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BREAKING NEWS: Pinnacle Development Partners LLC Under Investigation

by Joshua Dorkin on September 21, 2006 · 25 comments

  

Buy investment properties and sell within 60 days for a quick profit. $5K min. inv. 25% return w/n 60 days.

Look familiar??

Atlanta based Pinnacle Development Partners, LLC is currently under investigation by regulators in California. The company, whose ads in Newsweek, The Wall Street Journal, Barrons, the New York Post, and other publications, has promised investors 25% returns in 60 days, and claims to be in the business of flipping foreclosure properties for profit. Since early August there has been a debate about the legitimacy of Pinnacle on our forums, and I’m sure many investors are relieved to hear that their fears about the company are not their’s alone.

The investigation centers around claims that the company is yet another Ponzi Scheme, where early investors make their money from the funds of later investors. The last man standing is left broke as there are no new people investing to supply finds. According to the Wall Street Journal article (A MUST READ!) that broke the story, “The company has discouraged investors from checking out its business practices. In a recent letter, a lawyer for Pinnacle, Christopher M. Kunkel, told investors that if they check with anyone other than an approved list of partners, they risk “dismissal from the investment group and a return of only your initial capital contribution.” Mr. Kunkel declined to discuss the letter and said that, on Tuesday, he stopped representing Pinnacle.” According to the article, the WSJ attempted to interview company founder and owner, Gene A. O’Neal, but he declined comment.

We began to see red flags about the company when certain new members on our forums began to make claims about the company, and appeared to be nothing but cheerleaders. It seemed odd that people would sign up to the site soley to pump a company making rather bold claims. In addition, the following comments struck me:

Member rlawsonw: On Talking to a Company Rep . . .
On the development property the rep explain that investors are paid according to what phase the development is in at the time of your investment. On a 5 phase developlement project the investors that invested in phase 1 would be paid by monies from investors in phase 2. etc. Phase 1 would be clearing of the land, phase 2 site layout, excavation etc. Phase 3 would be infrastucture, sewer lines, utilities etc. Phase 4 would be building structures etc. You get the drift I’m sure.

You have no say so on what foreclosure properties Pinnacle uses your investment for. I’m still struggling to figure out how a silent partner’s names ends up on a deed, if the property is sold within a 60 day period.

 

Member HURRICANE
Hi, I too am interested in Pinnacle. I called and spoke with a represenative who sent me a package which look pretty generic. One thing in particular it clearly stated that if you attempted to contact any of the investors other than those whose name and numbers they offer, you will automatically be dismissed from the investment group. Why? Sounds very skeptical.

 

Member rwz
If you go back to page one of this string, you’ll see my question to someone who had been talking this company up based on his/her personal experiences with Pinacle. When I pointed out that the address they list in their information packet was bought and sold by the CFO of the company rather than a partnership between Pinnacle and investors, the person went quiet. You can check yourself on the Dekalb County Tax Assessor’s web page and hit ” property information.”

That in itself seemed fishy but then I read on another blog that if you ask these guys too many questions, or ask to speak to any other investors other than who they refer you to, they cut you off and refuse to let you invest. I would think a respectable investment company would welcome an honest inquiry into their dealings.

I was ready to pull the trigger and invest with these guys, but now I’m on hold. I would recommend extreme caution until I see more proof.

These are just a few of the comments on the thread. There are quite a few people who claim to have invested in the company and say they’ve seen returns, but that is always the case with this kind of scheme. What really caught my eye though, was the following: “Since incorporating in 2003, Pinnacle bought 15 properties for $9 million in Georgia, according to AFX Corp., which collects and analyzes real-estate records. In that period, AFX found no sales to third parties except to entities listing Pinnacle’s address.” (from WSJ article) It just doesn’t add up. If the company is buying and selling the properties between their own affiliates, where are the funds coming from? It seems like the only answer is NEW INVESTORS.

The company has also come under investigation by Private Investigator Barry Minkow of the Fraud Discovery Institute, the front page of whose site reads “Alleged Pinnacle Scam! Read the report”. In addition, we gleaned the following from the site “the Fraud Discovery Institute immediately hired and paid for a title search public records expert, nationally known AFX (TitleSearch.com), to corroborate the seemingly untenable business model of Pinnacle Development Partners, LLC and included these findings in the report. These findings showed material discrepancies between title reports of various properties listed in the Pinnacle offering memorandum that investors relied upon to make their investment decisions.”

Given the current investigations by regulators, the FBI, and others, and all evidence here and elsewhere, I’d recommend anyone looking into this company use EXTREME CAUTION BEFORE INVESTING! Speak with an attorney and do your homework. Something just isn’t right here. . .

I highly recommend reading the following sources in your investigations:

– Complete 32 page report from Fraud Discovery (very thorough)
Pinnacle Development Partners LLC Discussion Thread (over 75 posts discussing the company)

If you have any other good resources, please let us know so we can add them here!

