Calif. Broker Facing Lawsuit, Reelection

Guy Houston accused of fraud, elder abuse, negligence and breach of fiduciary duty

October 27, 2004

By PATRICK CROWLEY

“My clients have sued Guy Houston because they invested money with (Guy’s father) Fred Houston and Guy…and they lost their money,” lawyer Melinda Garcia, who filed the suit in Alameda County on behalf of four clients, told MortgageDaily.com.

“It’s a very unfortunate situation,” she said.

Houston, 44, could not be reached to comment and his lawyer did not return calls.

But Houston and his lawyer have told newspapers in California that the allegations are false and possibly politically motivated.

Houston has also put the blame on his father, who also could not be reached.

But Garcia said politics has nothing to do with the suit. Two of the defendants have previously supported Houston in his political campaigns, according to the suit. And no one has tied Houston’s Democratic opponent to the lawsuit or allegations against him.

Houston and his father have been involved in numerous investment deals over the last 20 years, the suit alleges.

“They used to work closely together,” Garcia said of the father and son.

The Houstons are also accused of running a Ponzi scheme that involved real estate investments secured by land that was either fictional or had already been sold.

Four plaintiffs — Gerald Stefanski, Carol Tomasa and Samuel and Joann Story — claim they lost more than $300,000 on an investment in commercial property in Napa, Calif.

They claim the Houstons told them that the property was secured by $1.75 million in equity on the land.

However, the plaintiffs learned that the land had been sold without their knowledge, Garcia said.

“My clients were never compensated…because the property had been sold,” she said.

The Houstons had “at the very least a duty to inform (investors) of the true facts as to the true nature of their investment interests, the manner in which they found would or would not be secured and the status of their investments,” according to the suit.

Houston is also accused of co-mingling investors’ money and moving it to other companies and partnerships he and his father allegedly operated, including a telecommunications company, a real estate investment corporation that went bankrupt in 2003 and an investment partnership.

The investors say in the suit that one of the reasons they trusted Houston, who was first elected to the California State Assembly in 2002, was because of his standing in the community and his “positions of public trust” that included stints as councilman and mayor of Dublin.

Garcia brought the allegation of elder abuse because one of the defendants is 76.

“The taking, misappropriating and retaining of (his) property…was wrongful and done with the intent to defraud,” the suit alleges.

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: pcrowley@enquirer.com