CBS 5 - KPHO Man ordered to pay $4.9M in real estate fraud

Man ordered to pay $4.9M in real estate fraud

A Phoenix man has been ordered to pay more than $4.94 million in restitution in a real estate fraud case, the Arizona Corporation Commission said Thursday. 

Terry Samuels was also told to pay a $90,000 administrative penalty for fraudulently offering and selling unregistered membership interests in limited liability companies that were in the house-flipping business, the Commission said. 

The Commission found that Samuels and his affiliated companies, 3-CG, LLC and Choice Property Group, LLC, while not registered to offer and sell securities in Arizona,  sold the unregistered investments to more than 50 investors, promising 15 percent annual returns.

The Commission found Samuels told some of the investors that they could roll over their IRA funds to purchase the unregistered LLC membership interests. The Commission found Samuels promised investors that their money would be used to purchase real estate, but that he and his companies actually used the money for other purposes while borrowing funds from lenders to purchase the properties.

Samuels told investors that they would own an interest in a company with a secured interest in real property when, in fact, lenders held the first lien position on the properties, the Commission said. So when the properties could not be sold, the lenders foreclosed, leaving the individual investors without any collateral.

In settling this case, Samuels admitted to the Commission's findings and agreed to the entry of the consent order.

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