A federal judge ordered a California real estate developer and its manager to pay $5.9 million in penalties for misleading municipal bond investors about the prospective value of a project, the Securities and Exchange Commission announced Friday.
U.S. District Judge Cormac J. Carney ordered Pacific Golf Community Development and its manager, Manoucher Sarbaz, to pay $4.9 million and $980,000, respectively.
The SEC, which filed a civil lawsuit against the developer in February 2003, accused Sarbaz of deceiving investors who purchased municipal bonds that were used to finance part of a housing development and golf course in Lucerne Valley in the Mojave Desert.
The land bought with proceeds of the municipal bond sale and pledged as security for repayment was worth less than the $28,000-per-acre value listed in documents given to investors, the SEC said. Sarbaz acquired the land for $1,812 an acre, on average, according to the agency.
Carney's ruling found that more than $53 million in bonds were in default, that no lots had been sold for the planned Rancho Lucerne development, that Pacific Golf and Sarbaz knew the land was not worth $28,000 an acre and that the golf course was incomplete.
Calls to Sarbaz's office and to his attorney were not returned.
The SEC had also sued the development's appraiser, Lee Andrew Hill. Hill settled the SEC's allegations without admitting or denying the claims.
This was the SEC's second lawsuit in connection with the Rancho Lucerne municipal bonds. In 2000, the SEC sued the bonds' underwriter, Pacific Genesis Group Inc., and its chairman, David Fitzgerald, accusing the group of also misleading investors with an inflated appraisal. Pacific Genesis and Fitzgerald were ordered to refund $13 million in that lawsuit, according to the SEC.