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Distrust between a receiver and investors in what might be Utah's largest-ever financial fraud has broken into the open.
Investors say Salt Lake City attorney John Beckstead has refused to turn over relevant documents, and he has accused them of meddling in his affairs as the court-appointed receiver of the real estate investment company Management Solutions Inc. of Fountain Green.
The dispute surfacing in court documents comes as Beckstead is moving closer to proposing a plan to sell off all remaining assets of the company in one big auction, an action that investors fear will give an inside track to one purchaser at the cost to them of tens of millions of dollars.
The investors "feel that they have the right to know appropriate and relevant information impacting the administration of their own property," according to a memo filed by investor attorney Gregory Hoole. "The receiver's attitude in this regard has bred mistrust and discontent among the investors, who only want to know the relevant facts impacting what to many is their life savings."
They want U.S. District Judge Bruce Jenkins to order Beckstead to turn over a marketing report from a company called Alvarez & Marsal and property appraisals of apartments, commercial buildings, farmland and other properties he might include in the auction.
"I think the most accurate statement is that the receiver tends to view the investors as an annoyance, as opposed to someone for whom he should be working," Hoole said in an interview Monday.
He added that some of the investors have intimate knowledge of the Management Solutions properties and have access to expert advice from people in real estate investment companies.
Beckstead said Monday that although he had not yet read Hoole's memo, "we have differences on how much input they should have on the running of the receivership."
Beckstead has said that a one-stop auction could greatly reduce the costs of the receivership and return a substantial portion of funds to investors.
The Securities and Exchange Commission last year sued Management Solutions and owners Wendell and Allen Jacobson, who recently agreed not to contest the allegations.
The lawsuit alleges that Management Solutions, a real estate investment company that took in $200 million from investors, was operated as a Ponzi scheme in which funds with investors were comingled among projects, companies and bank accounts, and were sometimes used to pay off other investors to make it look like certain transactions were profitable.
The Jacobsons also are facing a criminal probe by federal agents, according to court documents.
Beckstead is proposing to sell the assets by getting a so-called stalking horse company to guarantee the sales price will not fall below a certain level. But investors say that would give an inside track to the stalking horse company, allowing it to shape the process and drive away potential bidders who won't have the same amount of time to assess properties and put together bids.
They also say the stalking horse company, reportedly a real estate firm out of Denver, had been a previous client of Beckstead's firm, Holland & Hart. Beckstead has declined to reveal the name of stalking horse company.