State v. Mr. G (DMC No. 14590) – Felony Embezzlement ($471,640), Felony Mortgage Fraud and Felony Fraudulent Schemes – Not Charged – Enforcement and Compliance Division of the Arizona Department of Real Estate Investigated (File No. XXF-DI-XXX-REL).
Mr. G owned a global investment company and he was issued a real estate license through the Arizona Department of Real Estate. Later, he was also issued a broker’s license and a salesperson license. The Department of Real Estate conducted an onsite audit of Mr. G’s books and they found varying discrepancies.
His employees were negligent in the performing acts, which required a license, and they did not exercise supervision over the company. Specifically, property management duties were not properly handled. At one point, a property management agreement which was utilized by Mr. G which did not contain a clause stating that the PMA cannot be assigned to another licensee, or licensed entity, without the expressed written consent of the property owner as required by A.R.S. 32-2173(A) (1) (j).
The main issue was that the property management trust agreement, journals and client ledgers were not in balance with each other. This is required by A.R.S. 32-2151(B) (2). The resulting shortage was an amount of $471,640. The Department of Real Estate alleged that Mr. G had opened a line of credit from Chase Bank for approximately $300,000. They alleged that he had done this by purchasing Certificates of Deposit with trust fund account money and used that as collateral to secure the line of credit. They then alleged that he later bought properties to use for himself, and not for the benefit of his clients. Ultimately, the Arizona Department of Real Estate filed a Cease and Desist Order and set the case for a Hearing in front of an Administrative Law Judge. In addition, civil lawsuits were filed against Mr. G.
We became involved at the request of Mr. G’s civil counsel in order to prevent criminal charges from being filed. We were able to show that the entire amount of money that was supposedly missing was actually still deposited with the bank in various CDs. We were also able to show prior email communications with somebody in the Department of Real Estate who indicated that securing a line of credit with the CDs was “okay”, since the money couldn’t be touched and was being held at the actual bank. Eventually, all of the clients were made whole, and after a Motion to Stay the civil proceedings was filed, the case resolved.