‘Landmark’ Promoter Told Not to Dispose of Assets
A Superior Court judge, asserting that “massive fraud†appears to be involved, Wednesday barred Mark Anderson and his Beverly Hills-based Marlin Properties from disposing of assets while investigators trace $50 million raised for “historic landmark†tax shelter investments.
Judge Ricardo A. Torres granted the preliminary injunction asked by state Corporations attorney Dorene Wolf at a hearing in Los Angeles County Superior Court after the receiver said he has been unable thus far to trace about $30 million of the funds from the sale of limited partnership interests to about 1,000 investors.
Thomas H. Coleman, whom Torres confirmed as receiver, informed the court of evidence that more than $10 million in partnership funds went to Marlin and $750,000 to Anderson with “no apparent partnership purpose.â€
Coleman’s attorneys and accountants have already spent more than 1,000 hours in the first month of preliminary efforts to unravel purportedly chaotic records in the deals, he told the court.
Anderson sold partnership interests for the ostensible purpose of buying and rehabilitating old buildings, which could qualify for tax breaks through restoring and preserving their facades.
The buildings include the original headquarters of Union Bank on Hill Street downtown, the Hollywood Bank of America and the old Bay Cities Building in Santa Monica. Others are in the San Francisco-Oakland area and in New York. These include the New York City Chamber of Commerce building and the Carnegie Mansion in Millbrook, N.Y.
About $11 million was used to make down payments on the approximately 20 buildings, Coleman said, adding that “at most†$1 million was spent on the small amount of rehabilitation done afterward. Some of the buildings are now in foreclosure and bankruptcy proceedings.
Anderson’s attorney, Fred Rucker, argued at the hearing that the state and the receiver were using “hyperbole†in describing the alleged fraud of Anderson and Marlin Properties and of two affiliates, Marlin Industries and Marlin Equities.
The only issue, Rucker said, was whether there was fraud in the offering of securities--â€not whether there was mismanagement.†Conceding Marlin’s failure to maintain proper records, the lawyer contended that no fraud was committed because risks were spelled out in the materials concerning the public offering of the partnership interests.
Anderson’s attorney also maintained that there was no showing that Anderson “made any money.†Rather than keeping millions of dollars in fees to which Anderson was entitled, Rucker said Marlin and its owner made large loans to the partnerships to try to salvage their tax shelter rights after necessary construction loans could not be arranged.
Judge Torres, however, said there was ample evidence of “massive fraud and millions of dollars missing.â€
He granted the receivership over not only the Marlin entities but Anderson personally. A further hearing was scheduled April 22 on the state’s motion for a permanent injunction. Meanwhile, the judge issued a permanent injunction against defendants Michael Thomas and his Federated Construction Co. and Federated Capital Corp., which consented to the order enjoining them from violating any state securities laws.
Anderson, a lawyer who lives in Hidden Hills, had said in a declaration filed with the court that his business troubles occurred because of “explosive growth.†He said Marlin syndicated its first property in November, 1984, and within a year had taken in $50 million.
He said the earlier partnerships operated on “a negative cash flow basis throughout 1985†because of the inability to obtain construction financing, and their funds were “quickly dissipated†as a result. He said later partnerships made loans to earlier ones on the advice of accountants, and he denied the state’s allegations that the funds were “commingled†illegally.
Receiver Coleman said in a statement after the hearing that he plans to “pursue every legal remedy available to recover money and property which has been misappropriated.â€
Meanwhile, he said he intends to keep the buildings pending discussions with the partnership investors. He said he believes that liquidation of the partnerships could be “very harmful to the investors and cause severe, adverse tax consequences.â€
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