Harkey Investor Letter - March 8, 2013

The following letter was passed on to us by various investors and we are publishing it here with our analysis and comments accordingly. Our comments will be italicized in green to differentiate ourselves from Harkey.

From: Dan Harkey <dharkey@pointcenter.com>
Date: Fri, Mar 8, 2013 at 4:31 PM
Subject: Attn: All Point Center Investors
To: 

Please review the attachment

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Dear Investors,

As previously reported, Steven G. Cash and other members of the “Lloyd and Stella Charton Group” continue to impede Point Center’s ability to timely sell properties and maximize recovery to you.  

Steve Cash is a Point Center investor. He is also one of 86 plaintiffs who filed a lawsuit against Dan and Diane Harkey, Merri Gwen Melanson, and Point Center Financial - the Harkeys' company in the Orange County California Superior Court - Case #: OCSC 30-2008 00114401.  The Case was titled by the Court as "Charton vs Point Center Financial" however for brevity it is often referred to as "the Charton case" or "Charton v PCF".

Lloyd Charton was a successful and prominent Orange County attorney who was in retirement when he began to suspect wrongful dealings by Point Center Financial. As a result of Charton's investigation he formed a group of investors who filed the aforementioned lawsuit in late 2008. Lloyd's wife, Stella, a cancer survivor, is not actively involved in the lawsuit except as a plaintiff.

Every investor who opposes the agenda of Dan Harkey is bundled into a "Charton Group" or "Charton Gang" regardless of what relationship the individual investor has to Lloyd Charton himself. This tactic serves two purposes. It misdirects the reader's attention from Dan Harkey and his questionable activities and allows him to play the role of victim persecuted by a conspiracy of "disgruntled" investors. Harkey falsely accuses Charton and the imaginary 'group' of any number of contrived grievances, none of which he actually substantiates.

For example: Harkey accuses the imaginary "Charton Group" of impeding the sale of properties. This, however, is factually untrue as no "Charton Group" exists. There is a group of investors who were sued by Point Center Financial for failing to sign documents that would permitted Point Center to transfer their individual trust deed interests into an LLC in exchange for a non-voting 'financial' position. This would give Harkey sole control over the disposition of their collateral property. The majority of these investors are not plaintiffs and have no relationship to Lloyd Charton as illustrated in the listing of recent Point Center lawsuits against investors that you can review by clicking here. 

Of the 35 cases listed, perhaps three (3) are plaintiffs in the civil case. Each was sued individually, not as a 'group'. None, other than the plaintiffs, had knowledge of the others.

Unfortunately, their goals are furthered by attorneys afflicted with conflict of interests and no sense of urgency. Ultimately, this costs you (not Point Center) money when buyers cancel transactions, accounting costs continue, new property taxes come due, expenses for taxes, insurance and maintenance expenses accrue.  At this time Mr. Cash is single-handedly preventing two transactions from closing.  Please make no mistake, he is fully aware of this fact.

Steve Cash has a mind of his own and marches to the beat of his own drummer. His position on Dan Harkey and Point Center Financial can be found by clicking here. Point Center has an old civil case pending against Mr. Cash. Mr. Cash is no different than the 3,000 other investors. He wants Dan Harkey to pay him his money back, not from investor funds, but from Dan Harkey's own pocket. So, other than serving as a co-plaintiff in 30-2008 00114401, Mr. Cash's actions with respect to Point Center Financial are strictly his own.

In short, it appears Dan Harkey conjures Lloyd Charton, Steve Cash and other investors as bogeymen to use and abuse as tools to misinform and misdirect investors from Harkey's own failures, bad dealings, and mismanagement.

Harkey fails to support his assertion of "attorneys afflicted with conflicts of interest" nor is he able to support deficiencies regarding "urgency". If Steve Cash chooses to object and resists Point Center he may or may not be creating a conflict between himself, his fellow plaintiffs, and/or his fellow property investors. This has nothing to do trying the civil case at hand to which plaintiffs' attorneys are focused on. Dan Harkey confuses the issues.

"Ultimately, this costs you (not Point Center) money..." may or may not be true. Did Dan Harkey ever perfect even one of the "personal guarantees" and insurances that he represented would protect your investment in the unlikely event of a default or foreclosure? Why then should investors pay for Harkey's misrepresentations on loans to unqualified borrowers?

For those of you who may have forgotten, this started with Lloyd and Stella Charton demanding preferential treatment to recover all of their investment before you would receive your share. You are invited to see the “Plaintiff’s Demand for Special Treatment” PDF attachment. You may email us should you wish to see the actual emails containing the excerpts in the document. We declined their request and re-asserted our intentions to treat him the same as all investors as to their pro-rata share. 

