(Video Courtesy of NBC News)
Uh oh! Another black eye for the OC GOP has emerged as the husband of Assemblywoman Diane Harkey has been accused of running a Ponzi scheme – and some are alleging that her campaigns have been funded by ill-gotten gains. Here is the information I found at “the Point Center Investigation web site:”
Our mission, as investors at Point Center, has been to understand how our investments were treated by Point Center Financial and Dan Harkey as our money manager. We have made many requests over the past 6 months to obtain and study the loan files to ascertain if the funding of individual loans was sensible at the time they were funded. To determine if loans were made without fully disclosing the risks of non-payment to the investors. To obtain information regarding the borrower’s history and credit worthiness. To fully examine appraisals and loan to value ratios. To review the financial records of what has happened to our investments with independent experts and other standard “check and balance” procedures used regularly in business transactions.
To determine how much money Dan Harkey has taken off the top of failed loans for himself.
And investigate if DIANE HARKEY had herself elected to office using a million dollars she may have taken from Point Center leaving it unable to pay back mortgage note holders.
We wish to determine our options and review them with our co-investors.
We have been concerned with the failure of PCF to provide access to our business records. We have been alarmed at the game of “hide the ball” Mr. Harkey has been playing so we had no choice but to sue him in October of 2008 to obtain access to business records. He still has refused to produce many of those records.
Before resorting to the courts we have provided Dan Harkey with many opportunities to provide access to the records and loan files the law says all of his investors are entitled to review, and his refusal to allow this has resulted in the actions he forced us to take. And we find it suspicious and alarming.
Our review of over 150,000 documents that Mr. Harkey was forced to turn over to us has revealed a pattern of problems which we perceive as manifesting a business plan where Dan Harkey enriched himself at our expense by making very risky loans which were represented to be very safe. And taking large commissions and fees from those failed investments.
Even worse, perhaps, is the continued failure on his part to provide reasonable assessments and valuations of our assets as they currently stand.
We are now attempting to determine what options we have as an alternative to current management.
And we are consulting appropriate real estate experts to determine what the proper steps are for protecting our portfolio investments.
UPDATE:
The L.A. Times has published an article about this scandal. Here are a few excerpts:
The lawsuit accuses Dan Harkey of using slick marketing techniques — including mass mailings and DVDs of sales meetings — to attract investors in short-term, high-interest loans to real estate developers. It contends that Harkey exaggerated the value of the properties used as collateral by borrowers, making the individual investments appear much safer than they were.
Dan Harkey denied wrongdoing, saying any losses were related directly to the downturn in the real estate and financial markets.
Assemblywoman Harkey declined to be interviewed. A spokesman disputed the lawsuit’s claim that she used investor money to bankroll her campaign.
The allegations center on a little-known and lightly regulated segment of the real estate industry known as “hard-money” lenders. These lenders often provide financing for high-risk projects that banks won’t touch, such as speculative housing developments.
Wealthy individuals looking for outsized returns often provide the investment capital. The lawsuit alleges that many investors were retired people who entrusted Dan Harkey and Point Center with their life savings.
The lawsuit, filed in Orange County Superior Court in Santa Ana, claims that Point Center made millions of dollars by charging broker fees upfront to borrowers, allowing the company to profit regardless of whether the loans were repaid.
When the borrowers defaulted, the lawsuit alleges, the investors were often left with foreclosed properties worth a fraction of the money they had invested.
The suit cites a $19.3-million loan in 2006 to Burnett Development Corp., which planned to build 451 homes surrounding a golf course at the Palm Springs Country Club. The loan was made near the peak of the real estate boom, but conditions soon changed. Burnett Development defaulted on the loan in 2007 and Point Center foreclosed, according to court records. Burnett officials could not be reached.
The now-closed country club has fallen into such disrepair that the city of Palm Springs filed a lawsuit last year — naming individual Point Center investors as defendants — seeking immediate repairs to a property filled with weeds, polluted ponds and graffiti.
I don’t see where it is a Ponzi scheme? It’s not like he tried to enroll them in Social Security!
Bigmarkod,
The TV media is calling it a Ponzi scheme, but point well taken – Social Security is indeed a Ponzi scheme. In fact it is a reason to do another Amnesty as that would create an influx of new payees into the system, at the bottom rungs of it.
What Dan Harkey is being accused of is very serious – and this may bring his wife down too.
Another thinly disguised attempt by Lloyd to force preferential treatment for his investment. He knew the rules and now whines about his gamble. Such a shame to have to defend these false accusations.
#4,
Maybe, but by tomorrow this story will be blowing up in the media and it is bound to hit the AP wire.
