Greenleaf investors endured months of hopeful e-mails

For months, Greenleaf Cos. LLC issued regular updates about tenuous real estate ventures and commodities contracts in hopes of pacifying investors who stopped receiving monthly payments from the company last spring.

The litany of e-mails began in April after the Springfield-based company failed to remit payments to investors who took out loans for new homes primarily in southwest Missouri and northwest Arkansas.

Greenleaf then marketed those properties to third-party buyers with checkered credit histories.

By signing a contract for deed, third-party buyers agreed to make monthly principal, interest, tax and insurance payments to Greenleaf, which, in turn, pooled the money and cut monthly checks to its property investors to cover the mortgage loans.

In most cases, third-party buyers living in the homes agreed to make payments for three years before obtaining conventional loans to purchase their homes. At that time, Greenleaf property investors typically were to receive $10,000 each for participating.

But when investors in Missouri and other states didn't receive their April payments, they began inquiring about the oddity. Late that month, Greenleaf CEO Eric Gagnepain sent two e-mails to investors explaining the company's financial difficulties.

In one e-mail, he said Greenleaf began "unlocking" some $20 million in equity and property investments in late 2007 to cover business expenses and pay investors. The strategy, however, was short-lived.

"The bottom line is this, some of you have already made your payments with your own money - a fact that we appreciate," Gagnepain wrote in an April 29 e-mail, one of more than a dozen investors shared with Springfield Business Journal. "The rest of you have been unable to do so. Our priority has been to make sure that no one's credit is negatively affected."

But that's exactly what happened to Iowa investor Tammy Speidel, who - with her husband - bought four Missouri properties and one in Arkansas through Greenleaf's program. Lenders have since foreclosed on all five homes, and the couple filed for bankruptcy protection in October.

"We'll just be glad to reach the end of our discharge date for our bankruptcy. ... And hopefully, we never have to talk about Greenleaf again," Speidel said.

Greenleaf goes for broke

Gagnepain's electronic communiqués to investors routinely highlighted the company's endeavors, which included vague real estate deals and contracts for the brokered sale of large quantities of diesel fuel, oil and cement.

In a June 19 e-mail, Gagnepain said Greenleaf had signed contracts for two "large joint ventures" that would enable the company to buy out investors and pay them a bonus.

"We anticipate being able to start the systematic buyouts within the next 45 to 60 days," he wrote. "All of Greenleaf's contracts would be honored including an additional profit measure which we are still refining that will be remitted to you."

Details of Greenleaf's potential revenue streams began to emerge in a July 16 e-mail from Gagnepain.

In that update, he indicated that funding from two joint ventures - dubbed TurnPoint JV and Marino JV - had been delayed but offered little explanation other than "growing concern" about the economy. Also mentioned in the e-mail was a two-year contract for brokered transactions of 40 million metric tons of cement that Gagnepain expected to generate $1.6 million in monthly revenue for Greenleaf.

Five days later, Gagnepain fired off another e-mail in response to mounting investor dissent. Bulleted items covered the company's cash-flow dilemma, its purchase of a $1,500 paper shredder and touched on Gagnepain's own financial troubles.

Gagnepain said Greenleaf's income from third-party buyers in June was almost $282,200, which barely covered the company's monthly operating expenses of $279,600. On top of that, Greenleaf's monthly mortgage payments totaled roughly $1.23 million.

In the same e-mail, Gagnepain said he owned two Greenleaf investment properties that were headed into foreclosure and that he was driving a borrowed 1996 Chevrolet Blazer with 163,000 miles because his car had been repossessed. He also said he had no stocks or savings, an IRA worth about $1,800, a credit score of 509 and a debt of $200,000 to friends and relatives who loaned money to Greenleaf.

"I do not say these things to paint a woe-is-me picture but rather to illustrate the totality of my commitment to the success of Greenleaf for all of you," Gagnepain wrote. "There has not been a massive conspiracy. ... We are not sitting on a huge cash hoard nor do we own any more properties that do not have loans on them. The future earnings we generate will go to pay the investors first as it should be."

E-mails sent to investors between August and early December hinted at other deals in the works, including two contracts for delivery of diesel fuel to unidentified customers and a nebulous joint venture in Switzerland.

"At one point, they said their diesel fuel was loaded on a ship; I think that ship got lost at sea," Speidel said sarcastically. "It was almost like, 'I will do what I can to keep you hanging on, so you - as an investor - won't complain or start to question it.' ... I think they were buying time."

'Not walking away'

On Dec. 9, investigators with the Missouri Attorney General's Office served a search warrant at the South Campbell Avenue offices of Greenleaf and its sister company, The Real Estate Co.

In an e-mail sent to investors the next day, Gagnepain said documents seized by authorities had left Greenleaf "unable to help investors and buyers with imminent foreclosure," and he asked investors to resend pertinent information via e-mail or fax.

With apologies, Gagnepain also suggested that local media coverage about Greenleaf adversely affected the company's ability to reach a solution.

None of Greenleaf's ventures have materialized, Gagnepain told SBJ in a Jan. 7 phone interview.

He declined to comment on why individual deals fell through, but he said each one was worth pursuing.

"We absolutely believed - and still do in some cases - that the transactions were valid," Gagnepain said.

"I understand it sounds a little exotic. ... But I would hope it speaks to our willingness to go to whatever lengths necessary to succeed," he added.

Gagnepain said he doesn't blame investors who have written off Greenleaf, but he defended the e-mail statements.

"We communicated to investors based upon the most up-to-date information we had at the time, and sometimes that was, 'Hey, things are delayed.' ... Our intent wasn't to say those things to get people to hang on," he said.

Greenleaf has laid off some employees, but a skeleton crew is working to secure new revenue sources, Gagnepain said. The company still intends to pay investors for all missed monthly mortgage payments as well as the payoff fees promised for each property, he added.

The Real Estate Co. office was closed last week, and a sign posted on the door directed customers to call a local number for information about making payments.

"We're not walking away from this at all," Gagnepain said.

Speidel, though, said she and her husband gave up on Greenleaf months ago. "At some point, we just went, 'OK, we can't rely on what they're telling us to be true.' We don't have any faith they're going to pay us,'" she said.