Carinalli creditors respond to bankruptcy filing

<p>One day after real estate financier Clem Carinalli declared bankruptcy, the longtime Sonoma County families whose investments helped him build a real estate empire for the most part remained either publicly supportive or silent. </p><div class="art_item art_item_inset art_item_facts"> <h3>Facts</h3> <h4>Who is affected?</h4> <p>The list of creditors named in the bankruptcy filing by Clem Carinalli includes more than two dozen community leaders in agriculture, business, government, law, medicine and real estate.<br><br>Agriculture<br>John Balletto<br>Ronald Carli<br>Al and Betty Grove<br>Alice Muelrath<br>Melvin J. Sanchietti<br><br>Business<br>Robert I. Barbieri<br>Dennis Bartolomei<br>Dennis Hunter<br>Marc Opperman<br>Ty W. Pforsich<br>James Ratto<br><br>Government<br>Ken Blackman, former Santa Rosa city manager<br>Donna Born, former Santa Rosa mayor<br>George Delong, former county supervisor<br>John H. Downey Jr., former Santa Rosa mayor<br><br>Law<br>William E. Geary<br>Robert W. Sinai<br><br>Medicine<br>Dr. Christopher Barker<br>Dr. Freeman W. Born<br>Corsi, Hoey Pearson DDS Inc.<br>Dr. Mike Farmer<br>Dr. Lawrence C. Henig<br>Dr. Alan S. Johnson<br>Dr. Robert S. Oliver<br>Dr. James R. Palleschi<br>Dr. Robert L. Scheibel<br>Dr. Joseph S. Wand<br><br>Real estate<br>Larry Bertolone<br>Cary L. Bertolone<br>Todd M. Bertolone<br>Jeffrey D. Civian<br>Al Coppin<br>Jim Daw<br>James B. Keegan, Jr.<br>Thomas J. Laugero<br>James B. Madison<br>Avinoam Mandelbrot<br>Harry E. Polley<br><br>Source: U.S. Bankruptcy Court</p> </div> <p>The network of former politicians, doctors, dentists and farmers who profited for years from Carinalli’s lucrative land deals are hesitant to criticize him now that he’s buried beneath a $165 million mountain of debt. </p><p>Creditor after creditor Tuesday either declined to comment or praised Carinalli but offered few details about their investments. </p><p>“Clem is an honorable man. He did everything that he thought was right, in my opinion,” said Dr. James Palleschi, a urologist at Sutter Medical Center Santa Rosa. Palleschi, who is owed $1.2 million, declined to discuss details. </p><p>Grapegrower John Balletto, former Santa Rosa mayor John Downey, dentist Robert S. Oliver, real estate broker Jim Keegan and Healdsburg trucking company owner Marc Opperman are just a few of the influential Sonoma County residents who either declined to discuss the case or did not return telephone calls seeking comment.</p><p>The owners of Mead Clark Lumber Co., which has invested some of its employees’ 401(k) money with Carinalli, also declined to comment.</p><p>But as the bankruptcy proceeds, however, volumes of information about these investments is likely to surface through legal filings expected to stretch for years. The initial list of Carinalli’s largest 21 unsecured creditors and 25-page roster of other creditors is just the beginning. </p><p>In the coming weeks, new filings will reveal information about the banks and other secured creditors who ensured their loans were backed with property, furthering the public’s understanding of what fueled Carinalli’s rise to become the largest individual landholder in Sonoma County. </p><p>Many of those who invested with Carinalli are longtime business partners.</p><p>Mike Feeney, an insurance agent with Wells Fargo Insurance Services, for over 20 years wrote the surety bonds on Carinalli’s development projects around the county. Along the way, he became an investor who is now owed $1.2 million. </p><p>“It’s put a real hardship on me, especially in today’s economy,” said Feeney, a father of five. </p><p>A member of the board of directors at Wells Fargo Center for the Arts, Feeney said he was wise enough to make sure that all of his investments were loans backed by first deeds of trust on the properties. </p><p>“I guess if there’s a silver lining in all of this, that’s it,” Feeney said. </p><p>The loans performed well for several years, earning 8 and 9 percent interest. But with the real estate implosion, the borrowers defaulted and Carinalli foreclosed on the properties. </p><p>But even after the mortgage payments ceased, Carinalli continued to make the monthly payments, as he agreed to do with a personal guarantee on all the loans, Feeney said. </p><p>The fact that he did so for a time is what generated much of the goodwill toward Carinalli that is evident even today, Feeney said. </p><p>“He kept paying people until he just couldn’t keep up anymore,” Feeney said. </p><p>While some have expressed anger toward investors like Corrick Brown who pushed Carinalli toward bankruptcy, Feeney’s not one of them. He has “mixed emotions” about the bankruptcy because he is both loyal to Carinalli but also hopeful the process will be a fair one. </p><p>“I’m not angry with them because maybe it’s better in the long run for everyone,” Feeney said. </p><p>Many of the creditors on the list travel in the same social circles, and there is already some tension between those who forced the bankruptcy and those who wanted to let Carinalli proceed with an out-of-court restructuring. </p><p>Harry Polley, a retired real estate broker from Sebastopol who socializes with many other creditors, worries that the creditors will turn on one another. </p><p>“Hopefully as it plays out, people will be respectful of each other,” Polley said. “When you take losses, it’s hard not to personalize it.”</p><p>Santa Rosa retiree Norene Losee, 73, said she has struggled to overcome the personal stigma of losing money, but isn’t embarrassed to see her name among the Carinalli creditors.</p><p>“I’m relieved to see my name on the list. We’re entitled to our money,” said Losee, who loaned $175,000 to Carinalli. “To get in a position like this makes me feel dumb as a rock, but I know I’m not.”</p><p>Not everyone on the creditors list is necessarily owed significant amounts of money. </p><p>Keegan & Coppin real estate broker Tom Laugero is listed as a creditor, but isn’t owed anything, he said. The loan that Carinalli brokered between a landowner in Bennett Valley and a group of investors that included Laugero is performing just fine, continuing to generate its 9 percent returns because the owner keeps making the mortgage payments, he said. </p><p>Others are in a similar predicament by virtue of just being in business with Carinalli. </p><p>“I don’t know why I’m on the list (of creditors),” said James Ledwith, who owns a Santa Rosa self-storage business with Carinalli. “He doesn’t owe me any money.”</p><p>Ledwith described being listed as a creditor as a “complication” and a “headache,” but wrote it off as part of doing business.</p><p>“It’s a mess of course, but the asset is doing fine,” he said.</p><p>Carinalli did not return a telephone call seeking comment Wednesday.</p><p>The steady returns that Carinalli generated for so long also appear to be one of reasons that investors continue to have positive feelings toward him despite all that has happened. </p><p>James Madison, the top-selling real estate agent in Sonoma County last year, said he invested retirement money with Carinalli through his pension plan.</p><p>“If it’s through my pension plan, I’m not paying taxes on it,” he said. “I could get 10 percent year after year after year.”</p><p>Madison would not have to pay taxes on the investment until he started withdrawing it, he said.</p><p>“It’s been a good thing for me, even if this turns out to be a situation that loses money,” he said. “In the long run, I think I’ll come out ahead.”</p><p>With so many investors still supporting Carinalli, it is possible that several will end up sitting on the unsecured creditors committee. While their legal obligation will to be recover as much money for creditors as possible, how these people feel toward the debtor can have an influence on the case by determining how much flexibility to extend to a debtor, said Doug Provencher, the Browns’ attorney.</p><p>“I’m sure the U.S. Trustee will make every effort to make sure the creditors committee is truly representative of the creditors.”</p>