Improper TMI Money Shifts Cited : Investing: Court-appointed manager describes a ‘disturbing pattern.’ TMI owner calls report a ‘hatchet job.’
The owners of Teachers Management & Investment Corp. improperly transferred nearly $600,000 from one of the fund’s three dozen partnerships, according to a report by the court-appointed manager for TMI’s assets.
Dennis B. Schmucker said in his report, filed Thursday in Orange County Superior Court, that TMI “paid itself in apparent violation of the partnership agreement” for Parducci Winery Ltd. and that there was a “co-mingling of partnership funds” with other accounts. Schmucker, a veteran Southern California real estate trouble-shooter, also said he found a “disturbing pattern of apparent violations or distortion of the traditional transactions permitted under the terms of the partnership agreement.”
That included evidence that an estimated $122,500 was diverted by TMI during the past three years as management fees in excess of the amounts disclosed to investors in partnership agreements, the report stated.
Another $199,800 was taken to pay TMI staff salaries, also a violation of the partnership agreements, Schmucker said, citing an examination by the accounting firm Kenneth Leventhal & Co.
TMI owner Maurice B. Shuman called the report a “hatchet job” and said he will dispute the findings at hearing set for Wednesday.
Four investors filed a lawsuit in August alleging that TMI, based in Newport Beach, fraudulently lost $100 million of clients’ funds. Most of the money in TMI’s 38 real estate partnerships--estimated to total nearly $1 billion--was invested by California teachers for their retirement.
Schmucker was appointed by the court Oct. 6 to manage TMI’s assets and examine the partnerships. He is to issue a full report to Orange County Superior Court Judge Francisco F. Firmat next month.
In this week’s report, Schmucker also stated that an estimated $100,000 of investors’ funds was transferred from various partnerships to pay some of TMI’s legal fees stemming from the lawsuit.
Also, the report stated, in recent years TMI owners “began to look for new ways to withdraw money from the partnerships and to look for novel ways to attempt to justify the withdrawal of those funds.”
The report said the winery’s future is now in jeopardy, according to Kenneth Leventhal examiners, who found that TMI has operated Parducci in the red since 1991, losing $2.8 million during the past three years. The company has not paid returns to investors since 1991, the accounting firm found.
