$2 million fraud investigated

A Grass Valley loan company is being investigated for allegedly defrauding more than a dozen investors of more than $2 million in a scheme involving bogus first deeds of trust.

The victims - some now deceased - turned over amounts ranging from $40,000 to $425,000 to Ponderosa Home Loans for investment in real estate loans secured by first deeds of trust, according to the Nevada County District Attorney's Office.

But an "official of the firm" approached the DA's office several weeks ago with documents indicating that several loans made by the firm were fraudulent or nonexistent, according to Deputy District Attorney Jim Phillips.

"This office is taking this very seriously," said Phillips. "When the smoke clears, it's going to be big."

Some of the questionable loans are five years old, but Phillips declined to call the alleged fraud a Ponzi scheme, in which money collected from later investors is used to pay early investors.

Phillips said the investigation is proceeding slowly because some of the victims live outside California, and investigators are still tracking them down.

He said victims investigators have talked to are "quite upset. Two million to two and one-half million dollars is a lot of money to these people."

In addition to the DA's office, the county Sheriff's Office and the state Attorney General's Office are involved in the case.

Ponderosa, which had an office on Nevada City Highway, has apparently closed down. The company doesn't have a Web site and the state Department of Real Estate doesn't list the firm as a licensee.

Phillips wouldn't identify the principals of the firm, but said they are still in western Nevada County. He said the investigation may continue for several more weeks.

A first deed of trust involves three parties - the lender, a trustee, and a borrower - and replaces a conventional first mortgage. The trustee typically holds title to the property until the loan is paid.