A Laguna Niguel realty company and an affiliated investment company in San Clemente are being sued for selling commercial real estate securities that were allegedly "rigged" so the firms would make millions in fees while draining investors of their lifetime savings.
The investors seek compensatory and punitive damages in their suit filed in Orange County Superior Court against Argus Realty, Argus Realty Investors and several affiliated companies and people.
The complaint accuses them of intentional and negligent misrepresentation, securities fraud, aiding and abetting fraud or deceit, negligence, breach of fiduciary duty, elder abuse, and violations of the California Corporations Code and the Arizona Revised Statutes.
"The sponsors and entities behind this offering gorged themselves on unconscionable fees and costs associated with the offering and the management of the properties while placing the investors in a hopeless, fraudulent investment structure that had no chance of providing a reasonable return," reads the complaint.
"While the investment was touted as 'institutional grade,' it was anything but institutional grade. This TIC [tenant-in-common] was no investment in any sense, but a rigged game in which the sponsors made millions in fees while taking savings from people earned over a lifetime."
Argus is accused of selling undivided interests in three office buildings in Phoenix, described as "single-story class A back-office" buildings. The complaint calls it "inflated and indefensible" that the Argus team bought the properties for $51,375,000, tacked on millions in fees and then sold them to the investors for $58,240,000. The plaintiffs were supposedly told by Argus the investment was structured to last 10 years, but last June the properties fell into foreclosure, according to the complaint.
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In other words, within months, the investment was a total bust.
The Argus companies allegedly misrepresented the facts of the original transaction, their supposed $1 billion in commercial real estate acquisitions and more than 9 million square feet under management, claims the suit, which accuses Argus CEO Richard Gee and other company officers of misrepresentations and omissions about the securities.
Investors are represented by Mark Slater with Slater Hersey & Lieberman in Irvine.