Securities regulators have shut down an alleged investment fraud in which numerous “unsophisticated investors” bought overpriced, vacant land in Nevada.
The U.S. Securities and Exchange Commission said Friday it froze the assets of San Diego-based Western Financial Planning Corp. and its owner, Louis V. Schooler. They allegedly ran an investment scheme that raised about $50 million since 2007 from hundreds of investors nationwide, according to the SEC.
The agency accused Schooler and his company of selling ownership stakes in partnerships that were organized to buy and later sell for a profit property in Nevada. However, the SEC says, Schooler and Western “failed to tell investors that they were paying an exorbitant mark-up on the land, in some cases more than five times its fair market value.”
The SEC also alleged that since the spring of 2011, Schooler paid “hush money” to silence investors who had discovered they were defrauded, thus allowing the scheme to continue.
Western Financial’s website says Schooler formed the company in 1978. Since then, its investors have bought more than $100 million worth of land in Nevada, California and Arizona, totaling more than 10,000 acres, the website says.
Efforts to reach Schooler for comment Friday were not immediately successful.
“Schooler conned hundreds of people into investing with Western by leading them to believe that they were getting a good value for plots of vacant land,” Michele Wein Layne, director of the SEC’s Los Angeles regional office, said in a prepared statement.
In its lawsuit, the SEC alleges Schooler buys undeveloped land in the Southwest and then sells the property at “grossly inflated prices” to general partnerships comprised of “numerous unsophisticated investors.”
According to the complaint, Schooler and his company formed more than 100 general partnerships, roughly 86 of which still exist, owning more than 10,000 acres of real estate.
Western’s current offering involves land in Stead, about a dozen miles northwest of Reno, says the SEC. Schooler and his company bought the property for $1.85 million in 2010 but sold off ownership stakes at prices that valued the land at about $9.3 million, a 500 percent markup, according to the agency.
To conceal the property’s true value, Schooler allegedly did not disclose the original purchase price, the SEC says.
U.S. District Judge Larry A. Burns on Thursday granted the agency’s request for a temporary restraining order and asset freeze against Schooler, Western and all entities under the company’s control. Burns also appointed Thomas C. Hebrank as a temporary receiver over Western and the entities, says the SEC.