Neral Admits He Illegally Spent Funds, Pleads Guilty

Admitting that he improperly spent investor funds and that clients of his real estate investment scheme lost about $459,000, North County businessman Robert Neral on Tuesday pleaded guilty to two counts of mail and wire fraud.

Neral, 43, faces 10 years in federal prison and up to $500,000 in fines when he is sentenced by U.S. District Judge Judith Keep on Oct. 20. Neral remains free on $50,000 cash bail--funds that later will be used to repay investors.

Under questioning by Keep, Neral admitted that he used funds solicited from new investors to pay off existing clients--a typical Ponzi scheme. Neral also said he used some of the investor funds for personal expenses.

Neral acknowledged that he knew “at the time the money was solicited” that it wouldn’t all be used to fund the real estate limited partnerships he had peddled.

The funds were used “in a way totally inconsistent with what I represented,” Neral said in court.

Neral used more than a dozen firms and limited partnerships to defraud investors and, at times, sold the same parcel of land to several different clients, according to a federal information complaint filed last month.

Seventeen clients, including some of Neral’s relatives, lost about $459,000. Neral’s investors have previously claimed that he may have attracted as much as $2 million in the last four years.

Less than two weeks ago, Neral pleaded not guilty to the two fraud charges; however, Assistant U.S. Atty. Charles F. Gorder Jr. and Robert Grimes, Neral’s attorney, said then that a change of plea was likely.

Negotiations to settle several lawsuits filed by Neral’s investors have apparently broken off, and the lawsuits are scheduled to be heard by Judge Keep when Neral is sentenced, according to Robert Jackson, an attorney representing the investors.

“We intend to ask for full restitution for all civil complaints,” said Jackson.

Neral disappeared in February, leaving his wife and three children “devastated and shocked” and his investors and creditors uncertain about the status of their money, according to acquaintances and attorneys for the investors.

He returned quietly to San Diego County in April and opened negotiations with federal prosecutors, who had begun an investigation into Neral’s activities earlier this year, and former investors who had filed suits against him.

Neral was based in a 6,900-square-foot Encinitas office building that rented headquarters-style office space to about 20 tenants.

In addition to his real estate investment firms and partnerships, Neral was, at the time of his disappearance, attempting to start a North County cellular telephone network. He had already received state Public Utilities Commission approval for the system.

With the exception of his statements in court, Neral has declined to publicly discuss his company.