The Securities and Exchange Commission (SEC) charged Kenneth Mattson, the former CEO of real estate investment business LeFever Mattson, with defrauding approximately 200 investors out of at least $46 million through an elaborate “Ponzi-like” scheme. Many of these investors were retired senior citizens who Mattson met through his church community.
In a parallel action, the U.S. Attorney’s Office for the Northern District of California, a sub-agency of the Department of Justice, announced criminal charges against Mattson alleging wire fraud, money laundering and obstruction of justice.
“Instead of delivering the investment returns he promised, Mr. Mattson is charged with cheating these investors out of their hard-earned money and, in many cases, out of their life savings,” acting U.S. attorney Patrick Robbins said in a press release. “Mr. Mattson will now be held to account on charges of perpetrating a scheme that he kept afloat only by using new investors’ money to pay obligations to earlier investors — a classic Ponzi scheme.”
According to the SEC’s complaint, Mattsonsold fake interests in real estate investment limited partnerships from approximately 2007 to April 2024. The fake sales were not reflected in legitimate records of ownership, and investors who purchased the fake interests never became actual limited partners or received ownership rights.
Filed in the U.S. District Court for the Northern District of California, the complaint noted Mattson also managed various legitimate limited partnerships, owned by actual investors, that invested in residential and commercial real estate. But these were not among the interests offered to the defrauded investors referenced in the complaint.
Mattson allegedly commingled new investor funds with personal and business funds and used the commingled funds “to make Ponzi-like payments to existing investors.”
“Mattson concealed from investors the fact that he was orchestrating a Ponzi-like scheme by, among other things, using some new investor funds to make payments to deceive existing investors, and providing investors with altered limited partnership documents,” the complaint stated.
He also distributed falsified tax records to defrauded investors and misappropriated investor funds to pay for personal expenses, real estate transactions and expenses related to his personal partnership, KS Mattson Partners LP.
The complaint further claimed Mattson solicited investors to transfer funds from their individual retirement accounts (IRA) to so-called self-directed IRAs to enable them to invest in the purported limited partnership interests Mattson offered and sold.
“Because he concealed his fake limited partnership sales from people associated with LeFever Mattson, the fake sales were not reflected in the legitimate records demonstrating ownership percentages of the LeFever Mattson-affiliated limited partnerships,” the complaint stated. “As a result, the investors who purchased the fake interests in certain LeFever Mattson-affiliated limited partnerships from Mattson never became actual limited partners or acquired any actual ownership interests, and they never received legitimate distributions from the limited partnerships in which they thought they invested.”
After the SEC instructed him to preserve and retain evidence relevant to its investigation, Mattson allegedly deleted thousands of relevant files, including commercial bookkeeping records, from his laptop.
“As our complaint alleges, Mattson lied to hundreds of individual investors, many of whom were retirees investing their hard-earned savings, and did not actually sell them the ownership interests that he promised,” SEC Acting Director of Enforcement Sam Waldon said in a release. “The SEC is firmly committed to pursuing those who prey on retail investors and retirees, such as the individuals we allege that Mattson targeted.”
The SEC charged Mattson with violating the antifraud and registration provisions of the federal securities laws and said it is seeking permanent injunctions against him, including a conduct-based injunction, disgorgement with prejudgment interest, civil penalties and an officer and director bar. The complaint also named KS Mattson Partners LP as a relief defendant and seeks disgorgement of its ill-gotten gains with prejudgment interest.
The SEC’s Office of Investor Education and Advocacy has issued an investor alert with tips on how investors can identify and avoid frauds that operate in connection with self-directed IRAs.