More than a hundred state and local investigators raided the offices of Glen Ivy Financial Group, the nation's largest operator of time-share resorts, early Tuesday in search of evidence of fraud in the alleged overselling of some resorts.
The Riverside County district attorney's office served search warrants on the company at its Corona headquarters and on two company executives at their homes in connection with an ongoing criminal investigation of the controversial firm.
No arrests were made but several Glen Ivy employees were subpoenaed to appear before a state grand jury. Sources close to the investigation said the grand jury is considering filing grand theft, forgery and other charges against the company.
"We have probable cause to believe that fraudulent activity may have been committed in the sale of time-shares," said Jay Orr, supervisor of special prosecutions for the Riverside County district attorney.
Glen Ivy is familiar to many Southern Californians. Its telemarketers call about 100,000 people a month to sell time-shares, and employees often pass out brochures at events such as California Angels baseball games and air shows. The company routinely runs prize contests to attract customers.
The 16-year-old firm operates 24 time-share resorts in eight states and has about 60,000 customers. Time-share contracts give people the right to spend a specific period every year--usually a week--at a group of resort properties.
Tuesday's raid began in the early morning with Glen Ivy's Corona complex cordoned off with yellow police tape as investigators began seizing truckloads of customer files and company documents. Private computer experts hired by investigators began sifting through Glen Ivy's extensive computer system.
Glen Ivy, which has not been charged with any wrongdoing, said in a statement that it had no information about the investigation but "it considers the inquiry to be a very serious matter" and will take all "necessary steps to clear up the matter promptly."
Though regulators said Glen Ivy can continue selling time-shares, it was unclear how the company would be able to operate without its customer files and access to its computer system.
Sources who asked not to be identified said the Riverside County district attorney, the state attorney general and state Department of Real Estate believe that Glen Ivy has oversold some time-shares, including resorts in Laguna Beach and Hawaii.
Glen Ivy was the subject of a 1989 federal grand jury probe into alleged overselling of resorts. The investigation was dropped after 11 months with no charges filed.
At that time, a former company consultant claimed that Peter Giummo, then Glen Ivy's chief financial officer, had used a photographer's light table to trace over the signatures of inactive customers on time-share deeds and then resold those units to new customers.
Glen Ivy officials adamantly denied those charges, saying in an interview last summer that there was "no evidence" of records being altered or other misconduct.
In July, Glen Ivy Properties, the company's time-share unit, had its real estate license suspended for a range of infractions, including incomplete record-keeping on customer accounts. Without admitting any wrongdoing, Glen Ivy paid a $20,000 fine and agreed to a five-year probation in order to have its license restored.
About the same time, the attorney general's office opened an investigation into Glen Ivy's telemarketing practices.
On Tuesday, Giummo's Canyon Lake home was searched by state investigators, who removed a photographer's light table from his attic.
Glen Ivy spokesman Alexander Auerbach declined comment except to say Giummo was "upset to have armed police show up at his house when his kids were there."
Giummo was recently replaced as Glen Ivy's chief financial officer and named president of Equity Mortgage Corp., a Glen Ivy subsidiary that formerly serviced mortgages for Glen Ivy exclusively but is now seeking outside clients.
State investigators also searched the Moreno Valley home of Brian Wahlstrom, who oversees Glen Ivy's computer system.
Investigators said some employees have told them that Glen Ivy maintained two sets of computer records in an attempt to disguise the alleged overselling of resorts.
"It's very easy to hide evidence within a computer," an investigator said.
A former high-ranking Glen Ivy employee who asked that his name not be used said Tuesday that more than 5,000 customer documents were forged. "Too, too many people knew" about the forgeries, he said.
Generally, time-share companies are prohibited by state law from selling more than 51 weeks a year per time-share unit, allowing one week a year for repairs and maintenance. However, investigators believe that Glen Ivy may have exceeded that limit.