O.C. Firm’s Collapse Probed : Real estate: Investors, most elderly, are shocked by closing of company that controls millions of their dollars. Authorities examine operations of developer Harold Tobin.
From a bustling but modest office here, Harold (Hal) Tobin attracted investors for his housing developments with a sales offering that had worked for years--himself.
“He’d ask you about your golf game; he knew everybody by their first name,” said Ted Lewis, a Costa Mesa resident who invested $25,000 of his savings in Tobin’s housing developments. “If somebody asked you whether to invest with him, you had to say, ‘Sure,’ because you knew you could trust him.”
But investors were shocked earlier this year when Tobin abruptly closed his Tobin Investment Corp., saying in a letter to them that he had run out of money and no longer could pay interest of 15% to 25% that he had promised on their investments.
Worse, some 300 mostly elderly investors in Southern California fear that the money they had entrusted to him--between $45 million and $60 million--has disappeared in the collapse of his company.
Now federal, California and Nevada authorities are examining the activities of Tobin and his Las Vegas lawyer, Christopher McCullough. The California attorney general’s office has joined a criminal investigation led by the U.S. attorney’s office and federal postal inspectors, according to Andi Thomas, a spokeswoman for the attorney general’s office.
At least one investor has sued Tobin, alleging that the businessman defrauded him of $90,000 and then transferred properties to cover up the fraud. Other investors are retaining lawyers.
The Nevada Department of Business and Industry last month issued an order barring Tobin’s company from selling homes in two Las Vegas projects.
The once-gregarious developer no longer returns phone calls from investors, and neighbors in his gated Huntington Beach community say they haven’t seen him recently. Tobin, 55, is believed to be staying in Las Vegas or Palm Springs, refusing to comment while he looks for a new attorney.
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McCullough did not return telephone calls seeking comment, but in a May 1 letter to investors in two Nevada projects he said he is resigning from any roles he had in the projects. It was unclear whether he remains as an attorney for Tobin. A Santa Ana lawyer, John D. Barnett, said he could not comment yet on whether he has agreed to be Tobin’s new lawyer.
McCullough’s letter said he was cooperating with the Nevada attorney general’s office in the investigation it is conducting along with the state’s real estate authorities.
In California, neither Tobin nor his company had obtained a state license to sell securities, according to the California Department of Corporations. Tobin had told some investors that he didn’t consider their investments in his real estate projects to involve forms of securities.
Even so, the state agency issued Tobin an exemption from state securities laws, allowing him to sell interests in his projects to no more than 35 people. Agency spokesman Damian Jones said the department is investigating whether Tobin’s actions violated that exemption.
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The stocky Tobin, who carries the confidence of his football days at USC in the early 1960s, earned a reputation in real estate in the early 1970s as an agent and small-time developer of four-unit apartment buildings in Huntington Beach.
He began seeking money from others to build ever bigger projects, and his stature grew as he gained some locally prestigious clients.
There was Jack Kelly, the late former Huntington Beach mayor and co-star in James Garner’s old “Maverick” television series. There was Charles Hermansen, chairman of Huntington National Bank until it was sold recently. And there was Murray A. Bywater, a retired Air Force brigadier general.
Tobin sold individual lots in seven projects in Southern California and Las Vegas to fund the construction of homes on those lots. He paid his investors at interest rates that reached 25%, although most were about 15%. He sent them upbeat newsletters and often handed their interest checks to them personally.
“He was just a regular guy, with a smile and a handshake,” said Al Galbavy of Fountain Valley, who backed Tobin with $375,000 of his savings. “You knew him; you knew his wife. They really let you know they were there for you.”
As officers of the company, Tobin’s wife, Carolyn, and son Richard also frequently greeted clients at the company offices in Hermansen’s bank building. Huntington National also became the administrator of an escrow account for Tobin’s Vista Trails project in Las Vegas.
Only weeks before the company’s collapse in early February, several investors said that reassuring talks with Tobin had caused them to consider making additional investments.
But the Feb. 11 letter Tobin sent to investors in seven projects jolted them.
“This is a very difficult letter for me to write,” the developer began. He explained that Tobin Investments had run out of money and couldn’t afford to pay anything to anyone. He proposed that investors foreclose on the properties, few of which actually had homes on them.
On average, investors who paid about $150,000 for the purchase of a lot and the construction of a home are now left with empty parcels of land worth about $20,000 each, said Dominic Bronell, a Costa Mesa psychotherapist.
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Bronell has sued Tobin, his wife and their sons, Richard and Craig, along with McCullough and two Tobin Investment employees, Don Battles and Dolores Mann. Battles declined to comment for this article. Mann could not be reached for comment, nor could other Tobin family members.
Bronell’s lawsuit, filed last month in Orange County Superior Court, accuses Tobin, the family, the lawyer and the employees of putting Bronell’s $90,000 investment in one project, then wrongly pulling it out and converting it to their own use, eventually transferring property to disguise the misdeeds.
Other investors, like Al Galbavy and Ted Lewis, met earlier this week with Los Angeles lawyer Henry H. Rossbacher, a former federal prosecutor. Rossbacher, who already represents one investor, was asked about the possibility of filing a class action lawsuit on behalf of all investors.
Not everyone, though, is eager to sue Tobin. Some hope that with his cooperation they can avoid lawsuits and continue some projects.
“I know this sounds really Pollyanna, but I think what he was trying to do was to keep all the investors happy too long,” said Jack Kelly’s widow, Jo, a Huntington Beach real estate broker who worked for Tobin for eight years and has $20,000 tied up in his business.
“He kept paying interest even when his houses weren’t selling, and I think he just should have said something earlier,” she said.
Though some may be reluctant to sue Tobin, many investors have had their faith in him shaken.
“I have really mixed emotions about this because I thought we were friends,” said Harvey Pieper, a Huntington Beach retiree who had invested about $700,000.
Lunching with Tobin periodically, Pieper and other investors spoke about everything but business. Pieper said Tobin treated his most of his clients as social acquaintances.
“He may even think that he’s still a friend,” Pieper said. “But the way he’s gone underground, that’s no way to handle it.”
In a Feb. 21 letter with a Las Vegas return address, Tobin asked investors for patience.
“I am very sorry that I have not been able to talk to you about what has happened,” Tobin wrote. “My attorneys have been very restrictive in what I can say or whom I should talk to for now. They are reviewing my correspondence prior to mailing. I know you understand my circumstances.
“I have not run out of town,” he continued. “I am not hiding and I am sorry that I cannot return telephone calls for now. I intend to help with the recovery of assets when and wherever I can.”
