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A governor’s son who had so much and lost it all

Not many years ago, Jeffrey Guinn was the high-flying head of Aspen Financial Services.

He parlayed the booming Southern Nevada construction economy and his status as a son of popular former Nevada Gov. Kenny Guinn into a winning combination that profited Aspen’€™s first-trust deed mortgage investors and generated millions in fees.

Investors bragged that dealing with the governor’€™s son provided a foolproof financial foundation. What could possibly go wrong?

It was only when the economy slowed that the fissures and fractures in the Aspen portfolio began to show. Investors who had sung Guinn’€™s praises grew silent as their deals stalled and soured.

Eventually, Aspen tanked and spiraled toward bankruptcy. Most investors licked their wounds and moved on.

But one investor, Donna Ruthe, continues to wage a personal war against Guinn and has pursued the battle into bankruptcy court, where she’s filed a lawsuit through attorney Dennis Prince that accuses the former baron of Aspen of defrauding investors and practicing a Ponzi scheme that used his father’€™s good name to make millions.

Ruthe is the widow of longtime businessman Charles “€œChuck”€ Ruthe, who counted Kenny Guinn among his closest friends. The Ruthe family trust lost approximately $7 million to Jeffrey Guinn’€™s fraud, manipulation and conflicts of interest, the lawsuit alleges.

“€œIn virtually all the loans described below, Guinn engaged in a constant pattern of financing and refinancing first and second trust deeds at an ever-increasing debt level,”€ the lawsuit states. “€œThe primary purpose of virtually all of the Loans was to repay prior deeds of trust to carry out Guinn’€™s scheme, fund unpaid accrued interest on other loans, fund additional ‘capitalized’€™ interest reserve, pay fees and closing costs. Guinn often authorized cash out to borrowers, all of which was never disclosed to Plaintiffs before investing in the subject loans and in violation of the loan agreements. Plaintiffs were never informed of the real purpose of the Loans.”

As the economy slowed between 2005 and 2008, the lawsuit claims, Guinn pressed his bets, took on more loans and incurred more debt while generating more fees. Guinn “€œknew or reasonably should have known that the borrowers had no ability to repay the loans.”€ Some of the borrowers were insolvent, and many of the properties contained no equity, the lawsuit alleges.

Playing fast and loose was easy when the economy was racing ahead. That’€™s when, the lawsuit alleges, Guinn stopped following the rules.

“€œThis abuse of the lending process existed well prior to 2004 and continued with virtually all of the Loans until defaults occurred with all of the Loans, as there was no longer an ability to refinance,”€ the suit states. “Once Guinn lost the ability to refinance, Aspen collapsed.

“€œThis Ponzi scheme of ever-increasing debt loads and constant refinancing of first and second trust deeds was for the sole benefit of Guinn,”€ the suit continues, accusing him of enjoying a “€œlavish lifestyle”€ while investors came up empty, owning multiple homes, and even a $6 million private jet.

With Guinn in bankruptcy, it’€™s unclear what Ruthe can materially gain from the effort. But she’€™s obviously not in it for the money, and now depositions are again being noticed in the case.

“That’€™s a conversation we’ve had many times, both while Chuck and afterwards, and her resolve remains as strong as it ever was,”€ Prince said.

In 2015, the local economy continues to improve. You might even hear talk about the high-interest returns possible for first trust deed investments.

Surely some folks have forgotten about the fall of Aspen Financial Services and the son of a governor who had so much and lost it all.

John L. Smith is a columnist for the Las Vegas Review-Journal and a lifetime Nevadan. Contact him at 702 383-0295 or at jsmith@reviewjournal.com.

 

 

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