A real estate developer with some big-ticket LA properties in its portfolio has run afoul of the Securities and Exchange Commission.
In a lawsuit filed against Woodbridge Group of Companies in federal court last week, the SEC accuses Woodbridge and its founder of running a “massive” Ponzi scheme, spending more than $328 million of the $1.22 billion invested in the company since 2012 to pay back older investors.
The lawsuit claims that Woodbridge’s founder, Sherman Oaks resident Robert H. Shapiro, told investors they would be “repaid from high rates of interest” his companies were earning on loans to third-party borrowers. But those borrowers, according to the SEC, were actually limited liability companies that Shapiro owned and operated.
They include Beverly Grove-based Mercer Vine, a luxury real estate firm that has counted the Owlwood estate in Holmby Hills and Marilyn Monroe’s former home in Brentwood among its listings.
The SEC says those limited liability companies, Mercer Vine included, benefitted from the alleged scheme, as Woodbridge and Shapiro funneled investor money into “their own real estate projects—including buying and renovating celebrity properties,” according to the Los Angeles Times.
An attorney for Shapiro told the Wall Street Journal that Shapiro “denies any allegation of wrongdoing and looks forward to his opportunity to defend himself in a court of law.”
Once home to Sonny and Cher, Tony Curtis, and the founders of 20th Century Fox and Superior Oil, the Owlwood estate is the highest-profile property in Woodbridge holdings. One of the company’s development firms acquired the storied property for for $90 million last year, according to the Times, then relisted it this summer for $180 million.
It is still on the market. But The Real Deal, which reported in November that Woodbridge was under investigation by the SEC, says that Woodbridge’s legal trouble could jeopardize a future sale of Owlwood—and the sale of any of the company’s properties, for that matter.
The SEC has ordered the firm to freeze its assets and halt business operations prior to a hearing for the lawsuit.
“This would effectively prohibit the sale or marketing of the historic property,” says the Real Deal.
Woodbridge also owns an unbuilt, $100-million spec mansion, called Skygarden, in Bel Air. Skygarden was also marketed by Mercer Vine, which “received proceeds of [Woodbridge’s] fraud without any legitimate entitlement to the funds,” according to the SEC.
The lawsuit also accuses Shapiro of personally misappropriating investor money, allegedly using it on “luxury automobiles, jewelry, country club memberships, fine wine, and chartering private planes.”
- SEC says L.A. developer who bought celebrity real estate ran $1 billion Ponzi scheme [LA Times]
- Mercer Vine’s office hits the market following SEC suit against Robert Shapiro [Curbed LA]
- Pedigreed estate once owned by Sonny and Cher sells for $90M [Curbed LA]
- Owlwood Estate: One of LA’s grandest mansions is for sale again—for $180M [Curbed LA]