Nate Paul hit with 4 new fraud indictments


Nate Paul (Illustration by Kevin Rebong for The Real Deal; Getty, Dolcefino Consulting)

Austin real estate investor Nate Paul is facing yet more federal indictments, this time concerning his handling of limited partners’ money. 

In a new filing Tuesday, prosecutors accuse Paul of lying to his limited partners about how he used their money and the financial status of their partnerships. In particular, prosecutors allege that Paul transferred limited partner funds out of specific bank accounts created for those deals, and used the money for his other companies instead. 

“During his career in commercial real estate, Paul has repeatedly engaged in deception to persuade individuals and organizations to entrust money to him, and he has used the money to enrich himself and expand the commercial real estate business that he controls,” the indictment reads. 

Paul, who once controlled one of Austin’s largest real estate empires, was indicted on one count of conspiracy to commit wire fraud and three counts of wire fraud. 

Between 2011 and 2019, Paul allegedly transferred limited partner money to his other companies, where he used the funds to cover those companies’ expenses. He then covered his tracks by sending limited partners false financial statements that minimized the amount of money his companies owed them and inflated the cash those partnerships had on hand, prosecutors claim. 

The discrepancies can be huge. In 2016, Paul’s company told a Texas limited partner that their partnership’s accounts receivable — the amount it was owed but had not collected — was just over $11,000, when it was actually more than $4.3 million, the indictment alleges. The same report said the partnership’s operating cash was just over $591,000, when its bank account only actually held $2,707, prosecutors say.

The indictment lists 11 times Paul sent similar financial reports to his limited partners, referring to specific reports sent to investors in North Carolina, Florida and Texas. It cites Paul’s behavior in partnerships for properties in San Antonio, Austin, Illinois, Minnesota and Colorado. 

The problem stems from the agreements Paul struck with his limited partners. In those contracts, Paul promised to segregate the partnership’s money and use the funds exclusively to its benefit. But before the ink was dry, the indictments allege, Paul and his accountants were already breaking those promises.

In each instance, when Paul and his accountants transferred limited partnership money to their other companies, they allegedly tracked the amounts but did not share them with the limited partners. Instead, those balances were sometimes moved under the limited partnership’s “operating cash” category in the notes section of its financial statements, according to the indictment. 

Here are some noteworthy instances of fraud alleged in the indictment:

  • A North Carolina limited partner received a report in 2017 showing accounts receivable of $277,430, while the true receivable amount including money the Paul’s other companies owed it was about $1.2 million, prosecutors claim. The report also said the partnership’s operating cash was $538,850, when the accounts actually only held $20,685, according to the indictment.
  • That same limited partner received a 2018 report for a different World Class deal claiming the partnership’s accounts receivable was $62,555, when it was actually owed just over $500,000. The report listed the partnership’s operating cash at about $344,000, when it was actually only $3,656.87. 
  • A Florida limited partner received a 2018 report stating the partnership held $388,853, when its accounts actually held just $982.81. World Class companies owed it nearly four times the amount listed on the report, the indictment alleges. 
  • The Texas limited partner invested in another World Class deal and received a 2017 report saying the partnership’s accounts receivable were just under $100,000, when they were actually about $442,500. The report said the partnership had about $270,000 in operating cash, when its bank account was actually $315.64 in the red.

The new indictments come on top of eight other indictments revealed this year. Those relate to allegedly false statements Paul made to lenders to secure about $172 million in loans from March 2017 through April 2018. In those filings, prosecutors included documents allegedly showing Paul claiming his bank accounts held far more money than they actually did. 

Paul, who did not respond to a request for comment, pleaded not guilty to the earlier charges. He has been in investigators’ crosshairs since at least 2019, when the FBI raided his home and office, which Paul said left his business “severely compromised.” Paul avoided the limelight during Attorney General Ken Paxton’s impeachment trial in September, even as he was deeply enmeshed in the charges. Paxton was acquitted, but Paul’s legal troubles live on.



Source link

About The Author

Scroll to Top