U.S. District Judge Bruce Jenkins on Monday took a major step to resolving one of Utah's largest financial frauds, approving a plan to sell off tens of millions of dollars in property owned by a Fountain Green-based real estate management company.
Jenkins again rejected an alterative plan proposed by about 200 investors who had put more than $200 million into Management Solutions Inc. The judge instead gave his OK to a proposal by a court-appointed receiver to sell off dozens of properties, consisting largely of apartment buildings in various states, to the highest bidders.
He also authorized the engagement of a real estate broker to manage the sales, which could include bids by investors who believe the liquidation plan approved by the judge will cost them tens of millions of dollars.
Management Solutions and father and son owners Wendell and Allen Jacobson were sued in December 2011 by the Securities and Exchange Commission that alleged the company was insolvent and that the owners had lied to or withheld important information from investors and had operated the business as a Ponzi scheme.
Unlike at a Friday hearing, Greg Hoole, attorney for an investor group, on Monday was allowed to argue on behalf of the group's plan to take over the assets of the company and manage them until the market improves and they can be sold at a higher price.
Hoole said some investors feared they would be left with serious tax bills if the properties were sold now.
But Jenkins said he had the same reservations as he expressed Friday and again rejected the proposal, while recognizing "that many individual problems may be painful and individual results may be disappointing but it's like any other job of cleaning up the stables."
The decision means receiver John Beckstead, a Salt Lake City attorney, will be seeking bids for the sale of the properties and will later distribute to investors any funds left over after secured creditors are satisfied and the receiver's bills are paid.
Jenkins said he wasn't authorizing a "fire sale" but rather a process to get the highest bids for the properties that also include farms and office buildings.
Jenkins last week ruled that the Management Solution was not overall a Ponzi scheme but that parts of the operation and individual transactions were fraudulent. The Jacobsons earlier reached a settlement with the SEC, agreeing to fines and liability to repay some investors depending on how much is returned to them by the receiver.