Can’t Untangle Partnerships, Receiver Says

Nearly $90 million invested in 44 real estate limited partnerships was so mismanaged and commingled by officials of American Principals Holdings that it is almost impossible to trace a single investor’s funds, the receiver in charge of the Del Mar-based firm said Friday.

In court papers filed in federal court here, receiver Ashley S. Orr said the only way to recoup investors’ funds is to consolidate the partnerships into one entity.

U.S. District Judge Leland C. Nielsen will rule on Orr’s consolidation request May 20.

The court document estimates that American Principals Holdings raised about $90 million from about 3,000 investors between 1977 and March, 1984. Previous estimates put the amount at $70 million.

American Principals Holdings and its affiliated companies managed assets valued at about $250 million, although most were highly leveraged, according to the filing.

Others Not Included

An additional 27 APHI limited partnerships involving equipment leasing and research and development are not included in the consolidation request. Instead, Orr said, “we’ll find another general partner” for those entities.

Although Orr and his attorneys have not found any commingling in those partnerships, they have estimated their value at zero. “That way, whatever comes in is gravy,” Orr said in an interview.

Depending on how much money is eventually retrieved from the real estate partnerships, APHI investors could receive between 57% and 91% of their original investments, Orr said.

“Everyone will take their lumps, but the lumps won’t be as bad as (investors thought) they would be,” he said.

Orr, who has already filed suit against APHI’s former management, said he probably will file additional suits soon. The former management also has been sued by hundreds of investors.

In addition, the firm last year was sued by the Securities and Exchange Commission after an internal company investigation uncovered various “financial and operating irregularities.” The U.S. attorney’s office in San Diego also is investigating the once-booming company.

So widespread was the commingling, Orr said in his filing, that former APHI management used investors’ funds “wherever and whenever cash needs arose.”

Of the $13 million raised for one of the partnerships, he said, about $9 million was borrowed directly by APHI serving as general partner.