Two real estate lenders were found guilty of securities fraud and elder abuse Friday, in a Nevada County case that provided impetus for new legal protections for investors.
Philip Lester and Susan LaFerte, a brother and sister, operated Gold Country Lenders in Nevada County. The company was once a financial services highflier, underwriting millions of dollars for real estate projects using funds raised from investors, including many retirees who provided their nest eggs.
Lester was found guilty of 57 felonies, LaFerte 35. Each faces more than 30 years in prison, with sentencing scheduled for Aug. 10.
Their fraud involved “hard money” loans – high interest loans for people who can’t qualify for conventional mortgages.
A 2011 Sacramento Bee investigation exposed Gold Country’s lapses and found widespread abuses in the hard money industry statewide, sparking a new law to improve oversight of such lenders. One financial services expert called hard money lending “legalized loan sharking.”
Nevada County investors, including Gold Country victims, lost more than $50 million in the years following the real estate collapse. The Bee reported that the county had been a hotbed of crooked hard money lenders, many of whom went to jail or lost their licenses over the years.
Lester had previously forfeited his lending license and ceased doing business. He and LaFerte were remanded to the county jail. Their attorneys could not be reached for comment.
“The victims showed tremendous courage and poise throughout a very difficult process,” said Maggy Krell, a deputy state attorney general who prosecuted the case with colleague Randy Mailman. “Justice was served.”
Two of the investors, Midge and Dennis Fowler of El Dorado County, lost hundreds of thousands of dollars in the scams perpetrated by Lester and LaFerte. No money was recovered. The Fowlers helped prosecutors with documents and other information describing how the Gold Country fraud operated.
Midge Fowler said she was deeply relieved at the verdicts.
“I’ve worked on this for six years – trying not to go crazy,” she said. “We’re never going to get our money back. This is our only way to get justice.”