What a tangled web Homestead Northwest has weaved for itself.
The Lynden-based company, which has ties to properties and developments in Birch Bay and Whatcom County, has been under the magnifying glass as a trustee for the United States Bankruptcy Court has tried to determine exactly how much was owed investors as the company fell apart and entered into Chapter 7 bankruptcy.
It is estimated that Homestead Northwest founder James Wynstra’s company owes investors upwards of $65 million, and it is unlikely that his trusting investors will ever see returns from their investments.
Without admitting guilt, Wynstra has agreed to pay a civil fine of $100,000 in connection with the collapse of his company. That fine, which was assessed by the Washington Department of Financial Institutions, was disclosed in documents that were made public on March 8.
The financial records left behind in the wake of Homestead’s collapse constitute a twisted, convoluted trail that make following the money difficult. Bankruptcy trustee Virginia Burdette has declared it impossible to administer the bankruptcy cases of Homestead’s five umbrella properties separately.
“It is clear that the myriad of cash and real property transfers between all Homestead companies are so closely entwined that this task is impossible,” she said. Subsequently, she requested that the company’s bankruptcy cases be viewed as one entity since it is unlikely they will be able to disentangle the transactions.
Homestead Northwest’s money troubles came to light in April 2009 after the company stopped making payments to investors promised returns of 8 percent or more on their loans to the company. Wynstra’s company used the loans from those individual investors to finance real estate developments in Whatcom County and elsewhere, but the money was improperly managed and commingled with other projects. False deeds of trust – what amounts to for all intents and purposes the legal equivalent of a mortgage – were given to investors as collateral.
But when investors tried to withdraw their money or exercise their deeds of trust, they found they had been duped. Wynstra had issued multiple deeds of trust for many properties, and had also used those properties to secure bank loans.
“The testimony of Mr. Wynstra was clear the money was transferred from entity to entity depending on which entity had liabilities that needed to be paid without any consideration as to whom the monies actually belonged,” Burdette’s attorney, Denice Moewes, said in a court filing.
Court documents state Wynstra admitted to putting money in any account that needed it from whatever source they had available at the time.
Wynstra’s attorneys had not returned phone calls at press time.