Gausti…. a $77.4 million fraud
Guasti and Dry Creek Corporate Center….
Guasti and Dry Creek Corporate Center are vacant land properties owned as Principal U.S. Property Separate Account (PUSPSA) plan assets located in high density population areas, Guasti near Riverside, California, and Dry Creek Corporate Center near Denver, Colorado. Both undeveloped, Guasti has 53.3 acres and Dry Creek Corporate Center has 57.7 acres. Guasti is a “forward commitment” investment, and Dry Creek Corporate Center is not.
Guasti, founded in 1904, was once a self-sufficient community complete with a company store, bakery, fire station, hotel, post office and the world’s largest contiguous vineyard, encompassing over 5000 acres. The following information was found on the City of Ontario, California, website:
…”The San Diego-based developer, Oliver-McMillan, purchased 49 acres encompassing the century-old Guasti Village and is currently working with the City of Ontario and the Ontario Redevelopment Agency to restore historic structures and develop complementary new buildings, creating an entertainment district with a mix of hospitality, retail, entertainment and, possibly residential uses in a compact walkable community setting.”
Oliver-McMillan and Principal Real Estate Investors have enjoyed a close working relationship during the period leading up to the financial crisis of 2008. According to the San Diego website, Oliver-McMillan still owns the Guasti Project, based upon 2017 information provided. Yet, Principal is reporting this property as “wholly owned” by Principal. It stands to reason both resources can’t be true. I have uncovered other instances where a developer reportedly owns property where Principal is also claiming ownership. By using the Principal U.S. Property Separate Account (PUSPSA) as a “straw buyer,” Principal can build the falsely reported equity value of the PUSPSA. This is a classic Ponzi Scheme, one of many schemes Principal can use to defraud investors.
Principal has used the PUSPSA “assume ownership” of several Oliver-McMillan properties.The Everett Riverfront in Everett, Washington was one of the so-called investments, a former well known hazardous waste dumpsite reporting a maximum loan amount of $17.3 million in the PUSPSA Annual Report. Lindenhurst Village Green was another supposed purchase for the account, reporting a Bank of america loan value of $19 million in financial reports, while the PUSPSA Annual Report claims a loan value of $55 million.
The 2011 Annual Report identified Guasti as a forward commitment with a USPSA Loan Balance of $42.5 million:
When purchased in 2014, the Guasti acquisition price was $77.4 million, the Dry Creek Corporate Center price was $4.3 million:
At years end 2014, Dry Creek Corporate Center had increased in GAV by $25,844, while the Guasti GAV had dropped to $27.7 million, a loss of $49.7 million in less than one year!
Remember Oliver-McMillan’s sale of Lindenhurst Village Green in 2009 for $22.7 million? By the end of 2009, the fair value of Lindenhurst plummeted to $7.4 million, and in 2013, it had been devalued to $800,000!! Meanwhile, Oliver-McMillan was cutting big deals on luxury properties in 2013 with several banks for a $2 billion dollar price-tag! The above is one example of Principal’s fraudulent self dealing activities engaged in between 2007 through 2014. Multiple land purchases, usually through loan purchase agreements with Wachovia, Bank of America, or Wells Fargo Bank. In the case of Guasti, somehow the “forward commitment” loan balance grew $34.9 million between 2011 and 2014.
As an investigator, I can’t make up this stuff! If you have your 401(k) with Principal, this is what will happen to your money as well, at a time when you will need it to survive retirement. Principal sees their investor-clients as pawns… and their lobbyists in congress “donate over $2 million a year to assure they get the votes they want on the bills that will do the investor the most damage.
These are simply a handful of examples of how Principal steals funds from their investor clients. As a Fiduciary, you should be concerned by Principal’s fraudulent past…. because your plan participants will pay the price for your lack of a fiduciary responsibility to recommend investments in their best interest!