By Ray Stern
By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
But in Vancouver, Magellan is taking the lawsuit seriously and has opted to fight the battle outside of the courtroom.
Magellan and several financial-planning firms who sold the REIT shares are attempting to call a meeting of REIT investors on November 4.
The reason, according to dissident investors: to use proxy votes to regain control of the REIT, dismiss the lawsuit in Phoenix and immediately sell all REIT properties. No more REIT, no more pesky REIT investors demanding forensic audits.
Dissident investors resist Magellan's proposed sale of the REIT; they say they don't trust Magellan with the proceeds.
But several financial-planning firms that sold Magellan's REIT investments in the first place, and who some investors say might be legally liable in the future because of their alleged lack of presale "due diligence," say in an October 21 press release that most REIT investors just want their money back.
Resnick referred New Times to two financial planners who back up Magellan's efforts to kick out Mallmann. One planner could not be reached for comment. The other is Michael Boni, who paid more than $6,000 in fines and signed an agreement with the British Columbia Securities Commission in May in which he admitted he violated securities regulations in 1997 in connection with selling an "oil-and-gas fund" stock to 16 clients.
Boni contends that the dissident trustees who have taken over the REIT are spending too much REIT money on themselves.
Magellan has long pointed out that Ian Mallmann, the dissident trustee currently running the REIT, voted to pay himself and two others a total of about $192,000 to run the REIT. Magellan also points out that Mallmann once officed for free for three months at Pricewaterhouse Coopers, which conducted the forensic audit that has fueled the fraud and racketeering lawsuit against Magellan.
Mallmann insists there was nothing improper about getting a free office from the auditors for three months, and notes that the compensation Magellan now claims is excessive was approved and voted on by Magellan principals when they were trustees of the REIT.
Laura Gahn, an investor who opposes Mallmann, summed up her frustration in an October 27 letter to Mallmann: "We need better accountability. Was that not one of the reasons you people were elected? To right the wrong that was already taking place with the other trustees?
"Would it be too much to ask to have the investors' interest put first and foremost before the dog fights?"
The Gahn letter was faxed to New Times by Magellan.
When New Times asked Magellan to respond to complaints of mismanagement and low returns on investment, publicist Resnick answered with a single question in her October 22 letter: "Which limited partners and properties are you referring to?"
In a follow-up letter on October 29, Resnick wrote: "For the most part, Magellan projects have performed close to or exceeded projections. In a few cases, some have performed below expectations. That's the nature of the business."
She noted that one Magellan limited partnership called "Longmore Estates" paid off handsomely -- investors recouped equity plus a whopping 22 percent annual return, she says.
But not all investments have been Longmores.
In 1997, a homeowners' association sued Magellan in Maricopa County Superior Court, alleging consumer fraud, breach of fiduciary duty and negligence in connection with Magellan's allegedly shoddy construction and poor management of Scottsdale Mission, a condo complex.
Magellan denied wrongdoing and said the case was baseless.
Magellan and the homeowners' association are reportedly nearing an out-of-court settlement.
In faraway Canada, limited partners wondered what to do.
The troubled property drew the attention of Brad Seutter and Dave Miller, two Alberta realtors.
The Canadian duo isn't granting interviews to newspapers, but letters they sent to investors make it clear they have a game plan: get enough limited partners to vote out Magellan as managers of certain properties, then assign management to Seutter and Miller. The next order of business: demand forensic audits.
Seutter and Miller organized the limited partners in Scottsdale Mission and fought a successful battle in Superior Court to remove Magellan as general partner of the project. Seutter and Miller then replaced Magellan as general partners of the Scottsdale apartment complex.
Seutter and Miller also organized Canadian investors to oust Magellan from Morada, a Magellan project in San Diego that has been in receivership for more than a year.
The duo claims it has the votes to wrest control of Canterra, a Phoenix apartment building.
They have their eyes on Palomar, a Magellan condo project in Sun City West that was taken over by a receiver and is now facing bankruptcy.
They are also trying to organize investors in three other Valley properties -- apartment buildings in Chandler, Scottsdale and Tempe.
Magellan's response to the Seutter-Miller attacks is to write investors seeking their loyalty while simultaneously poking holes in the Miller-Suetter takeover proposals.
Miller and Seutter bombard investors with letters contradicting the Magellan rebuttals.
And so it goes.
Gordon Grant, a computer specialist from Calgary, Alberta, says he invested about $100,000 during the mid-1990s in two Magellan properties that are being targeted by Miller and Seutter for takeovers.
Since Grant claims to have gotten only about $15,000 of his money back, he wholeheartedly supports the takeovers.