Article: Investor payments likely to be suspended

Toledo Blade, December 16, 2005
By Mike Wilkinson
Blade Staff Writer

Retirees anxious about Westhaven turmoil -- Like many retirees, Mary Fisher worries. She worries about how she'll pay for her prescription drugs that require her to work part-time at the McDonald's restaurant at Toledo Hospital.

Now she has new worries, and they're also about money. She invested $25,000 with John Ulmer's Westhaven Group, and she relies on the $229 a month he has paid her since the summer of 2003.

In the last two months, the checks have been late; last week she had to show up at Westhaven's office on Tremainsville Road in West Toledo to get paid.

But with the Ohio Department of Commerce taking over Westhaven amid charges that it violated state securities laws, the 71-year-old Bedford Township widow wonders if she'll ever see that money again.

"I need this money to live on," she said yesterday.

Ms. Fisher and her friend, Richard Klosek, who also has an investment with Westhaven, may be among the last people to get paid for a while.

John Czarnecki, appointed as a receiver of the company, said yesterday that he will likely suspend - temporarily - all interest payments to the estimated 180 people who have money invested with Westhaven. He said cash flow from the company's assets fall below the monthly interest payments of investors.

He declined to identify how much the company owes its investors each month. The Commerce Department has said the company has an estimated $26 million in investments.

"We are doing the best we can to get our arms around the situation to maximize the returns," Mr. Czarnecki said. The company's dozen employees will not be paid this week as well, he said.

Although Mr. Ulmer and his sons have offered to help, Mr. Czarnecki said they would have no role in the operation of the company. He said the company has 180 clients making payments on homes they bought on land contract and another 50 homes that it owns as part of its inventory. Those homes will be put on the market, he said, to generate cash for the investors.

Ms. Fisher's concerns are being played out in homes throughout the area as some investors struggle to figure out how they'll make ends meet if their interest checks don't materialize and their initial investments aren't repaid.

While many of Mr. Ulmer's investors may be well-heeled professionals, a portrait is emerging of many smaller, less wealthy individuals who have put large chunks of their life savings in his care.

One of them is Daniel Cairl, also of Bedford Township, who has invested more than $320,000 with Westhaven. He filed a lawsuit yesterday against Mr. Ulmer, the company, and others.

In the lawsuit, Mr. Cairl said that he contacted Westhaven last week, concerned that his investments were not covered by real estate. Mr. Ulmer allegedly sent a letter back the next day.

"Our research at the office shows that the property captioned above is not collateral on your loan, and that your conclusion that you may be unsecured is correct," said the letter signed by Mr. Ulmer. "I am sorry for this to have occurred and hope you realize it is from the bottom of my heart."

Al Stanton, 77, of Perrysburg invested with Westhaven as well, and the retiree said it generates more than $6,000 a year for him. It's part of his self-directed IRA, he said. Asked if he was worried, he said: "Not a little, a lot."

Westhaven and its subsidiaries take investors' money and then buy homes, repair them, and resell them, often at a substantial profit. Other properties are rented. Westhaven also acts as a bank, loaning money to the prospective homeowners through land contracts.

The Commerce Department said Mr. Ulmer, Westhaven, Haven Holdings, and two of its former employees violated securities laws by selling promissory notes that weren't sufficiently covered by real estate. An assistant Lucas County prosecutor said Wednesday that the state is considering criminal charges in the case.

The state estimates that of 336 investments it reviewed, 77 were not secured by real estate; 53 were not properly recorded with the appropriate county recorder's office, and 48 notes were assigned mortgages valued at less than the amount of the loan.

Ms. Fisher is one of those in the first category; it is unclear if Mr. Klosek's investment of more than $40,000 is secured with real estate. He said he could survive if the investment failed.

But his good friend, Ms. Fisher, who worked at Toledo Hospital for 23 years in the catering department, is less sure. "I don't think I'd be OK. I need that money," she said.