When Los Angeles attorney Al Kaufer was shown a letter in 1980 from Pasadena developer Stanley S. Sirotin, he thought it contained an offer that was too good to pass up.
Sirotin was seeking investors for The Commons, a mix of upscale specialty shops, restaurants and offices that he planned to build in downtown Pasadena, where redevelopment and private projects were beginning to change the area's ambiance from seedy to chic.
In his solicitation letter, Sirotin said that he had obtained an $8.5-million construction loan from Bank of America, engaged the services of a well-known general contractor, and presold all of the office space as condominiums at an average price of $150 per square foot.
Kaufer had made successful real estate investments before and was so impressed with Sirotin's letter that he and his brother, Max, each invested $50,000 as limited partners. It is a decision they have come to regret.
No Condominiums Sold
What Al Kaufer did not know at the time was that there was no construction loan from the bank, according to Bank of America officials. The contractor had not yet agreed to build the project, nor were any condominiums ever sold, the project's leasing agent said.
"If everything that was said in the letter was truthful," Kaufer said recently, "it would have been a very reasonable investment. But if the guy walks away with the money, then everything goes to hell."
Kaufer, like many other investors, claims not only that Sirotin walked away with the money, but that he lied to them from the beginning about his developments and himself.
By the time Sirotin left the country for England in 1984, asserting in court documents that he was broke and in ill health and was traveling to Britain to obtain cardiac treatment not available in the United States, The Commons was bankrupt, his two other Pasadena projects were in financial trouble, and dozens of investors had gone to court charging that he had defrauded them of millions of dollars.
Sirotin, who apparently has never returned to the United States, also had become the focus of a joint investigaton by the state Department of Corporations and the Los Angeles County district attorney's office for possible embezzlement of funds invested in his projects.
"I believe there was embezzlement of funds," said investigator Al Lomas, who heads the state's probe of Sirotin. "I believe at one point in time that Sirotin knew things were not right and didn't tell the investors."
According to an affidavit Lomas filed in Los Angeles Municipal Court late last year seeking a search warrant to seize bank records, the investors' funds "were commingled and were used apparently for Sirotin's personal use and other unlawful purposes."
Lomas and investigators from the district attorney's Major Fraud Division have worked on the case for nearly four years. They have not filed criminal charges against Sirotin but say that they are still pursuing the investigation.
Deputy Dist. Atty. Tim Brown, who is conducting the district attorney's investigation, declined to discuss his findings, saying only that "there was some pretty substantial misbehavior" by Sirotin.
10 Civil Suits Pending
While the investigation continues, 10 civil suits against Sirotin filed on behalf of 70 investors and creditors are moving through Pasadena Superior Court and Los Angeles Federal Court and Superior Court, seeking a total of about $134.4 million for alleged acts of fraud, racketeering and nonpayment of fees.
Many of the suits, including one filed in Los Angeles Federal Court by Kaufer and 24 other investors in The Commons, contain similar complaints that Sirotin:
- "Embarked on a scheme designed to defraud plaintiffs of their money."
- "Made untrue statements of material fact."
- "Sold securities . . . without proper compliance to state and federal laws."
In court documents and in newspaper interviews published before his departure for England, Sirotin consistently denied any wrongdoing concerning his Pasadena projects. Efforts by The Times over several months to reach Sirotin by telephone at his home in England were unsuccessful.
Judgments totaling more than $5.5 million already have been awarded in eight other suits against Sirotin, almost all of them brought by creditors, including Weston-Lusk, the general contractor for all three of Sirotin's developments, for nonpayment of fees.
Last year, a London law firm representing Weston-Lusk obtained a court order freezing Swiss, French and English bank accounts belonging to Sirotin.
The contractor is seeking to recover about $2 million in unpaid construction fees for The Commons, as well as about $2.3 million in previously awarded civil suit judgments. According to Peggy Gerber, a Santa Monica attorney representing the contractor, no money has been recovered under the London court order.
Long Legal Battle