Two Sonoma real estate developers have exchanged lawsuits on the same day, each accusing the other of financial misconduct.
Kenneth Mattson and Timothy LeFever are joint owners of LeFever Mattson Property Management, which owns multiple properties in California, mostly in Sonoma County. The two men were friends in elementary school and served as best men in each other’s weddings, according to the San Francisco Chronicle.
But on June 6, they traded lawsuits after their company began unraveling last month when LeFever accused Mattson of fraud.
After the company’s investors didn’t receive monthly distributions over the past few months, LeFever mailed them letters saying that Mattson had stepped down from his post as CEO. Later, another letter accused Mattson of financial fraud, and later the FBI raided Mattson’s house in Sonoma County.
Mattson’s attorneys last week filed a lawsuit in Sacramento alleging that LeFever hatched a “preplanned scheme to destroy” his business partner by telling investors their money was gone and that Mattson basically stole it.
Mattson claims LeFever engaged in unfair competition and wrongly withheld access to company documents.
“LeFever always had access to all company documents, was privy to all material decisions and called Mattson, at least daily, to discuss operations,” the complaint states.
A few hours after Mattson filed his lawsuit, LeFever’s attorneys answered with one of their own. In it, LeFever claims their company allowed Mattson to amass a net worth of about $250 million, but it came through fraud. The complaint says Mattson created “what amounted to a secret division” of LeFever Mattson to embezzle $75 million from investors.
“Mattson took tens of millions of dollars from hundreds of people in exchange for nothing,” LeFever’s complaint states.
Despite the dueling narratives in the suits, they agree LeFever Mattson developed a business model in which the company used limited partnerships or limited liability corporations to buy properties, according to the Chronicle.
The dispute between the two men centers on one such limited partnership, Divi Divi Tree LP, to buy an apartment complex in Southern California’s Moreno Valley in 2003. LeFever’s suit claims that Mattson bought out many of Divi Divi’s partners — and sold false interests in the partnership to at least 177 investors — worth more than $55 million — “which far exceeds the entire valuation for Divi.”
In his lawsuit, LeFever said the full scope of the alleged fraud may grow larger and that he believes “there may be hundreds of unauthorized sales by Mattson in other (LeFever Mattson) investments that have yet to be accounted for.”
The lawsuit also accuses Mattson of buying properties with his own money, and then reselling them to LeFever Mattson at inflated prices. Another alleged fraud involves Mattson selling the company properties loaded with debt “so that the LM Investments would be stuck with these indebted and underperforming assets rather than KSMP, his wholly owned company.”
LeFever accuses Mattson of causing the company to suffer more than $100 million in damages and missed opportunities. In contrast, Mattson’s lawsuit describes him as working on investors’ behalf and paying distributions “whenever possible,” even with no obligation to do so.