Developer Faces Investigation, Lawsuit : Real estate: Letter announcing that the company is out of money shocks investors, many of them elderly.
From a bustling but modest office in Huntington Beach, Harold (Hal) Tobin attracted investors for his housing developments with a sales pitch 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., telling them in a letter that he had run out of money and could no longer pay interest of 15% to 25% that he had promised on their investments.
Worse, about 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, said Andi Thomas, a spokeswoman for the attorney general’s office.
At least one investor has sued Tobin, alleging that the businessman had defrauded him of $90,000 and then transferred properties to cover up the fraud. Other investors are also retaining lawyers.
Last month, the Nevada Department of Business & Industry issued an order barring Tobin’s company from selling homes in two Las Vegas projects.
The once-gregarious developer no longer returns phone calls to investors, and neighbors in his gated Huntington Beach community say they have not 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.
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 on whether he has agreed to be Tobin’s new lawyer.
In the letter, McCullough said he is cooperating with the Nevada attorney general’s office in its investigation 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 did not consider their investments in his real estate projects to be forms of securities.
Even so, the state agency did issue Tobin an exemption from state securities laws that allowed 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.
Tobin, who carries the stocky confidence of his 1960s football days at USC, earned a reputation in real estate in the early ‘70s as an agent and small-time developer of four-unit apartments 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 the late Jack Kelly, former Huntington Beach mayor and co-star in James Garner’s old television series “Maverick.” There was Charles Hermansen, chairman of Huntington National Bank until its recent sale. 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%, though most were about 15%. He sent them upbeat newsletters and often handed their interest checks to them personally.
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 could not 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.
In a lawsuit filed last month in Orange County Superior Court, Bronell accuses Tobin, the family, the lawyer and the employees of putting his $90,000 investment in one project, wrongly pulling it out and converting it to their own use, eventually transferring property to disguise the alleged misdeeds.
Other investors, such as Al Galbavy and Ted Lewis, met earlier this week with Los Angeles lawyer Henry H. Rossbacher, a former federal prosecutor. They talked with Rossbacher, who already represents one investor, about the possibility of filing a class-action lawsuit on behalf of all investors.
However, not everyone 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.
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.”