Saw the story in today’s paper. Does not sound like a Ponzi scheme, but yet another high risk investment sructure that plays on greed and makes the top priority to enrich those who run it regrdless of whether the investments work out or not. If he lied and misrepresented, then criminal charges would seem logical. On the other hand, people who turn over large sums of money to someone based on estimates of a 23% return are not doing adequate due diligence at best, and letting sheer greed overpower their thuoght processes -it’s hard to view them as innocent victims. When are people going to realize that flashy wheeler-dealers are quite often the focal point of extremely high risk ventures that can and do fail to pay off, or worse? OC sure seems to have more than its fair share of glitzy promoters flounting their wealth (ill-gotten or otherwise).
I worked for harkey mamaging the now torn down dana villa motel in the 90’s. once in a moment of candor he told me,” i was born poor white trash and always felt ‘less’ that everyone else. i promised my self i would become wealthy and everybody would respect and fear me…” oh i have so many stories… he put me on the street when he realized one of my workers would have sex with him.. aha..i warned him ,”there is A KARMA CARD IN THE DECK AND YOUR DAY WILL COME…”
Who knows about Ponzi but Harkey represented himself as knowing how to value land which is the basis for hard money lending. He misrepresented the value of the land he underwrote loans on. There is no question about that.
He made 4 loans totaling over $40 million to one developer (Ehline) in less than a year back in 2004-2005 and every single one deafulted. 4 for 4. And Harkey collected how many millions from those loans while his investors lost everything? Loan Brokers have a fiduciary responsibility to their clients. That is California law. Harkey passed himself off as an expert, but he was only an expert at bilking investors.
Tell us your knowledge of Summerwind,the Ehline Bros. and Tom Habbick. Try here: http://sbhousingbubble.blogspot.com/2008/05/im-alright.html PCF’s made several 2nd TD investments with LTV’s of 150% or more that were not disclosed to the investors along with many other extremely risky loans with fees for self-enrichment the only driving factor. This is fraud, not “a real estate market in turmoil” as Dan Harkey characterizes it. Any defense of PCF may be a little naive. There is much egregious behavior unknown to the naive bloggers here. The lawsuit wouldn’t have been filed without SUBSTANTIAL proof of wrong doing. Stay tuned……..
We need a look at the complaint filed by the plaintiff. The case was filed in OC, and the complaint is public record. Should make interesting reading.
Let’s clarify some things. I’ve been investigating Harkey since January of 2008. I have spent more hours than anyone else and still I’m finding new information.I can confirm to you all, without a doubt, nothing of which Harkey has done is less than fraud. I’ve challenged Harkey, both his attorneys, sent them all certified letters asking for the return of my money, stating the basis for such. Neither Harkey or his attorneys have denied any of my claims, ever! One of Harkey’s attorneys specializes in criminal law and I believe both attorneys have aided and abetted him in this scheme. Harkey repeatedly lies, distorts the truth, fails to properly disclose,though he claims on his DVD, “I would “never” want the illusion that people didn’t know what they were investing in.” Harkey misrepresents and disseminates disinformation. One writer remarks checking into any return paying 23% requires due diligence. True! But I would never consider being involved in an investment promising this. There is just too much risk. I’m involved the the first trust deeds using collateral of the property itself. Harkey told me in 2004, in his office, he stopped lending on 2nd trust deeds because of the financial loses from earier times. A FULL LIE! Harkey continued lending on 2nds and those people have lost all their money. Misleading appraisals, false LTV’s, important information left out. Harkey cons you into believing, on the DVD and through written material, how good he and his staff are. In 2004, he told me it was virtually impossible to lose my money because I had the property as collateral. Harkey said I should diversify into multiple loans to lower my risk factor. I’m in six. Harkey said, if they fall into foreclosure, it would take 15-18 months on the outside to have my money returned to me. NOT TRUE! All of mine are in the hole. When I met with Harkey in March of 2008, the first thing out of his mouth was about Jesus. We weren’t even talking religion. After 3.5 hours, only one of my questions had been answered. I challenged Harkey and his staff that they didn’t clearly disclose the fact that 3 of my loans were not going to be fully funded. Though I can prove this, the staff became very angry with me and yelled loudly in denial. I know if one begins a construction loan and runs out of money mid-course, there is no way the builder can obtain refinancing as a lender doesn’t want to take the additional risk. Harkey did not use fund control as he represents in the DVD. Money was just turned over to borrowers. Though I’ve asked for accounting, Harkey, his daughter and the staff haven’t provided it. Clearly this isn’t just negligence. It’s truly fraud and much, much more. It goes on and on twist after twist.
