Feds accuse West Chicago property developer of Ponzi scheme
A West Chicago, Ill., property developer is accused by federal authorities of operating a Ponzi scheme that defrauded more than 300 investors in 32 states of at least $41.6 million.
The Securities and Exchange Commission last week filed a federal lawsuit against Glenn C. Mueller, 72, of West Chicago; his company, Northridge Holdings; and other of his companies, alleging violations of securities laws by defrauding people who had invested in his businesses.
As of February, Northridge operated 11 properties and 935 units, the lawsuit alleges. The last property, a small, 20-unit commercial building, was purchased in 2012 for $535,000.
Since at least 2014, the suit alleges, Mueller solicited investors, many of whom were senior citizens, telling them he could purchase and renovate apartment buildings across the country and then charge higher rents or flip them, earning returns of 3% to 12% for investors. However, Northridge doesn't own the properties outright and they "carry substantial mortgages," the lawsuit states.
From at least May 2014 through 2018, Northridge's internal documents show that the company was losing money and assets and could not pay its investors or cover its business expenses, the lawsuit alleges. Northridge "routinely" used new investor funds to pay interest and principal to earlier investors, and Mueller created seven "shell" companies, the suit says. Mueller also used investor funds to pay $1.8 million in commissions and consulting fees since 2014, the suit alleges.
The SEC alleges that Mueller, through his companies, was still selling promissory notes to investors in April.
Mueller's company, Northridge, posted newsletters on its website heralding the company's success, with rising property values and revenue, the suit alleges.
Mueller wasn't immediately available for comment. A statement dated Aug. 1 that was seen Tuesday on Northridge's website said the company sent out a letter in June informing investors that "previously scheduled distributions and interest payments were put on hold" while inquiries and allegations by "several agencies" were pending. The payments have resumed, the website said, and "there has been no pause in our management and daily operations of the properties. The regulators inquiries are still ongoing. We hope to resolve such inquiries." The website also links to actions by regulators in four states, including Illinois.
The SEC seeks to have Mueller return funds to investors with interest and pay civil penalties.