Time-Share Condo Group Glen Ivy Seeks to Liquidate : Bankruptcy: Action temporarily stymies investors' class-action suit. : Authorities raided company in December in a probe of its sales tactics that still continues.

By JAMES M. GOMEZ

April 30, 1992 12 AM PT

TIMES STAFF WRITER

CORONA — Glen Ivy, the condominium time-share group under investigation for allegedly defrauding thousands of customers, filed for bankruptcy court liquidation Wednesday, temporarily thwarting a class-action suit filed by disgruntled investors.

The Chapter 7 petition in U.S. Bankruptcy Court in San Bernardino came more than four months after state and local officials raided the firm’s headquarters on suspicion that it had falsified time-share documents, oversold its properties and used misleading sales tactics.

The petition does not identify specific assets and liabilities for Glen Ivy Holdings Inc., Glen Ivy Financial Group Inc. and Glen Ivy Resorts, the three corporate entities named in the petition.

Nor does the filing include a list of creditors, said David McAdam, a company spokesman.

He said Glen Ivy has 15 days to file a list of assets, liabilities and creditors to the trustee selected Wednesday, Thomas P. Williams.

Once the largest seller of time-share properties in the United States, Corona-based Glen Ivy has been forced to lay off almost all of its 1,400 employees and scale back sales.

“There have been (continual) layoffs for the past five months,” McAdam said.

The company was once flush with success. It was operating 24 resorts in eight states and had posh sales offices in Newport Beach, San Diego, Woodland Hills and West Covina.

But customers began to complain that some of the company’s sales force used high-pressure tactics to persuade customers to purchase one-week ownerships at a resort for prices between $8,000 and $12,000.

Those charges sparked a probe that eventually led to the company’s downfall.

By Tuesday, management effectively closed the company, ordering all retail marketing to stop and all assets to either be put up for sale outright or wrapped into a joint venture with another time-share group.

The managers of the three Glen Ivy companies also fired 12 of their remaining 23 employees. The 11 other employees were given two months’ advance pay to continue working through preliminary bankruptcy hearings, McAdam said.

“They were deemed critical to get through the next period,” he said. “The trustee may require their services.”

Three other Glen Ivy subsidiaries--Glen Ivy Equity Mortgage Corp., Glen Ivy Travel Inc. and Glen Ivy Management Co.--were not included in the bankruptcy filing. The 100 employees for those companies are not facing layoffs in the immediate future, McAdam said.

McAdam said company officials decided to file for liquidation after they were unable to obtain new loans to keep it operating and came under intense “creditor pressure due to the financial condition of the company.”

“We needed a timeout on the playing field,” McAdam said. “When things start going at warp speed, it can be very conducive to call that timeout and let everything get sorted out.”

Attorneys who have filed a class-action suit against all the Glen Ivy companies said the bankruptcy filing was a callous attempt to stave off legitimate financial claims by time-share owners seeking a court-ordered settlement.

“This (filing) is totally inappropriate,” said Michael A. Sherman of the San Diego law firm of Barrack, Rodos & Bacine, “and is a cheap way for them to dodge their responsibilities.” Sherman filed a class-action suit against Glen Ivy in Los Angeles Superior Court on Feb. 10.

The suit alleges that as many as 60,000 “consumers and investors” may have been defrauded after Glen Ivy allegedly “made numerous false and fraudulent promises . . . regarding these time-share units to convince consumers and investors to buy such units at over-inflated prices.”

Sherman said that as a result of the bankruptcy filing, he would attempt to recoup losses for his clients by going “full speed ahead” against other defendants named in the civil suit.

He pointed out that Glen Ivy Management and Glen Ivy Equity Mortgage Corp. were also named in the suit as well as Glen Ivy founder Ralph Mann and 14 title companies, including First American Title Insurance, Co., TRW Title Insurance Co. and Chicago Title Insurance Co. Those defendants, he said, will also be pursued for damages.

“Those title companies were an integral part of the fraud,” Sherman charged. “They supplied consumers with title reports that were totally bogus.”

Albert Rush, vice president of Santa Ana-based First American, said that if his firm had processed any fraudulent titles, it was unaware of it and is not guilty of wrongdoing.

“I think he’s (Sherman’s) trying to form an argument out of thin air,” Rush said.

Last spring, an investigation of Glen Ivy was launched by the state Department of Real Estate. In December, more than 100 local and state regulators raided the firm’s Corona office. A Superior Court judge in Riverside barred the company from fraudulent practices and appointed a compliance officer to oversee its operations.

The Riverside County district attorney’s office launched a criminal investigation at the same time.

No criminal charges against the company or any of its officers have yet been filed, said Deputy Dist. Atty. Gerald Fineman, who is overseeing the case.

Fineman said investigators have been combing through 3,000 seized documents. He declined to comment Wednesday on the specifics of the Glen Ivy matter or to predict when charges, if any, would be filed.

But Fineman added that he believes that the bankruptcy would speed up the criminal investigation because court-appointed trustee Williams will also be probing the voluminous evidence.

Glen Ivy denies any criminal wrongdoing, spokesman McAdam said.

But the district attorney’s office appears to be building a strong criminal case against the Glen Ivy companies.

A March 20 affidavit filed by district attorney investigator Jonathan V. Mosely alleges an elaborate scheme to defraud customers, including the use of forgery and double-billing procedures.

An unnamed informant told Mosely that “Glen Ivy has oversold thousands of time-shares in their various resorts in which no deed is issued to the respective buyer as the property is already owned by other individuals,” he wrote.

Mosely also described in his affidavit a light table in the company’s headquarters, in which documents were allegedly forged by tracing signatures from one page to another.

He mentioned a mainframe computer in which two databases were allegedly kept. The second database, named “ ‘equity mortgage’ has all of the phony lender reports and other false and misleading information,” he wrote.

Fineman said his department is still interviewing witnesses involved in the case.