The husband of a state legislator and his Orange County real estate lending company were found liable for $10 million in damages after a jury found they acted with “malice, oppression or fraud” in breaching their fiduciary duties to investors.
Dan Harkey, the husband of Assemblywoman Diane L. Harkey (R-Dana Point), was accused of making ill-advised loans through his company, Point Center Financial in Aliso Viejo, and pocketing fees and commissions from the doomed loans.
Diane Harkey was removed as a defendant in the first jury trial. A judge still must decide if the legislator and her husband improperly transferred title of their home to their daughter, said Lloyd Charton, a plaintiff in the case.
After a three-month trial in Orange County Superior Court, jurors found Dan Harkey and his company liable for $9 million to investors. They added about $1 million in punitive damages to the award Monday.
Dan Harkey’s attorney, Jeffrey Benice, said Monday that he is confident a judge will overturn the verdict. Jurors rejected investor claims that Harkey had fraudulently deceived investors about the loans.
The trial stemmed from a lengthy battle between Harkey and his neighbor, Charton, who said he lost hundreds of thousands of dollars by investing in loans made by Point Center. Charton said he was thrilled by the jury’s verdicts.
“It feels like complete vindication,” he said.
Using videos and live presentations, Harkey attracted wealthy investors to his lending business, using their money to finance hundreds of millions of dollars in loans. The company began to falter about 2007 when many of its borrowers defaulted, sending the loans into foreclosure.
Although the company has filed for bankruptcy, it still manages many of the properties it owns through foreclosure, Benice said.
Many investors elected not to take part in the litigation, hoping that as the real estate market recovers, so will their investments, he said.
Investor allegations against Harkey and Point Center have been split into several phases. Separate juries will decide remaining allegations that Harkey and the company damaged investors through other investment products.
Benice said it could take six months for the remaining claims to be resolved.