Former Healdsburg investment adviser Gary Armitage will stand trial for his role in what prosecutors call a massive real estate Ponzi scheme that decimated the life-savings of hundreds of North Coast residents.
After a nearly two-month-long preliminary hearing, Shasta County Superior Court Judge Cara Beatty on Wednesday ordered Armitage, 60, and business partner James Koenig, 57, to stand trial on dozens of counts of felony securities fraud.
Prosecutors allege the men swindled more than 2,000 investors, many of them senior citizens, out of an estimated $200 million.
Investors who trusted Armitage with their retirement savings lauded the decision.
"Hallelujah! Hallelujah! Thank you Judge Beatty," said Dee Sunderland, a 71-year-old retired Novato nurse who lost $265,000 in two investments.
The ruling caps an unusually lengthy preliminary hearing that involved the testimony of dozens of witnesses. The case is being handled in Shasta County because the investigation centered on a Redding firm owned by Koenig, Asset Real Estate & Investment.
The company was raided in June 2008 by state Department of Justice investigators who confiscated hundreds of thousands of pages of documents and e-mails that formed the foundation of the prosecution's case. The documents helped investigators unravel a complex web of interrelated companies that prosecutors allege the men used to defraud investors and fund lavish lifestyles.
Neither Koenig's attorney, public defender Michael Horan, nor Armitage's attorney, Amy Babbits, could be reached for comment. Robert Morgester, deputy state attorney general, declined to comment.
In her 25-page ruling, Beatty laid out why she was upholding most of the charges against the two men. The prosecution originally filed 70 counts of securities fraud and burglary against the men. She upheld 42 securities fraud charges against each man, and an additional eight burglary charges against Armitage because he entered investors' homes as part of the fraud. She dismissed the burglary charges against Koenig, who never entered clients' homes.
A third man, Jeffrey Guidi of Santa Rosa, accepted a plea bargain with prosecutors midway through the marathon hearing in exchange for his cooperation, including possible testimony against his former partners.
Armitage and Guidi were longtime partners in Santa Rosa-based AGA Financial, which collapsed in the fall of 2008 when payments to its investors ceased and several sued the two men for fraud.
<CW-20>Armitage and Koenig earlier rejected plea deals that would have sent them to prison for 25 years and 20 years, respectively.
The judge found there was ample evidence that Armitage and Koenig conspired to keep clients in the dark about problems with the investments in order to keep the money flowing in.
</CW>The most glaring omission, the judge found, was that investors were never told Koenig had been convicted of mail fraud in the 1980s in connection with a gold-selling scam.
"To investors, Armitage portrayed Koenig as a financial wizard, a businessman who never lost money for his investors, and an old fishing buddy and family man who was worthy of their trust and financial support," the judge wrote.
Many investment documents lacked any reference to a conviction, while others contained only vague references, the judge wrote.
"Where there were disclosures, the wording was such that it took a tracking system to understand who — within the organization — suffered the conviction," she wrote.