Ethical Lapses at Vestin Mortgage (VRTB)

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Joined: Mon May 23, 2011 7:39 am

Ethical Lapses at Vestin Mortgage (VRTB)

Post by kurtsi » Mon May 23, 2011 8:39 am

A while ago I invested much of my savings into a trust deed company in Las Vegas called Vestin Mortgage. Although I could not at that time reason why a company which only loaned out 30% of appraised value, and kept the first trust deed along with the borrower's personal guarantee could be termed 'high risk' I found out it's worse than playing blackjack blindfolded.

Five years ago, at the height of the real estate boom, I asked for my investment back, and was told I would have it in 2008. No problem.

I was beginning to be severely affected by Post-Polio Syndrome and figured by then I could hire someone to help me around the house, pay extra health bills, hire a screenwriter for my book, etc. Never would I consider going on disability; polio kids were always taught to be independent.

A single man, I had a stipulation in my will that certain funds should help handicapped kids for a number of years.

Shortly before the check was written, however, CEO Mike Shustek convinced the majority to convert the company into an REIT. So VRTB was born.

Shares have declined more than 90%! Obviously my hopes of hiring that extra help and any largesse have vanished.

How could any property fall 90%? And how could EVERY Vestin property fall 90%? These are "real estate experts?" And what of the personal guarantees? Vestin refuses to say.

Forget about my regular dentist visits, and doctors except for an emergency. I worry about keeping my house of 21 years. But one can read about Shustek and his racehorses any time.

Scores of millions have vanished.

I contacted every regulator, confident of their outrage.

The Department of Justice, the SEC, the FBI, the California and Nevada Attorney General, the Department of Justice, Senators Feinstein's and Boxer's have either shuffled me off to another department or have been no help so far.

Yet this wording as part of Vestin's disclosure should send chills up any investors' back and down any government agency's:

"Our ability to achieve our investment objectives and to make distributions to you depends upon our manager’s performance in obtaining, processing, making and brokering loans for us to invest in and determining the financing arrangements for borrowers. You will have no opportunity to evaluate the financial information or creditworthiness of borrowers, the terms of mortgages, the real property that is our collateral or other economic or financial data concerning our loans. We pay our manager an annual management fee of up to 0.25% based on total capital contributions made to us. This fee is payable regardless of the performance of our loan portfolio. Our manager has no fiduciary obligations to our stockholders, is not required to devote its employees full time to our business and may devote time to business interests competitive to our business."

Never to be known as a quitter, I came across this article by Joseph Picard of July 21, 2010

"The financial reform package, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, became law today, as President Obama signed the measure."

Perfect timing I thought. Backed by Nevada's Governor Harry Reid, this would fit perfectly into his agenda.

Last year I phoned Washington and was put on hold. Do I mean the Department of Justice? "No," I said, "The new Act which just went into effect. " Another long pause. "That office might be set up some time in 2011" was the reply.

A few investors sued Vestin last year and received an undisclosed settlement at jury selection.

I was a plaintiff in that suit from the very start. But prior to the hearing, Shustek had come personally to visit me, insisted he had the funds (ours) to keep this in court for years, and the trials ands appeals would cost the plaintiffs dearly. I had told him my income was limited to $612 monthly from SS retirement. How could I afford more fees? He refunded the payment I had paid to the attorney. I formally withdrew.

When I complained to Shustek that he settled, he merely replied, "You should have sold when the REIT converted."

Politicians grandstand and personal economies suffer while businesses prey with questionable ethics and nonchalant regulators.

Can America work out of its business-caused corruption and recession? Will any change in government really change anything?

Incredibly, Vestin has a new scheme, NOW FUND 1 which offers a 10% return by buying undervalued properties. And the beat goes on...


Kurt Sipolski is the author of "Too Early for Flowers: The Story of a Polio Mother." He can be reached at

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