Investors Seek Liquidation of a Newport Firm : Group’s Petition Says Real Estate Syndicator Owes Them Almost $1 Million

A group of Orange County investors who say they are owed almost $1 million by a Newport Beach real estate syndicator filed a petition Thursday that seeks to force the liquidation of the company, Newport Interstate Properties Inc.

Also, several of the investors have been contacted by the Securities and Exchange Commission as part of what appears to be an SEC investigation of the company.

The petition, filed Thursday in U.S. Bankruptcy Court by 11 investors, alleges that Newport Interstate violated federal securities laws by lying to investors and misappropriating their assets. A second petition seeks liquidation of assets of Newport Interstate’s president, Richard J. Lorenat.

According to the petitions, Lorenat and his company allege that Newport Interstate does not have the funds to return investments totaling $897,000.

Money May Be at Stake

Up to $20 million placed with Newport by at least 500 investors in at least 24 partnerships is missing and may be at stake, said Jeffrey M. Howard, the Newport Beach lawyer who filed the petitions in Santa Ana. “We know of 24 partnerships that invested between $500,000 to $1 million (each) . . . and nobody has any idea where it went,” he said, adding that there may be up to 800 investors involved.

Gary S. Mobley, the attorney for Newport Interstate and Lorenat, said Thursday that he was “quite surprised” by the investors’ petitions for involuntary bankruptcy but declined comment until he has reviewed the documents.

Mobley confirmed, however, that his clients are already defendants in several civil suits, but would not say whether those actions were also brought by disgruntled investors.

The Securities and Exchange Commission also appears to be building a case against Lorenat, Newport Interstate Properties and an apparently related company, Newport Interstate Investors Inc.

SEC officials would not comment, but Howard said several of his clients have been asked by the SEC to sign statements for possible use in a court action by the agency.

The documents, mailed to Howard’s clients, indicate that the SEC “obviously wants a cease and desist order for (Newport Securities) to stop selling securities” without meeting registration requirements, Howard said.

1985 Investments

The petitions filed Thursday concern a series of investments made in 1985 by the Orange County investors. The petitioners each put up $75,000 to $250,000 to buy into real estate syndications--interests in partnerships that would own parcels of land in Victorville, Houston, Tucson and Phoenix.

The syndication shares were sold by Newport Interstate Properties, court papers state.

The investors became suspicious when land that should have been developed remained vacant, months after construction should have been finished, Howard said.

Title searches of some land revealed that parcels were “placed in the name of Richard J. Lorenat” instead of the partnerships that had bought the properties, court papers said.

Further checking of records disclosed that Lorenat borrowed heavily against much of the land without first telling the investors, Howard said.

Lien Placed, Petition Says

A $1.3-million lien was placed on one Phoenix parcel in June after Lorenat was sued by a lender for defaulting on a $1.1-million loan on the property, the petitions said.

The investors, meanwhile, believed they were owners of the partnership that should have owned the parcel and knew nothing of the loan, the lawsuit or the lien, Howard said.

Foreclosure sales are scheduled for July 21 and 22 on three other parcels that investors thought they owned, court papers state.

The immediate reason for the bankruptcy petitions, Howard said, is to halt those foreclosure sales.