A prominent public figure arrested in September in connection with an alleged elaborate real estate fraud operation, tarnishing his reputation and forcing his resignation from a high-profile nonprofit organization, maintains he is innocent of all charges.
Despite never holding public office, Jon Blinder is well known in the western Nevada County community, having administered two of its most visible and active local nonprofits.
Blinder was intimately involved in the founding of Nevada County’s The Center for the Arts, becoming the president of its board in 2000 and serving in that capacity until late 2011.
In February 2012, Blinder was hired as the executive director of the Economic Resource Council. With Blinder at the helm, the ERC landed a $120,000 contract from Nevada County in exchange for management and oversight of the county’s efforts to enhance tourism.
At the time, Blinder was praised by members of the Nevada County Board of Supervisors for his ability to collaborate and build consensus among public and private entities.
Then, in late September, Blinder was arrested on six felony criminal charges, including four felony counts of securities fraud in connection with his role as chief operating officer of Enlibra LLC, a real estate holding company created by Phil Lester in 2004.
Lester had multiple businesses, the most visible of which was Gold Country Lenders, which was at the heart of the alleged criminal misdeeds that defrauded investors of millions of dollars, according to California Attorney General Kamala Harris.
The charges filed against Blinder were substantially fewer than those against Lester and Susan Laferte, chief financial officer of Gold Country Lenders. Lester and Laferte were each charged with 66 felony counts, compared to Blinder’s four.
A business partnership
Lester and Blinder met in 2002, when Gold Country Lenders provided Blinder a $600,000 loan to purchase the building on West Main Street in Grass Valley that is now the headquarters for The Center for the Arts.
Blinder purchased the building and donated his equity to the center in 2003, according to his attorney, Malcolm Segal.
Soon after, Lester and Blinder became business partners, as Blinder was an investor in the South Auburn Street Project, a proposed Grass Valley development.
Lester created Enlibra for the sole purpose of developing the South Auburn Street Project and enlisted Blinder’s help, according to the Attorney General’s arrest declaration. In his role with Enlibra, Blinder allegedly “failed to inform investors that on most of the large project loans, Lester was the property owner, partner, developer, appraiser and/or borrower.”
The declaration further asserts Blinder failed to disclose that investors’ money would not be used for the stated purposes, and the money was not secured with an appropriate deed of trust.
Segal asserts those disclosures were, in fact, made, which is why he believes Blinder will be cleared of all charges. Segal added that the case essentially hinges on whether or not Blinder provided the necessary information to investors before pitching them on contributing money.
“I remain hopeful after more thought is given to the case, the charges will be reconsidered, re-evaluated and terminated,” Segal said. “It seems to me that the attorney general added the charges (to Blinder) as an afterthought.”
‘The numbers do not work’
The arrest declaration states that not only did Blinder actively conceal toxic waste issues and the identity of the borrower and developer on the projects, he knew the projects were not financially feasible but solicited investments anyway.
“In September 2007, Blinder presented an ‘update on all projects’ to Gold County Lenders staff,” the declaration states. “Blinder noted, ‘The numbers, no matter how we tweak, how we try to fool ourselves or create a best case scenario, DO NOT WORK!!’”
The business would have had to infuse about $5 million to $6 million for projects to feasibly move forward, Blinder allegedly said at the time.
Instead of disclosing this, Blinder, along with Lester, allegedly solicited around $650,000 or rolled investments made previously into Gold Country Lenders into Enlibra.
This time, investors did not receive a deed of trust as collateral for their investment but were essentially buying “shares” in Enlibra, although most investors were not made aware of this investment structure, the declaration states.
Also, many of the projects to which investors provided money had their names changed
after they were rolled into Enlibra, according to the attorney general.
“Some investors were not told about the toxic waste issues associated with (the projects, and) most investors were unaware that the projects contained in Enlibra were existing Gold Country Lenders projects,” the declaration states.
Investors were also not aware they were buying “stock” in a limited liability company that claimed it would pay its shareholders off as the projects were completed, the declaration states. Investors were under the mistaken belief they would receive monthly interest checks similar to the structure at Gold Country Lenders.
“Rather than discourage that belief, Blinder, Lester and Laferte aggressively pushed Enlibra on the investors, many of whom were elderly,” the declaration states.
Segal said the attorney general’s version of events is wrong.
Instead of willfully misleading investors, Blinder joined Enlibra toward the end of its existence and attempted to put a very complex set of real estate holdings in order — and continues to help those investors who lost money salvage some dollars from the wreckage, Segal said.
“It is clear that Jon had no direct relationship with the people who invested money in Gold Country Lenders over the years,” Segal said.
“On the contrary, he was asked to assist on those projects far down the road by trying to solve critical development problems. He did that work and he did it well and he is still assisting with many of the landholders even up to today.”
Another critical piece of evidence is the fact that Blinder invested a substantial portion of his own money into the projects, Segal said.
“He invested his own personal money in Enlibra projects because he thought they would move toward a successful conclusion, even in a difficult real estate market,” he said.
Blinder is currently scheduled to appear in Nevada County Superior Court in March for his preliminary hearing.
To contact Staff Writer Matthew Renda, email email@example.com or call (530) 477-4239.
“The numbers, no matter how we tweak, how we try to fool ourselves or create a best case scenario, DO NOT WORK!!”
— Jon Blinder notes, according to Attorney General’s arrest declaration