A family that invested $4 million in a mortgage brokerage firm that finances nontraditional loans has forced the firm into bankruptcy amid allegations of a Ponzi scheme.
The U.S. Bankruptcy Court for the Northern District of California has ruled in favor of appointing trustees to oversee operations of the San Jose-based California Plan Inc. The firm’s president, Michael J. Schneider, is named in the ruling, which effectively forced California Plan into Chapter 11 bankruptcy.
According to federal court documents, Schneider allegedly bilked members of the affluent Aspromonte family of Santa Cruz by telling them he would invest money in high risk mortgage loans that were secured by property. He would then collect fees from servicing the loans.
But Schneider then allegedly did not invest the money as he promised and instead converted the money for his own use.
“It does appear from the pleadings that $3,965,000 in funds invested … over the course of 12 loans are unaccounted for and unsupported by trust deeds,” U.S. Bankruptcy Judge Marilyn Morgan said during the recent court hearing in which she granted the involuntary bankruptcy motion, according to a transcript of the hearing. “This history and trail of fraud and dishonesty shows that the debtors cannot be trusted with fulfilling their fiduciary duties to creditors.”
The lawyer for Schneider said during the hearing that while he agreed to the involuntary bankruptcy, Schneider does not admit to “the veracity of any of the allegations” made by the investors, the court transcript shows.
During the hearing lawyer Bernard Greenfield, who represents the Aspromonte family, said Schneider was running “a Ponzi scheme.”
In court filings the Aspromonte lawyers accused Schneider and California Plan of “fraud and dishonesty” as they “falsely and fraudulently solicited funds to be used to make secured loans to owners of real property.”
“In order to maintain a regular cash flow into California Plan, Schneider forged deeds of trust to lull (investors) into believing the funds they loaned were properly invested,” the lawyers said. “There has likely been widespread conversion of California Plan’s assets by Schneider and likely for his benefit.”
On its Web site, which was still active at publication, California Plan bills itself as “an established mortgage brokerage firm serving clients throughout California.”
“We offer conventional loans and equity, first, second and third loans,” the company says. “We specialize in unusual loan requests and hard to place mortgage loans.”
Schneider is accused of using “doctored” and other fraudulent documents as part of his scheme.