I know PCF monies went to Diane’s political funds, my builder RW Hertel & Sons used to borrow millions from them and part of the loan was he would kick back monies to Dan for Diane’s run for office, Hertel then would default on the loan harkey would buy it back tell the investors they lost. Just this week Hertel’s company collapsed and he is in Involuntary BK Chp-7 Hertel defaulted on 21 Million from Harkey on the Atascadero ventures,LLC deal on purpose so all would benfit. I was told directly from PCF if you want a loan you must give to Diane’s war chest for office. It was a big scam just review the records and recently harkey tried to silence a News web site for revealing PCF’s dealings called http://www.uncoveredslo.com check it out.
Do any of the brain surgeons above think about how IndyMac, Countrywide, Fannie Mae, Freddie Mac, Bear Stearns, Lehman Brothers, AIG, Merrill Lynch, Downey Savings, Washington Mutual, Bank of America to name a few are either out of business or purchased for pennies on the dollar or only surviving because of massive government intervention. Point Center Financial investors should grow up and take responsibility for their investments. With high returns comes high risk. This wasn’t fraud, it was the real estate meltdown.
PCF has long been a money bag for the GOP and for Dan’s wife Diane and her desire to some day be in Sacramento. The only way you all will see justice if the US DOJ’s FBI Public Corruption Unit get involved and does it fast. Dan Harkey and his partner Ronald W. Hertel 11-17-56 have scammed you out of millions of dollars and you’d better act fast. Most went to Gambling, Horses, Jets, Yachts and two accounts in Cayman Is. Investments.
Hello Brad,
Do you know the name of the bank or financial institution that Harkey has his accounts at? I am trying to collect on a judgement that I have while Harkey sports the “I’m bankrupt, what do you want from me
” lifestyle. Devious schemer til the end. Thank you, Tom Berean
PCF has long been a money bag for the GOP and for Dan’s wife Diane and her desire to some day be in Sacramento. The only way you all will see justice if the US DOJ’s FBI Public Corruption Unit get involved and does it fast. Dan Harkey and his partner Ronald W. Hertel 11-17-56 have scammed you out of millions of dollars and you’d better act fast. Most went to Gambling, Horses, Jets, Yachts and two accounts in Cayman Is. Investments. Move fast and work together fast..
Your probably right. We should just fade away unto the sunset while Danny Boy pockets $50 million in fees for egregious loans he set-up……..not! This has nothing to do with the failed banking system or “a market in turmoil”. This is about fraud and theft. That’s it. Don’t try and deflect from Harkey’s culpability in this matter.
I had the opportunity to invest with PCF about three years ago and I decided not to. I felt real estate prices were totally unsustainable and a sharp correction was inevitable which in fact has come to pass. I’m not suggesting you fade away into the sunset, but just take responsibility for the decisions no one forced you to make. So Genius Bill, are we not on the cusp of nationalizing banks with the stock indexes at 50% of their value, some of the biggest and most stable worldwide companies out of business or begging for bailouts? This society and economy are getting very close to socialism and if this isn’t the definition of “a market in turmoil”, I’m not sure what would…
When I stood up against Mayor Diane Harkey for the entire time she was on the city council (four years) and was involved in her recall, I slammed her up and down and knew about her spending over a million on her campaigns; threatening residents by telling them they would lose their businesses in town if they did not support her; taking bribes from builders and developers (Makar and others); and hiring hit people to go against those who opposed her. I was being threatened as well both publicly and on the phone by her hit people. Dan Harkey sued me in court (SLAPP suit) and I represented myself against his million dollar law suit. I won the case and when he didn’t pay me the $310 court costs, I put a lien on their home at 76 Ritz Cove. His attorney finally offered me a few thousand to end the lien. I should kept the lien.
Diane claims she saved over a million dollars from working in the banking system for 30 years. A friend got her a job at B of A in the early 1990’s as an assistant to a loan officer. It was there she met Dan Harkey and got married. She quit the bank and worked for him. She could not have saved anything in just a few years as an assistant to a bank officer. Dan paid for her college afterward so there was no way she was an executive at any bank for 30 years. This is what she claims and this is perjury. I have made my statement to the feds about her. At this point, they both deserve to spend the rest of their lives in prison and if I can help them get there, I will. Time to pay the piper.
Jerry,
Sounds like that’s been quite a project you took on. I had to laugh at the lien you put on their home for the three hundred bucks owed you!
Wasn’t she responsible for the huge payout to those runners who were hit by a car? The case caught my attention because the payout was quite large and done very quickly – which seems unusual in practice for similar cases.
