We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
Defendants: The Companies, LLC, Kristoffer A.
Krohn, Stephen R. Earl, and Michael Krohn
What: This action stems from the alleged
fraudulent offer and sale of unregistered securities for the
purchase of distressed real estate for investment. Allegedly,
"[Defendant] The Companies or its subsidiary... initiated four
unregistered offerings of securities from January 2009 to June
2011." According to the complaint, "the four offerings
raised a total of approximately $11.9 million from approximately
169 investors."
The complaint states that the Defendants established a long-term
strategy of purchasing real estate owned properties or
"REOs". The complaint describes an REO as a
"portfolio[] of homes that have been foreclosed upon and
packaged together to be re-sold by a bank or lending
institution." Allegedly, the Defendants planned to purchase
REOs and "then donat[e] or sell[] off the homes that were in
complete disrepair, repairing those homes that were worth
repairing, renting the repaired homes for a steady cash flow, and
later selling the homes at a profit when the homes appreciated in
market value."
According to the complaint, the Defendants obtained valuations
of the individual properties in Defendant Kristoffer Krohn's
REO, by hiring a third party real estate evaluation company, which
used broker price opinions or BPOs. The BPOs evaluated all of the
properties in the REO at approximately $2.9 million. Purportedly,
the Defendants also used an online software program, RealQuest, to
evaluate the REO properties. The complaint states that the
RealQuest software valuations did not account for the fact that
many of the REO properties "had significant liens or other
encumbrances that exceeded the value of the properties, thereby
giving the properties a negative equity." Allegedly the
RealQuest valuations for the REO properties "totaled
$12,272,986, approximately $9.4 million more than the total of the
BPO values."
The complaint states that "in order to raise money for the
purchase of REOs, The Companies and [its subsidiary] initiated four
private offerings[.]" According to the complaint, multiple
offerings supplied investors with material misrepresentations and
omissions, including the failure "to disclose that [the]
Defendants already knew that [Defendant] Kris Krohn's REO
properties had substantial problems and encumbrances."
Additionally, the Plaintiff alleges that, in more than one private
placement, the Defendants provided RealQuest valuations without
disclosing "the significant limitations to RealQuest
valuations in determining current market value [of real
estate]."
Based on these allegations, the complaint alleges two causes of
action against the defendants: fraud in the offer and sale of
securities and offer and sale of unregistered securities. The
plaintiff seeks a judgment that the Defendants committed the
violations, an order enjoining the Defendants from engaging in
similar transactions and courses of business, and payment of civil
penalties.
Where: United States District Court for the
District of Utah
When: August 6, 2012
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In its first public Policy Statement regarding the treatment of cooperation in investigations, the Public Company Accounting Oversight Board provided guidance on how it will consider a firm’s or associated person’s "extraordinary cooperation".
After a two-week trial before United States District Court Judge Edward Chen of the Northern District of California, David Nosal was convicted of three counts of violating the Computer Fraud and Abuse Act.
The U.S. Court of Appeals for the Second Circuit in United States v. Walsh ruled that the defendant could not use the proceeds from the sale of his house to fund his criminal defense because he used tainted funds to obtain the home.
In Commonwealth v. Nies, No. 5793-2012 (Pa. Ct. Com. Pl, Apr. 18, 2013), the Honorable John A. Boccabella of the Berks County Court of Common Pleas applied a somewhat rare exception to the requirement that those who do not submit to a blood test in connection with a DUI investigation are subject to enhanced sentencing requirements.
Last week, Liverpool striker Luis Suarez was suspended for 10 games for biting a Chelsea player during a globally broadcasted English Premier League game.
On March 26, 2013, the Office of Inspector General published much-awaited guidance on physician-owned medical device distributorships (commonly known as "PODs") in the form of a Special Fraud Alert.
