SAN DIEGO — A group of disgruntled San Diegans who lent money to and invested in missing financier Clifford Graham's failed gold investment firm on Thursday filed a petition to force Graham into involuntary Chapter 7 liquidation bankruptcy.
The petitioners, Robert D. Rens, Shirley Stack, Dennis P. Riley and Leon W. Parma, are owed a total of $632,000 in notes and interest, according to the petition.
Graham's Au Magnetics firm, founded in 1980, reportedly lured nearly $13 million from more than 100 investors. He reportedly sold 125% interest in his venture by offering 1% shares for $100,000 each.
Au Magnetics was supposed to extract its gold through a complicated process that had been tested in the laboratory but never marketed commercially.
Investors discovered the scheme in early 1984 and a flurry of lawsuits followed.
Founder of Fotomat
Graham, a founder of Fotomat, has not been seen since last May, although rumors have placed him anywhere from the Caribbean to Rancho Santa Fe.
Both Graham and his firm are now under investigation by the Internal Revenue Service, the FBI and the U.S. attorney's office here.
The investors who filed the bankruptcy petition Thursday invested in Graham's firm and also lent him money, according to one of the investors, who asked to remain unidentified.
The bankruptcy petition postpones the scheduled Oct. 24 foreclosure sale of Graham's 18-acre Rancho Santa Fe home. The ranch-style property has an estimated worth of between $4 million and $5 million, according to sources close to the case.
The filing was well-timed: One year ago today, a group of investors who had sued Graham reached a settlement with him and received, as part of that settlement, a third trust deed to his Rancho Santa Fe home.
The investors who filed the bankruptcy petition will likely claim that the settlement was an "insider preference payment," according to attorneys close to the case. For that allegation to hold up in court, the bankruptcy action had to be filed within one year of the settlement.
Under federal law, insider preference payments are those made within one year of a bankruptcy filing.
Auction of Yacht
Apparently unaffected by the bankruptcy petition filing is the Oct. 31 scheduled auction of Graham's 180-foot yacht, the Pegasus.
General Electric Credit is owed $1.3 million for loaning Graham the money to buy the boat in 1976. The minimum auction bid on the vessel, which is now docked at the Kona Kai Club on Shelter Island, will be $600,000, with increases in $25,000 increments.
The boat loan is secured by the Rancho Santa Fe house, according to Ed Walton, the attorney representing General Electric Credit. "Our intention (was) to liquidate the boat and go after the property," said Walton.
Although the boat can be liquidated, General Electric Credit will have to wait in line on its claim to the house.
"We didn't want a bankruptcy; we wanted everything to proceed as is," said Walton.