Onetime investors in the defunct Westhaven Group have been invited by a Lucas County Common Pleas Court judge to submit ideas on how to best liquidate remaining properties and finally dissolve the company.
Judge Gene Zmuda asked attorneys to submit proposals within 30 days.
He made the order after a hearing of more than 1 1/2 hours yesterday, during which the court-appointed receivers explained their financial situation and offered possible options to accomplish the liquidation of the receivership.
Specifically, the court could order the receivership to abandon all properties and shut down operations; expedite rehabilitation of properties for sale, or find a buyer for the remaining land contracts and sell the vacant properties as-is.
"We've looked at three options. There may be more," said attorney Gerald Kowalski, one of the court-appointed receivers. "We don't think it's our call. Everyone's involved."
Westhaven, which bought, repaired, and sold blighted houses, committed securities fraud and was shut down by the state in 2005.
In December, 2006, former Lucas County Common Pleas Court Judge Thomas Osowik issued an order on how to distribute the firm's $16 million in assets to the banks, creditors, and as many as 280 investors.
The court also established a receivership to oversee the distribution of assets.
Since then, Judge Zmuda has clarified questions that arose from the distribution order.
Yesterday, attorneys for several investors appeared before Judge Zmuda to express concerns about the fees collected by the receivers and the amount of time it was taking for investors to be paid.
Judge Zmuda also addressed a November motion filed by attorney Thomas Pigott asking that the court order the receivers to create a liquidation plan.
Judge Zmuda ordered the receivers to put any money gained from sales of properties - over and above the 80 percent of sale costs owed investors - into an escrow account.
He added that, although the remaining employees working to sell Westhaven properties should continue to be paid and that work being done to rehab the properties should be finished, any further rehabilitation work would be approved only after the receivers submitted a budget of the costs.
Investor Randall Evans of Bowling Green, who attended the hearing, questioned the wisdom of continuing to rehab properties in light of the problems in the real estate market.
"It's a gamble to rehab in this market in Toledo," he said. "It seems to me that it would be a gamble of other people's money."
Judge Zmuda said he was mindful of the "sinking ship" that was Westhaven and that because of the real estate market, it could sink only further.
He added that he was amazed so many of the properties had been sold and that only about 100 were left.
"But now that we're getting closer, it's becoming evident that there is less money available than obligations," he said.
The receivership submitted a financial report, including a list of property sales as well as the costs to maintain and rehab properties. The report is available for review on the receiver's Web site at www.cooperwalinski.com/WhitevsWesthavenGroup.html
Contact Erica Blake at: email@example.com or 419-213-2134.
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