The One with the “Dealmaker”

It’s one thing to make a deal. It’s another to execute on the business plan agreed to in the deal you make. Matthew Skinner calls himself a deal maker. The Securities and Exchange Commission says that he didn’t execute on his deals.

Mr. Skinner was building a real estate empire, developing residential properties in southern California, an apartment building in Arizona and unidentified multifamily real estate. It looks like some of the deals went sideways. There was litigation over property rights and cost overruns. Problems happen. You tell your investors and move forward. Looks like Mr. Skinner did not.

This is real estate, so why is the Securities and Exchange Commission involved? Mr. Skinner was selling securities to fund his real estate empire. He was purported to be using the Rule 506 option for fundraising. According the the SEC, Mr. Skinner and his funds were “engaged in general solicitation for each offering, broadly targeting members of the public with whom they had no preexisting relationship.” According to the complaint, at least some of the investors were not accredited and Mr. Skinner did not take steps to determine their status as accredited investors.

The other key part of fundraising is identifying the use of proceeds. In particular, how much, if any, is going to the sponsor of the fundraising. Mr. Skinner’s fundraising documents listed certain fees to which he was entitled. However, the SEC has accused him of taking much more than was detailed in the fundraising documents.

The last thing that caught my eye was using COVID as an excuse. I think we’ll start seeing more of this in fraud cases. Mr. Skinner “falsely cited economic dislocation caused by the COVID-19 pandemic as the reason why he could not pay [his investors] and would need to defer distributions.”

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