State Seizes Firm That Filed for Bankruptcy

State authorities have seized control of California Resources Group, a debt-ridden Pasadena firm that they say raised $46 million from 1,000 investors for limited real estate partnerships during the last nine years.

The firm’s general partners, Russell A. Guarino and Carl A. Keith, have been accused by the state Department of Corporations of having made misrepresentations to investors and having commingled funds from 117 separate limited partnerships.

The pair filed federal Chapter 11 bankruptcy papers last week, and authorities said Friday it is unclear just how much of the funds will be available for return to the investors.

Assets Turned Over to Receiver

In issuing a permanent injunction Friday against California Resources Group, Guarino and Keith, Los Angeles Superior Court Judge Miriam A. Vogel ordered that all assets be turned over to a receiver, attorney Steven Earl Smith.

Vogel also fined California Resources Group $100,000 and ordered a stay on foreclosures against the firm’s properties, which consist mainly of apartment buildings and suburban office properties in Los Angeles County and Dallas.

An attorney for the state Department of Corporations, George A. Crawford, which sought the permanent injunction, said the action was taken to prevent further limited partnership offers and to protect the interests of the investors.

Crawford said state officials became aware of California Resources Group’s financial plight late last month after the firm began holding meetings with investors concerning its debts. The injunction was issued the day before the first foreclosure sale was scheduled to take place on one of the firm’s properties, Crawford said.

Don Davis, an attorney representing Guarino and Keith, said his clients “are basically businessmen who got themselves in trouble through some bad management decisions and bad luck.”

“Unfortunately they did not have the benefit of security counsel as they were doing these deals,” Davis continued. “That was one of their management mistakes.”

Davis said his clients specialized in buying and rehabilitating “fixer-upper” properties. But they ran into financial problems when the rental market became soft, particularly in Dallas. Guarino and Keith agreed to the appointment of the receiver, Davis added, to avoid imminent foreclosures.

Pasadena attorney Clark Byam, who invested $14,000 with California Resources Group, said Friday he believes a criminal investigation is warranted.

Byam, who invested in 1979 in a limited partnership on a City of Commerce commercial building, said: “I did not authorize them to put my money in a Dallas apartment building. . . . I think they were propping up these things in Texas that were absolute dogs.”