A Springfield company slapped with a cease-and-desist order for an alleged "investment scheme" that targeted property investors and homebuyers has requested a hearing before Missouri Securities Commissioner Matt Kitzi.
Through general counsel J. Kaye Irwin, Greenleaf Cos. LLC principals Eric Gagnepain and Scott Dasal submitted their formal hearing request to the Securities Division of the Secretary of State's Office on Jan. 20, spokesman Ryan Hobart said. The hearing, which is open to the public, has been scheduled at 9 a.m. April 15 at the division's 600 W. Main St. offices in Jefferson City, Hobart said.
The cease-and-desist order signed by Kitzi on Dec. 16 prohibits Greenleaf and its owners from selling securities in the Show-Me State but stopped short of assessing civil penalties of up to $10,000 per violation against Dasal and Gagnepain.
Hobart said the hearing provides a forum for Irwin to argue against the imposition of penalties against Greenleaf.
On Dec. 9, investigators with the Missouri Attorney General's Office served a search warrant at the South Campbell Avenue offices of Greenleaf and sister company The Real Estate Co. in Kickapoo Corners shopping center. Authorities seized more than 80 boxes containing financial records, real estate documents and credit applications as well as cell phones, compact discs and DVDs, according to court documents.
Greenleaf recruited investors with good credit in Missouri and other states to purchase new homes primarily in southwest Missouri and northwest Arkansas. The Real Estate Co. then marketed those homes to third-party buyers with tarnished credit who signed a contract for deed.
In the contracts, buyers agreed to make monthly principal, interest, tax and insurance payments to Greenleaf for three years before obtaining a conventional loan to purchase the home. At that time, investors typically receive $10,000 per property for their participation.
Greenleaf's business model, however, backfired last year when the mortgage meltdown prompted lenders to tighten underwriting standards. The company stopped cutting monthly checks to investors in April, when officials diverted payments from third-party buyers to cover business expenses. Banks, in turn, foreclosed on many of the investor-owned homes.
But several third-party buyers who contracted to buy homes from Greenleaf have told Springfield Business Journal they were making payments to the company when they learned lenders were foreclosing on their homes through no fault of their own. Some buyers are suing the company.
In late January, a group of tenants who had contracted with Greenleaf to buy homes in the Tuscany subdivision in Peculiar, near Kansas City, filed a lawsuit against the company and its owners in U.S. District Court. The plaintiffs have accused Greenleaf of racketeering, mail fraud, wire fraud and violating the Real Estate Settlement Procedures Act, and they are seeking compensatory and punitive damages, court records show.
In addition to seeking compensatory and punitive damages, the plaintiffs are asking the court to prohibit lenders from foreclosing on the homes, according to the suit. Records show the case has been assigned to an outside mediator.
