More than 100 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 for 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 home in connection with an ongoing criminal investigation of the controversial firm.
No arrests were made Tuesday but several Glen Ivy employees were subpoenaed to appear before the county 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 contests to attract customers.
The 16-year-old firm operates 24 time-share resorts in eight states and has 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.
Early Tuesday morning, Glen Ivy's Corona complex was 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 that "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 and computer files.
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 in Hawaii.
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 Glen Ivy may have exceeded that limit.
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. That investigation is continuing, Senior Assistant Atty. Gen. Herschel Elkins said Tuesday.
Glen Ivy was the subject of a 1989 federal grand jury investigation into alleged overselling of its 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.
If true, that would mean two customers owned the same week.
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.
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.
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 knowledgeable source, who asked not to be named, said that Glen Ivy Chairman Ralph Mann is also a subject of the state investigation but his Canyon Lake home was not searched Tuesday.
Mann has denied any wrongdoing in previous interviews but was unavailable for comment Tuesday.
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.
With 1,600 employees and $122 million in revenue in 1990, Glen Ivy is the country's biggest time-share company, according to an independent industry ranking.
In response to earlier unfavorable publicity, the company had cited a 1990 survey that found 94% of its owners thought Glen Ivy time shares are excellent or good vacations.
Glen Ivy, whose slogan is "We're Good Company," once called itself a "model of ethics and consumerism."
This summer, in spite of its regulatory problems, Glen Ivy was able to attract $15 million from an investment group that included weight-loss maven Jenny Craig and Los Angeles investment banker Michael E. Tennenbaum.
On Tuesday, Tennenbaum said he spoke to Mann and was told the company was innocent of any wrongdoing.
"We received further assurances that there has been nothing illegal going on in the company," said Tennenbaum, a Glen Ivy board member.
The Riverside County district attorney's office has established a hot line for anyone "who may be the victims of criminal fraud related to the operations" of Glen Ivy. The number is (714) 275-5494.
Pursuing a fraud investigation, more than 100 state and local officers Tuesday descended upon the Corona headquarters of time-share resort operator Glen Ivy Financial Group, as well as the homes of two company executives.
Investigators suspect that Glen Ivy oversold its resorts in part by tampering with ownership documents in a way that would allow the company to resell the units of inactive customers. That would mean two customers were sold the same time period at a resort.
Unclear. The Riverside County district attorney's office said Glen Ivy can continue to sell time shares.
Glen Ivy Profile Established: 1975 Headquarters: Corona Sales Offices: Newport Beach, San Diego, West Covina, Woodland Hills, Reno, Las Vegas 1990 Sales: $122 million 1990 Profits: $5 million Employees: 1,600 Customers: 60,000
Glen Ivy Resorts 1. Lagonita Lodge, Big Bear Lake 2. The Villas of Palm Springs, Palm Springs 3. The Plaza Resort & Spa, Palm Springs 4. Vista Mirage, Palm Springs 5. Desert Breeze, Palm Desert 6. The Inn at Silver Lake, north of Victorville 7. Laguna Surf, Laguna Beach 8. San Luis Bay Inn, south of San Luis Obispo Other Glen Ivy resorts are in June Lake, Calif.; Tahoe Vista, Calif.; Lake Havasu City, Ariz.; Aspen, Colo.; Park City, Utah; Kauai, Hawaii; Austin, Tex.