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SEC Charges California Man in Fraudulent Real Estate Investment Scheme

The Securities and Exchange Commission charged a Southern California man with defrauding investors and misappropriating more than $1.3 million from Caliber Partnership I LLC, a real estate investment fund he controlled. According to the SEC’s complaint filed in U.S. District Court for the Central District of California, the victims of the fraud included an 82-year-old who lost $250,000.

The SEC alleges that Paul Garcia of Newport Beach, California raised $675,000 from 13 investors in 2014 and 2015 by claiming that Caliber would use their money to purchase an unfinished golf resort in Colorado.

Garcia claimed that Caliber management had already committed $2.7 million toward the golf resort purchase and that once the purchase was completed, Caliber would join a real estate investment trust that was poised to begin public trading of its securities. In truth, no one had committed the $2.7 million as Garcia claimed.

But as investor money came in, Garcia caused Caliber to borrow heavily to finance two real estate purchases and misappropriated more than $1.3 million of the borrowed funds and investor funds through separate companies he controlled.

The SEC further alleges that Richard Woods of Southlake, Texas, negligently misrepresented Caliber’s prospects in marketing materials used to attract investors that he authored and Garcia approved. Woods was the primary drafter of the private placement memorandum and business plan, which the SEC claims contained numerous falsehoods.

To settle the charges, Garcia, Caliber, and the other companies involved in the fraud agreed to pay a total of more than $3.3 million in penalties and disgorgement of ill-gotten gains plus interest. Garcia also agreed to a court order prohibiting him from participating in securities offerings and from serving as an officer or director of a public company.

Woods agreed to be enjoined from future violations and to pay a penalty and disgorgement totaling approximately $30,000. All settling parties agreed to the sanctions without admitting or denying the allegations in the complaint.

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