Excerpt of letter to investors

A Bay Area real estate firm under investigation by the U.S. Securities and Exchange Commission engaged in "serious misconduct" over three decades, according to a recent investor update.

The SEC opened a fact-finding inquiry into Novato-based Professional Financial Investors Inc. after company founder Kenneth J. Casey died last month. In June, the firm asked all of its corporate officers to resign and appointed Michael Hogan of Armanino as chief restructuring officer of PFI.

In a letter to its more than 1,500 investors June 28, Hogan said that he had independently verified that the company had engaged in misconduct in the 30 years prior to Casey's death.

"Shortly after Mr. Casey's death, it came to light that interest payments could not be funded  without new investment, but accepting new investments would have been a continuation of the Misconduct," he wrote.

Hogan noted that within days of Casey's death, PFI and its associated fund, Professional Investors Security Fund Inc., ended the misconduct, resulting "in the suspension of new investment and interest payments, and the request for a SEC Investigation."

Casey was one of the largest commercial property owners in Marin County, according to Marin Independent Journal, and his portfolio included more than 900 apartment units under management and over 600,000 square feet of commercial warehouse space in Marin and Southern Sonoma counties.

The company hired law firm Ragghianti Freitas to advise on the transfer of ownership for PFI and PISF. After an audit of real estate holdings and debt financing from Ragghianti Freitas partner Eric Sternberger, the firm referred the matter to the SEC.

In an update June 14, Sternberger predicted that the companies will unveil a plan in 60 to 90 days for all investment types and an updated outlook on the status of investments. Hogan noted in his letter Sunday that the plan will be presented in a recorded webinar.

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