Here is an update for everyone with the latest news on Pinnacle Development Partners LLC. According to Reuters (full article), the U.S. Securities and Exchange Comission (SEC) today filed fraud charges against Pinnacle and its founder, Gene O’Neal, claiming that it operated a ponzi scheme.

“The U.S. District Court for the Northern District of Georgia froze the assets of Atlanta-based Pinnacle Development, which had been running a nationwide advertising campaign, the investor protection agency said . . . Pinnacle promised investors a 25-percent return in 45 to 60 days and a second 25-percent return, and the return of investor capital, after 90 days, the SEC said . . . The exorbitant returns promised to investors were generated by the partnership selling the property to other investor partnerships controlled by Pinnacle, the agency said.”

This afternoon, Hays Financial Consulting, LLC was appointed receiver by the US District Court.

We have been operating a discussion thread about Pinnacle Development Partners here on BiggerPockets since August 8, 2006, which has generated huge interest, hundreds of posts, and tens of thousands of visits. Linda Baldwin at the Hays posted the following message this evening on our forums:

To all Pinnacle Investors:

I was appointed Receiver by the United States District Court this afternoon for Pinnacle Development Partners, LLC. I have been investigating Pinnacle since that time. My principal effort today was to secure assets and freeze bank accounts. The Receiver’s team and I will be working diligently to identify other assets to secure on behalf of investors.

My investigative team in this case is comprised of accountants, fraud investigators, lawyers and computer experts. Today we met with all Pinnacle employees and began a hands-on investigation. We will be at the Pinnacle offices all day tomorrow.

We have posted the SEC’s complaint and the Court Order appointing me as Receiver on my web site at: www.haysconsulting.net. Please click on the Pinnacle logo on the home page to view these documents. We will post additional information for investors as it is available. We will write periodic reports to keep you advised of the status of our investigation.

PLEASE DO NOT CALL MY DIRECT OFFICE LINE AT THIS TIME. This evening, my voice mail inbox was full, which prevents me from receiving important messages in connection with my investigation. I understand there are over 2,000 investors. Please understand that I can’t possibly return all of your calls and emails while undertaking the important task at hand.

We will draft a claim form and post it on the website in the near future. At this time please gather all documents regarding your investment along with copies of your checks so that you are prepared to complete the claim form.

We will provide periodic blog updates and we will write interim reports which will be posted on my website. Additionally, we will set up a hotline as soon as possible.

S. Gregory Hays

A final message from Linda (Value Adder); I have posted my real name as well here to further show that we are genuinly concerned for each one of you. I will also set up a user account for Greg so that he may also post updates directly. Thank you, in advance, for your understanding while we begin to investigate and recover assets for you, and thank you to Joshua for maintining this forum for the investors. If we work together it will bring a better result for all.

Linda Klinner Baldwin CPA, CFE, CIRA

We’d like to thank Linda and Gregory at Hays Financial Consulting for keeping everyone in the loop. We will continue to bring news of this company to you through this blog and through our discussion forum.

For more information about Pinnacle, read:

- 9/21/06 Pinnacle LLC Under Investigation
- Pinnacle Development Partners LLC Discussion

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Tags: Baldwin, Consulting, development, Financial, Gene, Gregory, Hays, haysconsulting.net, Linda, LLC, O'Neil, partners, pinnacle

The latest edition of the Investing Carnival took place today over at Investing World Today, and featured Real Estate Investing for Real. Our Pinnacle Development Partners Under Investigation article has now been mentioned in 3 blogging carnivals this week.

In addition, with over 11,000 views and over 100 replies, our Pinnacle Discussion forum thread has shown how important this discussion about the company really is.

Tags: blog, carnival, development, discussion, forum, partners, pinnacle, Real Estate Investing

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!