Creditors wonder where revenue went

<p>By the time Clem Carinalli offered to buy 42acres of undeveloped residential land in Santa Rosa in 2001, the group of investors who had owned it for more than 40 years were happy to sell.</p><p>The investors — seven families who all knew one another through one of Santa Rosa’s first eye doctors, H. Ward Wick — had purchased the land in 1960 as a retirement investment.</p><p>But the property turned into decades of frustration and hard work as the investors wrangled with the city over land-use rights, spent hundreds of thousands of dollars on development plans and tried in vain to sell it.</p><p>Carinalli, a well-connected Santa Rosa developer and financier, appeared to be the answer. The group sold him the property in 2003 for $2.6 million.</p><p>But now some of those former owners say Carinalli never fully paid for the land, and they are irked because land records show he has generated enough money from the land to pay them back nearly three times over.</p><p>“He should have paid us back,” said Greg Wick, the son of investor Marian Wick. “He could have.”</p><p>Marian Wick received $105,000 in cash in 2003 and an additional $117,900 promissory note from Carinalli. The loan note was to accrue annual interest of 4.25 percent until its maturity date in 2007.</p><p>Since buying the property, Carinalli has received more than $3 million in revenue from the residential land without ever building or selling a home on it. His land deals have included selling a right-of-way easement to the city and selling controlling interest in the property to a business partner.</p><p>In an interview Wednesday, Carinalli said that he has paid back all but two of the original investors, and he would have paid them back except he incurred an additional $2 million in development expenses related to the property.</p><p>Neither Marian Wick, 96, who lives in Hawaii, nor Ruth Lindemenn, 92, from Santa Rosa was repaid, Carinalli said. Lindemenn had loaned him $18,000 as part of the sale.</p><p>“I would pay them back if I could,” he said.</p><p>Carinalli, one of Sonoma County’s largest financiers and land developers, stopped paying many of his creditors this spring. The downturn in the real estate market left him owing around $150 million that he cannot repay.</p><p>When Carinalli purchased the land on Petaluma Hill Road, which had already been subdivided into residential lots, he used a combination of $1.4 million in cash and $1.2 million in personal notes to pay the group of owners.</p><p>He then sold a right-of-way to the city of Santa Rosa for $2.5million in 2007. The city wanted rights to extend Farmers Lane across five acres of the 42-acre parcel.</p><p>Then in 2008, he sold a controlling interest in the property for $1.4 million to longtime business associate Dennis Hunter, one of his partners in the county’s garbage hauler, North Bay Corp.</p><p>“It comes across as if I’m a crook, but I’m not,” Carinalli said. “I don’t have any cash flow.”</p><p>The city made three payments of $838,995 for the right-of-way to the property. Two went to Carinalli, the first in February 2008 and the second in July 2008. The final payment was made last month. Carinalli told the city to send the check to Dennis Hunter. The check was picked up at the city hall annex by former city manager Ken Blackman, who works for Hunter, according to the city.</p><p>Truman Jones, whose late mother was one of the original investors, was surprised to learn that within a few years of purchasing the property, Carinalli was able to get City Council approval for the subdivision development and to get the city to pay the developer $2.5 million for building the subdivision’s main road.</p><p>“It’s amazing how the big boys play,” Jones said.</p><p>Jones watched as his mother and the other investors spent decades trying to sell the land, but ran into problems with the city.</p><p>“There were several potential buyers, and they all seemed to bump into problems with zoning or the City Council,” Jones said.</p><p>The 40-year real estate odyssey morphed into such a monster that the original investors named one of the subdivision streets Franz Kafka Avenue, after the existentialist writer long synonymous with bewildering bureaucracies and alienation.</p><p>“It mushroomed into Kafka because of the endless bureaucratic things that were happening,” Jones said.</p><p>He said the investment turned into a major headache for everyone involved. All told, the investors who have been paid in full earned an annual return of about 8 percent for their travails over the last four decades.</p><p>Most of the original investors are either dead or near the end of their lives. Only two — Ruth Lindemenn and Marian Wick — have not been repaid, Carinalli said.</p><p>Today, Wick suffers from Alzheimer’s and requires 24-hour care at her home in Hawaii. Her son, Greg Wick, said he needs the money to pay for her care, or he’ll have to further mortgage their house.</p><p>“Mother needs that money. She is coming to the end of her life,” he said. “I would think this would have been almost peanuts in his big scheme.”</p><p>News Researchers Michele Van Hoeck and Teresa Meikle contributed to this story. You can reach Staff Writer Nathan Halverson at 521-5494 or nathan.halverson@</p><p>pressdemocrat.com.</p>