Bill, I agree with the majority of your remarks. I made my investment with PCF with the understanding that my investments were at a 50% LTV, hence, by your calculation, my principal today, even with a 50% loss, would be protected. That did not happen. My investments are gone with loan values now discovered at 150% LTV plus and 10% origination fees in Harkey’s pocket. That along with the promise of personal guarantees by the borrowers, who I was told, had personal assets many times over the loan value. That just did not happen, yet Harkey got his outlandish origination fees. Harkey made 4 loans to the Ehline Boys that all failed. I was unaware he let those boys continue back to the trough for more money and more fees to Harkey. That does not make financial sense. This can not and will not be tolerated. Harkey also refuses to turn over any documents, as required by law…. only through forced litigation. Harkey is corrupt and the litigation will prove it.
Not sure about the fast payout to the runners but she did pay people to contribute her money back into her campaigns (mostly the senate race in which she lost to Harmon)under their names. Many of those people didn’t have a pot to piss in yet next to their names were contributions of thousands of dollars. So you may want to add those tens of thousands to the already hundreds of thousands, perhaps a million or more, that Diane contibuted to her elections.
And you know where this money came from…and now those investors are not able to get their money back. It was all about blackmail and laundering of money. There is also a RICO law suit in Riverside County that was taken against Dan Harkey in September. That’s even a stronger case.
You might say that for a small town like Dana Point, Diane truly put it on the map. It’s too bad, but for such a ‘smart person’…and I say it facetiously…Diane put both feet in her mouth at the same time, because now she doesn’t have a leg to stand on!
Genius Bill, understand I’m sympathetic to your plight and to all of those that invested in PCF. There is nothing pleasant about watching your investments evaporate into a puff of smoke. However, like you and the other PCF investors, most people I know have taken tremendous losses outside of PCF in real estate and stocks these past few years. I bought AIG stock at $48.00 a share thinking it was a steal only to have it now hover at $1.00 a share as it had a lot of exposure to insuring real estate loans. All companies large or small exposed to the real estate market whether builders, financial companies, banks, insurance companies, residential or commercial lenders are at risk of failing without the help of the government. I’m not suggesting Harkey didn’t oversell the safety of his investments, but I don’t think any of us anticipated real estate values retracing 40% to 50% these last few years. While you might not make back your entire investment, I do believe there is equity in many of the properties held by PCF even though they are not performing. However, be certain of one thing, if the government gets involved and appoints a conservator to control investments, they will blow the remaining properties out at 10 cents on the dollar and your losses will go from bad to absolute devastation…
The many different scams that PCF ran with wife Diane are so big so wide you would not understand it if was in front of you. This was and has been a long very thought out and carefully planned deal, that I’m aware of since early 2005. Remember these names, Bryan Troxler, Kevin McCarthy, Ronald W. Hertel, Thomas Habbick, Dana Levy, Richard D Wildrot, Robert John Samuel Fowler aka Robert S. Fowler aka John S. Fowler, Devon Fowler, Meridian Realty Consultants, Vance Rose, William Zech and the list goes on and on and on. Their are more than 74 different LLC’s , LP’s, Inc.’s that I knew of, the Political Kick Backs were common if you wanted large loans. If the case moves forward you will want to get a protective order real fast, since the filing of the case hundreds of records and accounts have been shredded and more are happening this week end, you will want to get the Secret UBS accounts and the many accounts in the Cayman Islands as well, where several of the perps ie. Hertel, Harkey, Fowler, Zech haave concealed assets and monies. Good luck but you’d better move quick.
Thanks for the information here is what we have learned as well the three main culprits are:
Ron W Hertel of RW Hertel & Sons, Inc. who has used his many fronts and LLC’s to both borrow and then default on PCF at Dan’s direction and give $ to his wife’s funds.
Robert S. Fowler partner with Hertel in scams his new firm is Meridian Realty Consultants 811 El Capitan Wy # 210 San Luis Obispo, CA.
other partner is Federal X-Con Eddie I Palmer DOB 8-10-46.
Cayman Is is where hertel has a holding company and Harkey too.
Do you know where Hertel is today?
To Thanks:
You might want to post an email address where other like-minded people who need that information, can get in contact with you and network out solutions.
Here is the OC Register story about the gravely injured joggers. There are over 90 comments attached to that story:
They were hit on April 8, 2006. The city’s settlement of $50 million dollars was offered on the day before when case was going to court on November 26, 2007. It was the largest private injury case settlement in Orange County History.
TWO other incidents in which two bicyclists were killed on the same bike path followed the joggers’ tragedy before the city fixed the problem by putting in protective barriers. Of course the city didn’t admit any guilt and in fact, put the protective barriers in ACROSS THE STREET FROM WHERE THE JOGGERS WERE HIT.
Some leadership there, in Dana Point!