I can't speak for Lloyd Charton, but if you examine the history and documentation of these allegations of "preferential treatment" you will find one investor who becomes suspicious of bad dealings and wants out of the investments and his money returned. Harkey fails to mention that he refused to allow an examination of his records, as allowed by law, until he was sued to do so.

If any of you (back in the day) suspected something was up with your investments that stories of a bad economy did not adequately explain and an examination of your investment broker's records supported your concerns, wouldn't it be reasonable to assume you would have asked for your money back too? 

If your investment broker-lender was your neighbor and friend, wouldn't you first try to find a low key solution that gives your friend the opportunity to do the right thing, make corrective changes in his business practices and preserve his reputation in the eyes of his other investors? Is this preferential treatment or cutting your friend the benefit of the doubt and giving him an opportunity to do the right thing?

And if the friendly approach failed to work, wouldn't you start making repeated demands and find ways to get his attention, to think about the consequences of his actions? Wouldn't you try to engage in and reach a mediated settlement? And if the settlement agreement Harkey drafts for your signature materially deviated from the agreed terms what other recourse would you have than seek justice through the courts.

If your only recourse was to file a lawsuit, wouldn't you want to discuss the matter with other investors, see if they felt the same, and ask them to join with you to help fund what has now turned into a long and protracted litigation?

All of the above seem like reasonable concerns evolving naturally into a serious civil action. Not the preferential treatment that Dan Harkey would have his readers subscribe to.

Dan Harkey is being sued for fraud, breach of fiduciary trust, misappropriation, elder abuse, and running a Ponzi scheme. There are reams of evidence and analysis to support the allegations. Under the circumstances, beating the drums of "preferential treatment" seems disingenuous and contradictory. 

I wonder how many times Dan Harkey wishes now that he had simply repaid Lloyd Charton his money?

I suggest that you communicate your sense of urgency to the attorneys who represent the Lloyd and Stella Charton group. Do not allow these rogue few to hold you and your investment hostage. Because the same law firm represents investors who wish to sell and those few who do not, you should ask yourself who’s interests are they representing?

This is another misdirection. If the investors really agreed with Harkey they would have happily signed his documents and this matter would not be a point of discussion. They didn't sign which speaks for itself. This has nothing to do with the civil case at hand to which plaintiffs' attorneys are focused on. This has everything to do with the futility in signing documents for mismanaged assets whose loss on principal will be so great after Harkey extracts his cut that not signing seems better than caving in.

Many investors who wanted to speak to the other investors involved in their assets, asked Point Center for their contact details, and were summarily denied. Many investors want to replace Point Center and Dan Harkey as their manager but are unable to do so because he not only withholds the contact details of fellow title holders but also the roster of National Financial Lending pool and Mortgage Note members whose votes are essential in displacing Harkey from their assets.

Harkey can say what he wants about investor revolt and plaintiffs attorneys. One thing is for sure, in the absence of Point Center protecting the fiduciary interests of its investors, the investors are looking out for their own best interests as are their attorneys. No conflicts there.

This situation is very frustrating for Point Center as well, 

As would be expected under the circumstances.

but we continue work on your behalf 

It would appear, based on our analysis of the available information and public records that Dan Harkey continues to work on his own behalf, and history indicates he has failed to act in the best interests of his investors.

as Lloyd continues his diatribe.

Where is the documentation to support this statement?

  Please rest assured we are doing everything that can be done to get properties sold in this difficult market.  

The residential real estate market is operating at 2005 pre-bubble levels, levels that peaked in 2007. What Harkey avoids mentioning is that it is difficult to sell the grossly overvalued properties they control, but continue to accrue fees on (but fail to pay property taxes on until looming tax sales force them to dispose of the assets at their true market value.)

I encourage your participation by calling:

           

Catherine Convy-Harrison, Esq.

Chad J. Brandel, Esq.
Grant, Genovese & Baratta, LLP
2030 Main Street, Suite 1600
Irvine, CA 92614
Telephone:  (949) 660-1600
Facsimile:   (949) 660-6060
Email:  cjb@ggb-law.com

We will continue to provide you with updates as we obtain them. We also invite you to view www.lloydchartoninvestigation.com and read about the Lloyd and Stella Charton Retreat investigation at www.theretreatinlagunainvestigation.com. Thank you for your continued confidence and support.

Best regards,

Dan Harkey

President

Point Center Financial, Inc.

7 Argonaut │ Aliso Viejo, CA 92656 │ Toll-free: 1-800-544-8800 Ext. 6201 Direct/Fax: 949-276-6201 www.pointcenter.com

Real Estate Broker - CA Dept. of Real Estate #00745721

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