Grayson Gets Portion Of Home Sale
A judge grants Jeffrey Grayson just $34,000 of $600,000 in
proceeds from the sale of a California vacation home
By Jeff Manning of The Oregonian staff
Friday, May 25, 2001
Jeffrey Grayson's Carmel, Calif., vacation home will not provide the besieged financier with the cash infusion he had sought.
U.S. District Court Judge Garr King gave the embattled money manager access to just $34,000 of the $600,000 in proceeds from the house sale. What's more, King ordered Grayson to hand over $300,000 of the sale proceeds to the court-appointed receiver liquidating Capital Consultants, Grayson's former investment firm.
The balance of the money -- $266,000 -- will remain frozen.
Grayson said in court papers that he desperately needs the full $600,000 to pay living expenses and attorneys fees.
Grayson has been forced to get permission to spend his personal funds since September, when King froze his assets. At the same time, the U.S. Department of Labor and the Securities and Exchange Commission sued Grayson and his firm claiming that Grayson engineered a complex Ponzi-like scheme -- using new investor money to pay old debts – in an effort to hide the firm's failed investments.
Subsequently, dozens of former clients sued Grayson and Capital Consultants alleging they lost more than $200 million of client money in imprudent and fraudulent investments and then conspired to conceal the loss.
Lawyers for the many parties involved are scheduled to go into a court-ordered mediation Wednesday in an attempt to reach a quick settlement.
The question of fees -- attorneys fees as well as the receiver's -- dominated Thursday's hearing. In court papers, Grayson claimed he owed his attorneys $68,000. The $34,000 in proceeds from the house sale that he was allowed to keep represents half of that amount.
In separate filings, Grayson's son -- Barclay Grayson, who pleaded guilty to mail fraud in March -- said he owed his attorney $48,000.
Thomas Lennon, the receiver in charge of Capital Consultants, is seeking more than $1.6 million in fees, most of which would go to law and accounting firms he has hired.
Jeffrey Grayson has been pressing the court for access to his money since the first of the year. The court gave Grayson a $10,000-a-month living allowance. But even that marked a major adjustment for a man who had been paying himself $130,000 a month as chief executive of Capital Consultants.
Jeffrey Grayson's former vacation home became a central issue this spring in the tug of war over money. Grayson and his wife sold the house this spring for just more than $2.5 million. After paying off the mortgage, that left $1.2 million in proceeds, which court papers say the Grayson couple split evenly between them.
Lawyers for Jeffrey Grayson argued that he needed access to his 50 percent share of the proceeds -- $600,000 -- to stage a defense. "The Carmel proceeds comprise the only fund from which Mr. Grayson can pay attorney fees," argued Grayson's attorney Wilson Muhlheim. "Without that money, this litigation ends."
Lennon and the SEC had objected to Grayson's motion. Lennon claimed that Grayson had used Capital Consultants' money to renovate the Carmel home and that the sale proceeds should therefore rightly go to the company.
Lennon and Tom Toothacker, Capital Consultants chief financial officer, alleged in court documents that Capital Consultants – not Grayson -- made nearly $500,000 in payments to architects, contractors and interior decorators.
After Thursday's hearing, Norman Sepenuk, a Portland attorney working for Grayson, said his client will continue his defense. "There's still a pool of money left," he said, adding that he's hopeful King will eventually grant Grayson access to the $266,000.
"I think he's being optimistic," said SEC attorney Nick Morgan.