The Securities and Exchange Commission filed a lawsuit Tuesday accusing Newport Interstate Properties Inc. of securities fraud and seeking to permanently enjoin the company from further violations of federal securities laws.
The action, filed in U.S. District Court in Los Angeles, is the latest attack against the Newport Beach company resulting from complaints by disgruntled investors. Late last month, the real estate syndication company agreed to voluntarily reorganize under U.S. bankruptcy laws after 11 Orange County investors in two civil suits accused the company and its managers of refusing to account for investments totaling $897,000.
The SEC's civil complaint alleges that Newport Interstate and three of its officers "commingled, misused and misappropriated investor funds," violating registration and anti-fraud provisions of federal securities laws.
The officers--President Richard J. Lorenat, Vice President Michael Joyce and Controller Kenneth L. Shattuck--also were accused in the SEC suit of violating federal broker registration provisions.
$11 Million Allegedly Raised
None of the three nor their lawyer could be reached for comment Tuesday.
According to the SEC lawsuit, Newport and its officers have raised at least $11 million from at least 400 investors for real estate syndications in Texas, Arizona and California.
But at least 23 of the company's limited partnerships and real estate parcels "have either been sold at public auctions in foreclosure or have had foreclosure proceedings" started against them, the complaint says--all allegedly without investors' knowledge.
Filed along with the SEC suit Tuesday was a consent decree in which Lorenat, Joyce and Shattuck agreed to a preliminary order forbidding them from future violations of securities laws. In agreeing to the temporary order, the three officers did not admit or deny the SEC allegations.