TLC America Investors Could Lose More Than $50 Million

A federal judge on Monday approved a plan to liquidate TLC America Inc., while a court-appointed receiver warned elderly investors who poured $159 million into the Brea real estate company that they could lose more than $50 million when its assets are sold.

U.S. District Judge David O. Carter gave the receiver, Robb Evans of Los Angeles, permission to sell about 500 properties worth less than $250,000 each without seeking further permission from the court. In a report last week, Evans said the properties are worth at least $19 million.

Evans was appointed receiver last month after the Securities and Exchange Commission filed a lawsuit, one of its larger fraud complaints in recent times, against TLC, its chairman, its chief financial officer and an Atlanta man who marketed the company’s investments.

The suit accuses former Chairman E. Frank Cossey and the others of defrauding more than 2,000 people in a Ponzi scheme, in which debts to early investors are paid with funds from later ones.

The SEC also accuses Cossey of using some of the funds for his personal benefit, including a donation to Diamond Bar High School, which his son attends, and the purchase of racehorses.

TLC investments included hundreds of troubled properties being fixed up for resale, as well as land under development in Arizona. Evans said previously that the liquidation could take years to complete.

At Monday’s hearing, Carter ordered Evans to obtain the court’s permission before selling any property valued at more than $250,000. Evans estimated that there are 29 properties in that category, worth a total of at least $50 million.

Evans stressed that his projections are based on information provided by TLC employees, not independent appraisals, and could be revised. But using that information for now means the company is worth $80 million to $95 million, he said.

Because earlier investors have been repaid some of their principal, he said, the total amount owed is $131 million, meaning losses would be $36 million to $51 million.

In his report, Evans also said he is considering legal action to recover damages from third parties who may share blame for the losses or who were wrongfully paid money by TLC. The report wasn’t specific about any potential claims, and Evans declined to elaborate.

The report says that the racehorses were purchased by Cossey for $4.5 million, but are “young and unproven” and currently worth $1 million to $3 million. Evans said he will auction the horses.