Amcor Capital Corp., the Irvine real estate syndicator under criminal investigation by the Internal Revenue Service for alleged tax fraud, has been sued for alleged fraud and negligence by a disgruntled investor.
The suit was filed in U.S. District Court in Los Angeles on June 29 but was not served on Amcor and its officers until earlier this week. Named as defendants are Amcor, founder Frederick H. Behrens of Newport Beach, former president George L. Schrieber of Villa Park, and current president Robert A. Wright, an Illinois resident.
The action was filed on behalf of a South Carolina investor, said Edward Gartenberg, a Los Angeles attorney whose firm filed the suit. Gartenberg said he will seek to establish a class action on behalf of all the investors in the nearly 140 limited partnerships established by Amcor.
In a search warrant affidavit filed in U.S. District Court in Los Angeles earlier this year, an IRS agent alleged that Amcor and its top officers defrauded the government of as much as $700 million by setting up phony agricultural leases that enabled investors to take deductions for expenditures that were not actually made. More than 4,000 people pumped $200 million into Amcor-arranged agricultural investments from 1982 to 1986 to take advantage of substantial tax benefits allowed by the government during that period.
Liability for Back Taxes
While the individual investors are not liable in any criminal action the IRS might bring, they would be liable for back taxes, interest and perhaps penalties for deductions taken that are shown to have been created by a fraud.
Although the suit does not seek specific damages, it accuses Amcor and the other defendants of violating the federal Racketeering Influenced and Corrupt Organizations Act--a charge that, if proven, triples any damages that are awarded in a civil suit.
Wright said Wednesday that he is aware of the suit but that he and the other defendants have been advised by the company's tax attorneys to make no comment.
He also has declined comment on the allegations in the IRS probe.
Attorneys handling the suit against Amcor said it was filed on behalf of investor J. Drayton Hastie, a retired telecommunications industry executive who invested $160,000 in three Amcor partnerships.
Although the suit was filed after the IRS criminal probe was publicly revealed on June 8, and cites the scheme outlined in the IRS agent's search-warrant affidavit, Gartenberg said it was being prepared months before that. He said Hastie had grown concerned because Amcor officials were difficult to reach and it was hard to get information from them.
The suit alleges that Amcor, which acted as managing agent for the various limited partnerships, and Behrens, Schrieber and Wright, who acted as general partners, failed to fully inform investors of their risks.
The suit also alleges that the three men and the company committed securities fraud by failing to disclose in the circulars submitted to investors several crucial aspects of Behrens' background--specifically that he had filed a personal bankruptcy petition in 1975 and had stipulated to a 1974 judgment that was based in part on a claim that he defrauded a client.