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{ 20 comments… read them below or add one }

Chris Kunkel September 23, 2006 at 3:27 pm

I am the attorney referenced in the article. The article slightly misrepresents the facts. The purpose of the letter was for the privacy of investors (if you read the brief letter it clearly states that); it was not meant or could it be interpreted to discourage investors. I did comment on that in my brief interview with the reporter Zach Seward, I called Zach the day after the article ran and brought the discrepency to his attention. He confirmed my statement , but I did basically say “no comment” he inferred this meant my comment regarding the letter. Because the statement did not substantially effect me I did not ask for a retraction. You can verify this with the reporter

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Joshua Dorkin September 23, 2006 at 11:25 pm

Chris – Thank you for your comments. Our goal here is to try and find out what the truth is about Pinnacle. If there is any way you can further enlighten us, please do. Thanks.

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raja rama September 24, 2006 at 3:38 am

i am a real estate investor also a loan officer i personally know the owner of pinnacle for over ten years and i know that he is a very decent person. it seems to me that he and his company is being bad mouthed unjustly has anyone been scammed? If not this can have a damaging effect one’s reputation.

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Remy September 24, 2006 at 6:52 am

Raja – I have invested with Pinnacle and to date I understand everyone involved has been paid as contracted. I do hope your correct about Gene O’Neal.

It will be quite sad if things do not work out as contracted.

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Hejustlaughs September 25, 2006 at 9:11 am

Your post is mentioned in the carnival of business #23 over at HJL Money Blog located at http://pf.endlessgibberish.com

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Poppins October 16, 2006 at 11:59 am

After several friends successfully invested in and received their returns from Pinnacle, like clockwork, I also invested in May of this year. I have not had any problems with Pinnacle until this “so called” scam was supposedly “uncovered.” Everything seemed to run like clockwork until this investigation began. Now, it seems that the chances of recovering my last return or for that matter, just the last amount I invested are getting slimmer…..not so much because of Pinnacle not keeping their word, but because of this so-called investigation. If Pinnacles’ assets have been frozen, then who is actually the blame for this? Pinnacle or the US SEC. As usual, instead of making things better they seem to only be worse. To me, this makes them no better than Pinnacle.

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lisa sheeehan October 17, 2006 at 9:23 am

I have been trying to reach Pinnacle for 2 weeks and thier phones are not being answered. I had a return due 3 weeks ago and was not contacted. Is my money lost?

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Joshua Dorkin October 17, 2006 at 9:32 am

Development are changing quickly with the Pinnacle situation. If you want to keep in the loop, please read our forum thread on Pinnacle. We’ve got some officials there keeping people in the loop, as well as many other investors who you can communicate with. The link to the discussion is:

http://forums.biggerpockets.com/viewtopic.php?t=4009

You should read the last 5-10 pages or so of the thread for the latest info!

Good luck to you

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Craig August 2, 2007 at 1:18 pm

Investors want exactly the amount promised to them. Always play it safe with investors, they can make you or break you.

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Johan Svensson August 2, 2007 at 2:06 pm

This is something we can’t do in Sweden. We are just not allowed to invest in property to make money. The government will just tax you to death hence why I’m trying to migrate to the US or Australia. I’m very much into investing and would expect to get back what I had been promised when entering an investment deal. I’ll check back here for updates and more comments

Johan
http://www.flickurpic.com

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MaxAzi August 3, 2007 at 6:47 am

I am new to this stuff, can we do these stuff around canada also? Btw thanks for the tips…
Max

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Jag August 3, 2007 at 8:59 pm

Was this a loophole that needed to be closed? Is it yet?

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Krank October 1, 2007 at 8:08 am

Very interesting

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sean russell November 15, 2007 at 9:45 pm

thanks for the clear up on the article Chris

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Chris May 28, 2008 at 4:43 pm

Hey,

I’m also in Sweden and would get taxed to death like Johan is saying.. I’m also on the lookout to MOVE, MOVE, MOVE beacause it’s bad you can’t make money passively here unless it’s online =)

– Chris

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sylvan June 10, 2008 at 10:19 am

Ok so I am assuming this company has been around for 60 days at least, is there anyone who has seen results. I will continue to check out the forum for more info, but this sounds interesting.

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Wallace Nuanez July 22, 2008 at 9:25 pm

Yah me too, Sylvan I will also check back on the updates!

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yukino August 12, 2008 at 2:48 am

I understand that black propaganda would really impact the image or credibility of any organization. But, if Pinnacle is truly legit and has earned trust among its investors, how come the scam (bad mouthing Pinnacle) seems to crash the business that fast. And why would they not allow their investors check their business practice? I think this is the first thing stockholders are interested with.

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mike September 21, 2008 at 6:53 am

why Gene A. O’Neal, declined any comment during the interview?

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Joe July 30, 2009 at 2:41 am

As I tried to write before, “If it’s too good to be true, it probably is.” Be careful, especially in this economy.

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