Scripps Investments & Loans 17 percent return didn't last

I assume you mean Imperial Capital Bank? It is the same kind of animal that First Regional was with heavy risk concentration in real estate. Imperial was also taken over by the FDIC at the end of 2009 and the FDIC was expected to eat a $600 million loss on about $ 4 billion in assets. It doesn't sound like First Resource had a conflict on Scripps Villas if their only participation was custodial. I wonder how FR reported the yearly "fair market value" to the IRS and account holders? Still don't know a great deal here about the major banks that provided funds on Scripps deals. So far, the blog tally of "sound and solid" banking organizations that dealt with Scripps is 0 out of 2.
— June 21, 2011 5:46 p.m.

Scripps Investments & Loans 17 percent return didn't last

Surfdog, Do you know if First Regional was also providing more senior loans or funding to the Scripps Villa projects? If so, was First Regional a first-in-line creditor after Scripps Villa filed bankruptcy and, at the same time, was the bank in a more senior position on the creditors committee--- compared to the custodial IRA accounts of amateur Scripps investors?
— June 21, 2011 2:33 p.m.

Scripps Investments & Loans 17 percent return didn't last

What seems to be UNIQUE about Scripps Investments is that they apparently had found a way to attract money from amateur investors to significantly fund a very complex and risky asset based lending operation. And they were able to raise investor money largely by avoiding broker dealers or any meaningful of regulatory oversight---other than a $100 mil Reg D offering. I really wonder if there are or were any other asset based lenders or hard money lenders in the entire USA that could access amateur investor money in same way that Scripps could do it? Hard money lending can be quite complicated and provides necessary working capital to businesses on the ropes that might not have any other source. There are success stories. It’s risky and most of the people involved in this stuff are very sophisticated. Scripps investors, on the other hand, seem to be fish out of water. And, asset based lending deals also can be quite intertwined with many loans with different security interests. I am wondering if there were other major lenders involved that provided liquidity to Scripps real estate deals ONLY BECAUSE the amateur Scripps investors had agreed to provide a secondary source of funds. These major lenders really wouldn’t care what rate of return was promised to Scripps investors as long as the major lender is protected. It is also possible the major lenders helped Scripps find its investors through referrals For example; any bank has plenty of customers that are unhappy with current CD rates these days--- Did major banks send these grumbling investors to Scripps which offered high rates? Were referral fess and or commissions paid? It goes back to the question--- how did the investors find the path to eventually write a check to Scripps?
— June 21, 2011 11:16 a.m.

Scripps Investments & Loans 17 percent return didn't last

First Regional’s name has come up in connection with Scripps. Whether or not it was active with asset based lending may not be relevant. I think the bigger question is if First Regional’s DISASTER real estate banking operation was somehow interlinked to Scripps downfall?? We may never know and since the bank is out of business, any litigation appears unlikely.
— June 21, 2011 11:14 a.m.

Scripps Investments & Loans 17 percent return didn't last

Real Estate publication in 2004 had Wilson and First Regional boasting about using IRA money for unconventional deals. Find it at realtytimes.com. First Regional company report said it's IRA trust administration was run out of it's Carlsbad location. FDIC estimated it would eat 800+ million when it closed First Regional. This represented about 30% of 2.1 billion in assets. A VERY large loss for a bank of this size. FDIC for unknown reasons could not dispose of Carlsbad trust operation--seems odd why they could not find buyer.
— June 18, 2011 6:30 p.m.

Scripps Investments & Loans 17 percent return didn't last

As confirmed by "madatscripps" there apparently is some level of connection between First Regional and Scripps Investments. This makes sense because First Regional was a bank that took way too much risk by specializing in real estate loans. You can find a FDIC report on the web that explains more about how they got into trouble. It brings up more questions such as did First Regional provide loans to some of the Scripps deals (or was Scripps funding projects referred to them by the bank)? There could be intertwining of real estate deals that were partly funded by senior loans from the bank and mezzanine loans from Scripps investors. Some entity or persons "introduced" prospective investors to Scripps and /or the other way too. How did Scripps find the people who gave the money? Perhaps further investigation and interviews with Scripps investors who got burned might show some patterns. (As a great example, showing how these deals are made possible by feeders there is another big financial blow-up in the Midwest for example that paid "feeders" to send them investors from religious organizations. They got plenty of trusting folks like ministers who invested their life savings.) Perhaps this is a future story for the Reader.
— June 18, 2011 10:38 a.m.

Scripps Investments & Loans 17 percent return didn't last

My feeling is that the term "due diligence" is very misunderstood. You can rely on lawyers to review certain aspects of an investment, but how are they going to know if a shopping center or an oil well has good return potential? If you are about to invest in real estate, my suggestion is to find someone who can offer a second opinion on the specific category. If you want to invest in an office building, for example, get the secondary opinion of someone who knows the market conditions, demand for space, and the relative risk/reward potential. Don't rely on lawyers and CPA's to know such stuff. I know of an oil deal in TX where lawyers reviewed a deal and gave it a go ahead. They never bothered to check that the operators had no drilling record or experience. The investors were just sucked into a persuasive sales pitch by amateur land-men. There are plenty of other examples of so-called "due diligence reviews" which missed the essential facts. Always remember the saying: A "gold mine" is a hole in the ground with a liar posted at the opening.
— June 16, 2011 9:37 a.m.

Scripps Investments & Loans 17 percent return didn't last

This is a wild guess. Scripps IRA biz was placed by C. Wilson to First Regional Bank in Carlsbad that did unconventional real estate custodial trust ops. First Regional was taken over by the FDIC in 2010. FDIC sold bank to new operator in LA but trust biz was excluded. The trust accounts are now being managed by reciever. Can anyone confirm or deny this scenario? Thanks to surfdog for the IRAAA.org tip.
— June 15, 2011 9:50 p.m.

Scripps Investments & Loans 17 percent return didn't last

I agree that custodians and fiduciaries probably got caught up in real estate hype of recent years. There are a few specialized custodians who will actually allow one to purchase stuff like tax liens for an IRA account. You also can set up real estate IRA LLC just to shield oneself from lawsuits. My question about the use of IRA money in Scripps and the custodian involved--relates to another lawsuit against Fiserv-- which was the only custodian that Madoff would deal with. If an investor went to Madoff with IRA money, Madoff sent them to Fiserv. Lawsuits were then filed against Fiserv for turning a "blind-eye" to Madoff. Fiserv has also been involved as the sole custodian of a couple of other blow-ups or ponzi's (Louis Pearlman and Daniel Heath.) Did Fiserv or another firm serve as the sole custodian for Scripps? How in the heck did the custodian(s) provide a "fair market valuation" statement once a year to a Scripp's IRA client---without disclosing the investment might be a disaster or worth a minimal amount? Maybe the amount of IRA money here was piddly and it is moot.
— June 15, 2011 2:16 p.m.

Scripps Investments & Loans 17 percent return didn't last

As I understand, most Scripps deals were partial interests in secured "mezzanine" real estate loans where the only recourse is limited to property foreclosure. Anyone other than a first lien lender would be wiped out. But, on the other hand, looking into the $100 million investment fund in 2005 that Don cited in his article---this apparently was a securities offering under SEC rule 506 form D. This fund would be subject to “securities law” and could have much more potential for litigation.
— June 14, 2011 1:48 p.m.