Please share your info
Please share:
http://www.pointcenterinvestigation.com
pointcenterinvestigation@yahoo.com
This had nothing to do with the credit markets freezing up. Investors were the source of funds and we put plenty of money in there. It was the horrible loans Harkey made to his “friends” under the guise of being a conservative investment with plenty of protective equity. When a 50% LTV loan fails and then we find out the property is not even worth 20% of what he claimed then that is breach of fiduciary duty and probably fraud. This was a case of Harkey claiming to be an expert, enticing investors with exagerated appraisals, collecting huge fees upfront, and then collecting more fees when the properties become REOs. Guess what? His fees even now are based on the inflated appraisals. There is so much more. No accounting controls. Account statements with handwritten notes saying to ignore the chart that says your investment is worthless. 85% of loans originated since 2005 are in default or extinguished. How is this guy even in business today. Oh yeah he’s collecting “management fees”
While you all wait and post your frustrations on the net the culprits are taking time planning and moving assets and cash accounts far away so you would never get them, You should have moved faster and sued in Federal Court gotten your papers served sooner either way as this mess starts to come apart before your very eyes, watch the FODD= Friends of Dan and Diane scramble to create a false paper trail and cover the tracks. Jets, Yachts, Loose Woman, Gambling, Fancy Cars, Horse Racing Betting, phony Ranches, Bogus Farms, Housing developments as fronts etc. it was about a 200 Million dollar scam and the names involved are deep and wide many will NOT step up to the plate because they do NOT want to be known, so good luck you will need it.
The Math doesn’t add up: Diane Harkey is 57 years old.
Dan and Diane have been married for approx. 25 years. She was 32 when they got married.
Diane said she went back to Orange Coast College in her late 30’s, That would be after she and Dan had their first child. Then went on to get her College Degree from UCI after Orange Coast. But Diane was able to earn and save $1,000,000.00 from her 30 years in the Banking business and most of that time without a college degree.
And then after saving $1,000,000 for 30 years, she gambles it on a long shot to win the State Senate race and lost.
Why would the desire to be in the State Senate be that important to gamble away one’s life savings that took 30 years
to accumulate? Unless the campaign money came from some place else.
“Despite public denials from her own Assembly staff, just a few months ago, Diane Harkey disclosed under penalty of perjury an interest of up to $1,000,000 in “Point Center Financial,” a company being sued by investors for fraud and under investigation for operating “Ponzi scheme,” bilking investors, according to the Los Angeles Times and KNBC News. Harkey’s recent mandatory financial disclosures as an elected official now prove her connection to the troubled company and may become evidence in the fraud litigation.”
http://republican.assembly.ca.gov/member/73/
Assemblywoman Harkey proposes long term budget solutions for Californians during Assembly floor debate:
http://republican.assembly.ca.gov/member/73/
Citibank, JPM, etc trade at the whim of the stock market, our investments were secured by the promise of developed real estate by 2007, before the meltdown occurred.
3 loan examples to help illustrate:
Ehline Summerwind ($10m) development completion promised by Nov 2007 / currently raw useless land.
Ehline Coachella ($4m) 79 home development completion promised by June 2007 / currently raw useless land.
Tatum Apple Valley ($4m) 30 development completion promised by June 2007 / currently 10 useless homes.
Where did the money go? These loans and pay off promises predate the meltdown. This is about reckless, egregious, self-enriching loans made to benefit the Harkey’s insatiable desire for man made wealth and political ambition, plain and simple. Harkey will not release or accurately evaluate the current loan pool. Harkey knows if he does, he will lose any remaining support. Harkey draws his ongoing 3% fees on the inflated values he currently uses. His “phone book” defense is nonsense. The majority of disclosures in the phone are irrelevant. Paper volume does not equate to accurate, required disclosures. Do I even need to mention the Diane for assemblywoman funding crimes with the investors deposits?
I do not want to hear excuses from the Harkey’s or their supporters. I want an unbiased juror to hear the facts and make a determination.
pointcenterinvestigation@yahoo.com
http://www.pointcenterinvestigation.com
Official word just came from Federal Bankruptcy Court in Santa Barbara, CA RW Hertel & Sons, Inc. Harkey’s partner and who gave $$ to Diane to get elected in now Bankrupt he failed to show and failed to answer to the Summons. Judge singed order of relief for creditors and now Hertel is gone with the Monies from all.
From today’s Orange County Register
Tuesday, March 17, 2009
Assemblywoman’s rise tied to troubled lending firm
Dana Point legislator’s campaigns may have gotten a boost thanks to her husband’s business, which is being sued for fraud.
By MARTIN WISCKOL
The Orange County Register
Assemblywoman Diane Harkey’s blossoming political career appears to have been funded in part by earnings from her husband’s embattled real-estate lending business, which is being sued for fraud and is being investigated by the Securities and Exchange Commission.
