost good faith."
The jury further found that Mr. Harkey and Point Center Financial committed elder abuseupon a number of pliaintiffs who were 65 years or older at the time of their investments and that he "took/hid/appropriated/obtained or retained plaintiff's property for a wrongful use, with the intent to defraud, or by undue influence."
Relevant questions to the jury and their responses are as follows:
1. Did PCF engage in any act or omission as it relates to the plaintiff that constitutes gross negligence, intentional misconduct or a knowing violation of law without the utmost good faith?
X Yes _____No.
2. Did Harkey engage in any act or omission as it relates to the plaintiff that constitutes gross negligence, intentional misconduct or a knowing violation of law without the utmost good faith?
X Yes _____No.
3. Did Dan Harkey take/hid/appropriate/obtain or retain plaintiff's property for a wrongful use or with the intent to defraud or by undue influence?
X Yes _____No.
4. Did any of the Plaintiffs prove by clear and convincing evidence that Point Center acted with malice, oppression or fraud?
X Yes _____No.
5. Did any of the Plaintiffs prove by clear and convincing evidence that Dan Harkey acted with malice, oppression or fraud?
X Yes _____No.
Behind the scenes, the Harkey defense team had numerous motions pending designed to overturn or nullify the jury's verdict. Judge Perk, upon hearing oral arguments ruled as follows:
1. Harkey committed fraud upon Lloyd Charton,
2. That Dan Harkey is the alter ego of Point Center and that Point Center is the alter ego of National Financial Lending,
3. Both Defense motions for nonsuit were denied.
It was left unproven whether or not Diane Harkey was an employee of Point Center and she was dropped from that portion of the trial. While there was strong evidence to suggest she was involved in the fraudulent transfer of the Harkey Ritz Cove home, Judge Perk did not believe the evidence was sufficient to justify a ruling for the plaintiffs and she was dismissed with prejudice.
Phase 1 of the trial addressed issues with the National Financial Lending pool, Phase 2 of the trial will address the Mortgage Note Program and is scheduled to begin on August 20.
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Sincerely,
PCFInvestor
PCFInvestor is an email newsletter researched and published by concerned investors for fellow Point Center Financial investors. We are not affiliated with any other web sites other than those mentioned immediately above, nor are we employed by Point Center, Dan Harkey or related entities. The information herein is derived primarily from public records, testimony, and confidential sources. All opinions expressed are our own. While we make every attempt to ensure the accuracy of the information provided the authors assumes no responsibility for any errors or omissions that appear in this document.
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