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Newport Interstate Still in Business, Chief Says : Lorenat Denies Any Wrongdoing, Claims Suit Filed by SEC Has Been Settled

August 20, 1987|MARY ANN GALANTE | Times Staff Writer

Breaking a monthlong silence, the president of Newport Interstate Properties Inc. said Wednesday that the beleaguered company "absolutely will stay in business"--despite federal accusations of defrauding investors.

"We have not done anything wrong," Newport President Richard J. Lorenat said repeatedly during an hour-long interview.

Lorenat said the Newport Beach firm "is still accepting funds for viable projects" and blamed his company's woes in part on investors who, he claims, failed to make payments on real estate projects in Texas, Arizona and California.

He also maintained that Newport has settled a lawsuit filed Tuesday by the Securities and Exchange Commission.

In the suit, filed in Los Angeles Superior Court, the SEC alleges that the company and three of its officers "commingled, misused and misappropriated investor funds," violating registration and anti-fraud provisions of federal securities laws.

The three officers--Lorenat, Vice President Michael Joyce and Controller Kenneth L. Shattuck--also were accused of violating federal broker registration provisions.

At least 23 of the company's limited partnerships and real estate projects "have either been sold at public auctions in foreclosure or have had foreclosure proceedings" started against them, the SEC complaint says--all allegedly without investors' knowledge.

Lorenat said Newport Interstate Properties has settled with the SEC over the allegations contained in the lawsuit. "The SEC has closed the book" in its investigation, Lorenat said.

The reported settlement could not be confirmed. The SEC's chief of enforcement in Los Angeles, James A. Shalvoy, said Tuesday that "no consent (agreement) has been filed for Newport Interstate Properties." Shalvoy declined to comment, however, on whether an agreement has been reached or on Lorenat's claim that the agency has closed its investigation.

Newport's problems surfaced publicly July 16, when a group of Orange County investors tried to force a liquidation of the company, claiming in two lawsuits that up to $20 million in investments were missing.

In the suits, the investors said they each put up tens of thousands of dollars with Newport to buy into real estate syndications that would own projects in Buena Park, Victorville and cities in Arizona and Texas.

The company agreed to a voluntary reorganization under federal bankruptcy laws 10 days later, and ever since has been controlled by a trustee, retired Orange County Superior Court Judge Bruce W. Sumner.

In recent weeks, a team working with the trustee--including the accounting firm of Coopers & Lybrand--has been poring over the company's books, piecing together "what went on" and trying to locate assets, said Robert P. Mosier, the trustee's consultant.

Cooperated With Trustee

Mosier said that an estimated 600 to 1,200 investors plowed between $20 million to $30 million into the company from 1980 through last month.

According to Mosier, Lorenat has cooperated with the trustee and has indicated that active investments now total $12 million to $15 million. If all of the company's current projects were to be liquidated, Lorenat reportedly has told the trustee, they would bring in around $10 million--leaving the company $2 million to $3 million in debt.

Mosier said the trustee will not know if those estimates are correct until the review is complete. "Based on everything we know, I don't see" Newport Interstate Properties continuing to operate "with current players and the current method of investing," Mosier said.

In Tuesday's interview, however, Lorenat said the company has sufficient funds to continue operations. But he refused to clarify the firm's primary business, describing Newport as a "multipurpose company" that does real estate brokerage, tax services and insurance work.

No Decision Made

Lorenat would not say how much syndication his company does. He said no decision has been made about whether Newport Interstate will continue syndicating projects.

Lorenat also said he does not know the amount of the company's--or investors'--current equity or debt.

He emphatically stated, however, that investors will be paid back in full. Asked about foreclosures on the projects, Lorenat said, "Nothing has been foreclosed upon unless it has not received the (financial) support of investors. . . . We deny any and all allegations."

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