As Dan Harkey has attracted increasing criticism in recent weeks, the legislator – through her husband, political consultant and chief of staff – has attempted to distance herself from that business, Point Center Financial.
But public documents have listed her as both an officer and an employee of the company; her financial disclosure forms indicate limited personal assets and she indicated Thursday that her political spending has included money from her husband’s earnings. Campaign disclosure forms show she’s spent $2.1 million on political campaigns since 2004.
“I’ve been married for 25 years to my husband,” said the Dana Point Republican. “We have personal income. He has income. I have income. Sometimes it was my income. Sometimes it was his income. Sometimes it’s both of our incomes. And I’ve saved him financially many years. So I’m not going to get into whose, yours, mine, ours. Who knows after 25 years?”
Harkey said she’s been unfairly drawn into business litigation that has nothing to do with her work as a lawmaker.
The 53 investors suing Dan Harkey for fraud have included Diane Harkey as a defendant, alleging in part that Dan Harkey “fraudulently transferred investors’ funds … to his wife Diane Harkey for her use in advancing her political career.”
There is little in the suit to substantiate the claim that campaign funds were illegally obtained, but records do point to Point Center Financial as a source of income for her political spending.
Campaign disclosures show that she’s pumped $1.25 million in personal contributions into her political races since 2004. She’s spent another $875,000 on other local, state and federal campaigns and political organizations. Two of those campaigns filed contribution disclosures listing Harkey as working for Point Center Financial.
Additionally, Point Center Financial is Dan Harkey’s primary business, and some investors worry that they’ve been losing money while he’s been funding his wife’s political ascendance.
“I believe Dan Harkey fraudulently took money from Point Center investors to support his and his wife’s lifestyle, included her political campaign,” said investor Donna Wall, one of the plaintiffs in the lawsuit against the Harkeys.
The Corona del Mar real estate broker, who said she’s had to postpone her planned retirement indefinitely, suspects she’s lost all of her $176,000 Point Center investments, and that some of that money has gone to Diane Harkey’s political career.
The lawsuit alleges that Diane Harkey, “used hundreds of thousands of investors plaintiffs’ monies, through and/or via her husband, for her personal and campaign uses.”
Investor Lloyd Charton – the lead plaintiff and a neighbor of the Harkeys in the gated, ocean-view Ritz Cove community – said that in 2006 while they were still friends, Dan Harkey told him he’d given $1 million to his wife’s campaigns.
Such spending, if from joint family funds, would be legal. Dan Harkey has denied his wife took $1 million from the company, and the Assembly member’s chief of staff, Jeff Corless, said there were no illegal funds used in the campaign.
TIES TO POINT CENTER
Diane Harkey, 57, burst onto the political scene in 2004, spending $135,000 of her own money to win a Dana Point City Council race. In 2006, she spent $936,000 of her own money in a bid for state Senate, losing in the primary. She spent $151,961 of her own money in her 2008 Assembly victory.
It’s not uncommon for wealthy candidates to draw from community-property accounts for their races, listing the donations as coming from themselves. In a particularly costly loss, Laguna Niguel’s Cassie DeYoung listed spending $3.7 million of her own money in a 2006 supervisorial campaign. DeYoung’s developer husband was the biggest earner in the household.
Diane Harkey is not currently employed except as an Assembly member, according to the “Statement of Economic Interest” legislators are required to file. She lists a range of $12,000 to $110,000 in non-real estate investments, most of it in a Point Center Financial fund.
She also lists eight properties, six of which generate rental income. Two of those generate more than $100,000 in annual income – one of which is Point Center Financial’s headquarters in Aliso Viejo.
Dan Harkey told the Register last month that his wife had never been employed by Point Center Financial.
But disclosures filed by U.S. Rep. John Campbell, R-Newport Beach and former presidential hopeful Mitt Romney list Harkey as working for Point Center Financial as, variously, a broker or mortgage banker.
In addition she signed a 1990 “certificate of amendment” filed with the California secretary of state’s office changed the name of the Harkey business from All Loan Services, Inc., to Point Center Financial, Inc. It is signed by Dan Harkey – listed as president – and Diane Harkey – listed as secretary.
THE BANKER AND THE LENDER
Harkey had a 30-year career in banking, starting in an entry level position. She went to college while working, and graduated cum laude from UC Irvine with a 1994 degree in economics. She retired as a bank executive in the early part of this decade.
Shortly after the lawsuit against the Harkeys was first reported last month, by the Los Angeles Times, Corless told the Register that her campaign spending came from personal money she’d accumulated during her banking career. However, her statement to the Register on Thursday made it clear that the earnings of she and her husband had been co-mingled.
