28 Jul Airo AV Says: Real estate investor’s firms head to bankruptcy
The two North Bay investment companies run by the late Ken Casey are being put into bankruptcy protection, the law firm handling his estate matters announced Monday.
The Chapter 11 reorganization filings in U.S. Bankruptcy Court in San Francisco for Professional Investors Security Fund and Professional Financial Investors Inc. were made in response to the real estate investor’s financial “irregularities” that raised red flags after his death in May. Casey, who died of a heart attack, owned and managed many North Bay properties through his Novato-based companies. These irregularities led to a subsequent probe by the U.S. Securities Exchange Commission, which is pending.
“We are writing to inform you that I, in consultation with the companies’ counsel and input we have received from creditors, have determined it is in the best interests of PFI and PISF to seek bankruptcy relief,” San Ramon accountant Michael Hogan wrote in a letter dated July 26.
Hogan’s firm, Armanino LLP, was brought on board to assist Ragghianti Frietas attorney Eric Sternberger of San Rafael in sifting through mounds of documents on Casey’s real estate holdings accumulated over three decades. Casey was well connected and well known in Marin County.
It was determined by the two legal and accounting entities that “interest payments could not be funded without new investment,” a June 28 letter stated. But taking on new investment would have resulted in further “misconduct.”
From June 4 to July 26, the law firm sent out four letters to investors disclosing the audit and the investigation by the SEC.
The bankruptcy filings were initiated on July 16 by creditors Jacques Achsen, Samuel Goldberger, Elizabeth A. Goldblatt, Arthur Indenbaum, Andrew Roy Michaels, Mary Michaels, Cheryl Reinhardt, Joel Rubenzahl and Steven Wertheimer. Creditors are considered a person and entity holding a claim against a debtor.
At this point, payments to note holders and withdrawals of investments have been suspended. Every PFI corporate officer has resigned to facilitate a corporate restructuring.
The court is awaiting a response from Casey’s companies to the filed petition, due within 21 days.
Meanwhile, stakeholders of all types have lined up to see how the proceedings will pan out.
Marc Elias, whose San Rafael-based maintenance company cleaned Casey’s 18,400-square-foot Ignacio Boulevard office, wants to get paid.
“They’re late on their payment by two months,” Elias told the Business Journal. The debt adds up to about $5,500.
Elias noted this is a bad time for his clients’ to get behind on making good on their accounts, given the coronavirus outbreak’s economic fallout.
Gary Rifkind, the CEO of the Ignacio Hills Association — under which Casey owned 10 of 13 buildings on Ignacio Boulevard, insisted he couldn’t find fault with Casey in following through on his rental properties’ upkeep.
The two men shared a dedication to the properties, but they slightly differed in style.
“My goal is to keep the property in good condition and under market. Ken was far more aggressive in setting the rents. I saw Ken develop more and more acquisitions and create partnerships,” Rifkind said. “I didn’t feel they were mismanaged. While he was there, he did a good job. As for the finances, I didn’t know about that.”
The head of the association, operated through Marshal & Company of San Rafael, described the situation as “sad,” especially with what presumably the investors are facing with the legal proceedings.
The law regarding bankruptcy proceedings is robust and well developed, including many legal protections as well as checks and balances for stakeholders.
Hogan pledged in this most recent letter the business would operate with “no disruption in leasing or tenant support” and cooperation would be provided for the SEC during its investigation and government organizations “in their inquiries.”
The U.S. Trustee’s office is tasked with forming a creditor committee to oversee the bankruptcy proceedings.