Yesterday, the California Attorney General’s office raided Redding-based Asset Real Estate & Investment Co. (AREI) as part of their ongoing investigation of the firm. AREI is accused of defrauding investors and is the center of a flurry of investor lawsuits. Jim Koenig, who founded AREI in the late 1990s, is seeking bankruptcy protection and closing the firm.
AREI once controlled about two-dozen assisted senior living and memory care centers nationwide (including Sierra Oakdale Property Management and Oakdale Heights Senior Living in Redding) that offered tenants-in-common investments and tax shelter property exchanges.
Investors in some of the senior care centers have not received base rent since November and have faced foreclosure on their properties. AREI also offered shares in a San Joaquin County golf course and a $55 million corporate note issued without collateral. The lawsuits are accusing AREI of the classic Ponzi scheme – it defaulted on the corporate note after issuing greater debt to pay off prior promises of a 12-percent annual return. The lawsuits also allege Koenig and his partners own at least a half-dozen other firms that charged investors processing fees, brokerage fees, loan processing fees, property operating fees and other fees without letting investors know they owned those firms.
The Attorney General’s office is asking any investors who lost funds to send copies of their documents to the agency’s Public Inquiry Unit. Documents should show the nature of the investment, what promises were made, where the sales occurred and how much was lost.
This is not the first time Koenig has ran into trouble with the law. In 1986, Koenig was sentenced to two years in prison and ordered to pay $5 million in restitution to investigators after he and two partners were convicted of fraud in a gold selling scam.