She declined to comment further, which left unanswered issues of her working relationship with Point Center and use of Point Center income for politics.
“I’ve disclosed everything,” she said. “I’ve said everything. There’s nothing more to say.”
Point Center loans developers money at high rates, typically 10 percent or more, and sells interest in those loans to investors.
The Nov. 6 lawsuit filed against the Harkeys by Point Center investors alleges that Dan Harkey exaggerated the value of properties and was misleading about the risk in sales pitches to prospective investors in his business, which makes loans to real estate developers.
The lawsuit claims that Harkey made millions by collecting his fees upfront, allowing him to profit even if the loans went unpaid and investors lost money.
The real estate crash littered Point Center’s books with bad loans. Harkey has said that 60 percent of the company’s loans have defaulted or been foreclosed. The lawsuit puts the figure at 85 percent.
Among Point Center’s biggest borrowers is bankrupt Laguna Niguel restaurant king John Gantes, who personally guaranteed $18.5 million in Point Center loans. Gantes claimed a personal net worth of $205 million last April. Gantes, who has filed a personal bankruptcy and 29 corporate bankruptcy reorganizations, said in a late January bankruptcy court filing court documents that he is more than $370 million in debt.
One of Gantes’ biggest lenders, GE Capital Franchise, accused him in a bankruptcy court filing March 10 of trying to defraud his creditors by hiding assets.
“Mr. Gantes categorically denies any wrongdoing,” said his attorney, William Burd.
Another big borrower was Ventura real estate developer Ronald W. Hertel, who in December 2005 gave Diane Harkey’s Senate campaign $3,300. In early 2006, Point Center loaned him $22 million for an Atascadero development. Late last year Point Center foreclosed, taking ownership of most of the land it had financed, according to land records. The land appears to be worth just a fraction of the money loaned by Point Center.
Hertel and homebuyers have sued each other over homebuyers’ claims that Hertel did shoddy work. Hertel’s company, once one of the biggest developers on the Central Coast, was driven into a bankruptcy liquidation last week for failing to pay $42,000 in overdue bills.
“The Harkey scheme was nothing but a slick and carefully conceived fraud and hoax, designed primary to feed Harkey’s and his family’s high end and high profile lifestyle with the hope that the economy would allow … his scheme long enough to dupe the investors,” according to the lawsuit.
Harkey has dismissed the allegations, saying that his company is struggling with the same financial difficulties as other lenders.
“We’re just victims of the economic downturn like everybody else,” he told the Register last month.
Register Staff Writers Brian Joseph and Ronald Campbell contributed to this report.
Contact the writer: 714-285-2867 or mwisckol@ocregsiter.com
Indeed investors have and will loose millions in this entire debacle. One of the borrowers mentioned is RW Hertel & Sons, Inc. they have recently been forced into Involuntary Chapter 7, Hertel and his Partner Robert Fowler have long ago concealed assets, transferred monies from PCF loans and many banks into their own secret accounts out of the region. One of the new Business’s they started is MERIDIAN Realty Consultants of San Luis Obisop, CA ran by Fowler and others. They will NOT reveal to the BK Trustee or the Courts any of there assets, accounts, or where the monies are hidden or have been laundered too. Good Luck, Hertel, Fowler and Harkey had a long term plan to screw you all.
Do any of you have information that Diane Harkey had been having affairs with several of PCF clients who borrowed millions and she would offer extra services if they would ” Donate” back to her finance funds. Please post information so I can have a Investigator contact you for a Sworn Statement. We already have others and the names of Hotels and Yachts were some of these activities took place. Any Video or taped conversation as well.
Warning to those invested with PCF on the Atatscadero Ventures, LLC aka Atascadero Investments, LLC Harkey has hired back under a new name the same people who defrauded you. RW Hertel & Sons and partner Robert Fowler. Now Devon Nicole (Fowler)Giordano as well as Robert S Giordano they were hired to “fix” the homes and now Fowler has been associated with a federal x con on realty fraud so check the facts. This is one more big con game with Fowler changing names and using family members all back with Harkey under assumed ID’s
Why would anyone do business or trust hard earned savings with a company that has an “F” rating with the Better Business Bureau?
I would like to know what and why did US Congressman Kevin McCarthy R-CA of Bakersfield accept thousands of unclean monies from the likes of Bankrupt RW Hertel & Sons and Robert JS Fowler whom both defaulted on Harkey Loans ? same guys who gave monies to Harkey as well ?????? Now they are in defaults on dozens of loans from Banks, Private Lenders (PCF) Investors, but had plenty of money to Give to Diane Harkey and Kevin McCarthy what was given in return ?
Dan caught in a lie.
