Lamorinda-Connected Embezzlement Scheme Starting To Unravel?

A Walnut Creek man who managed a $700 million real estate investment fund from his Lafayette office has filed for bankruptcy protection as a string of former investors line up demanding to know where their money went.

Records filed in connection with a bankruptcy hearing for Walter Ng and his wife Maribel allege that between 1985 and 2002 Walter Ng and Ng's partner, pediatrician Dr. Bruce Horowitz, used their California real estate licenses to create and fund a series of nine limited partnerships, each open for approximately 18 months and then closed, with the company's partner's siphoning off money for personal use or using it to secure additional loans.

The partnerships, according to documents filed in federal bankruptcy court Aug. 4, were "in the business of pooling the limited partners' money, investing it in loans secured by real property, and returning the profit to the limited partners as either periodic payments from the interest earned from the borrowers, or lump sums when the loan(s) were paid off by the borrowers."

In 2001 and on the advice of their legal counsel, the managing general partners opted to close all the limited partnerships and to create a new one they called R.E. Loans, LLC.

Walter Ng and his partner, Bruce Horowitz, continued in their management role as co-managing members of B-4 Partners, LLC, the managing member of R.E. Loans, LLC.

From its inception, R.E. Loans boasted a membership of more than 500 and total assets of more than $10 million - with Ng and Horowitz allegedly selling unregulated securities, allegedly in violation of Federal law. By 2007, the fund had more than 2,000 investors and more than $650 million in total assets. Horowitz reportedly found some of his investors at his local running club, the Orinda Roadrunners.

Ng, Horowitz, and Ng's son Kelly, allegedly made "substantial preferential payments of principal to their families and Kelly Ng's good friends," according to court documents.

The Fund very quickly became illiquid as millions in loans borrowed against the perceived strength of the fund and secured by promissory notes was allegedly squandered.

A class action complaint with several former investors named as plaintiffs has been filed in connection with the bankruptcy proceeding. A status hearing on Ng's request for bankruptcy protection has been scheduled for Tuesday in Federal bankruptcy court.

The federal government, in the form of the Federal Bureau of Investigation, are also reportedly looking into the case.