While Dan Harkey has been quoted as saying that the Department of Real Estate has given him a “clean bill of health” – this is a lie. Recent inquiries to the California Department of Real Estate actually reveal that the matter has been handed over to their legal department and has not given Dan a “clean bill of health”. Also, the Better Business Bureau has given PCF a “F” rating. Point Center NO LONGER HOLDS A LICENSE wiith the California Department of Corporations
Dear Fellow Point Center Investors,
My name is Lloyd Charton. I am an investor with Point Center. Dan Harkey was my friend and neighbor. He remains my neighbor.
I retired in 2003 from nearly 30 years as a litigator, and soon thereafter Mr. Harkey asked me to invest money with him.
I found him to be very convincing and listened to him attentively. We had many discussions in my home and his, and attended social events including dinners and parties. He charmed my socks off.
He said he would be my loan manager and I could trust him to do all the due diligence necessary to protect my investment. He said he had a very experienced underwriting team. He described a “very safe, well diversified lending program for first trust deeds on commercial real estate.”
Isn’t this what he told you as well?
It turns out that a comprehensive, professional review of the underwriting and loan files reveals he did virtually no due diligence at all.
He called this program the ‘National Financial Lending Pool’ (or NFL), and said he had been doing this for 30 years. It turns out that Mr. Harkey began this business model in 2002 and seriously altered it in 2004 to a new model without the critical diversification clause. It began to fail very quickly and was so disastrous that by 2007 Mr. Harkey would not honor requests for redemption of shares.
Mr. Harkey has blamed the demise of his business on the economy. Not so. A large group of us have filed an action in Orange County Superior Court and in connection with the action have just conducted an extensive review of the NFL Pool, based on records dating back to 2004, and its 16 largest loans. We have spent hundreds of thousands of dollars of our own money and thousands of hours to uncover what happened at Point Center. All the investors need to know what really caused the huge losses.
We have used forensic accountants, underwriters, land development consultants and other experts. Although we requested to see the complete loan files, which we had every right to review, Mr. Harkey refused until he was sued. Mr. Harkey has sent letters saying he voluntarily produced these files upon request. Not so. We could not review these documents until we sued Point Center. Mr. Harkey seems to have little regard for the truth. Sadly, it’s as simple as that.
Here is what we have unearthed in connection with the investigation and what we believe will be revealed in court.
It appears that over 80% of the money loaned by Point Center’s NFL Pool since 2004, (at the height of our real estate boom) was never paid back by the borrowers.
Mr. Harkey used roll-over (sometimes called Ponzi-style lending) techniques to stall the inevitable collapse of his “scheme.” He would take a loan the borrower could not pay back, increase the size of it by obtaining a new, much higher appraisal and bring in new money to replace the old.
It appears he used impounded payments from our invested funds to make distributions to us, essentially giving our own money back to us. As a result, we all thought the borrowers were doing fine. They were not.
Mr. Harkey did not diversify the lending on the 200 million dollars entrusted to him for the NFL Pool as promised. Instead, he plunged the vast majority into raw land development on residential housing.
By and large this highly speculative loan type was on desert raw land, which was not entitled and not permitted, or on other highly speculative ventures.
The borrowers had yet to go through the risky environmental impact reports and lengthy entitlement process. Virtually none of these projects have been paid off by borrowers or been completed as promised.
Mr. Harkey has viciously attacked me with fabrication and innuendo because I sent communications to other investors, and had the audacity to ask to review the loan files on his failed loan, which are the majority of the loans made (by dollars invested) with our money.
Mr. Harkey says I want to take over management. Not so. Again he fabricates this out of thin air. I have never asked to be anyone’s manager and do not want that task.
Mr. Harkey became very rich by taking tens of millions of dollars for himself, or the entities he controls, as fees and commissions on these failed loans. Mr. Harkey has not been a very good fiduciary at all.
On the management side of things Mr. Harkey has set new records for keeping his investors in the dark while he does very little to improve the properties or report on their status. He has been sued in multiple jurisdictions for fraud, misrepresentation, racketeering, etc.
He continues to accrue huge management fees against our assets while doing little to help us.
He refuses to comply with standard reporting requirements for his investors. He doesn’t tell us which properties have huge outstanding tax liabilities. He won’t inform us of the status of the entitlement process on our large REO properties. We have been sued by borrowers and cities. He won’t even tell us what the properties are worth in this market. He needs to be replaced.
You might consider not allowing him to bully you or deflect the real facts by blaming the whistleblower, which is, yes – me -I’m proud to say.
You can learn more by going to http://www.pointcenterinvestigation.com -and you can reply to this communication by sending me an email at pointcenterinvestigation@yahoo.com
You will not find non-related, personal attacks. You will find out what happened to your money.
Sincerely,
Lloyd Charton