Thu09182014

News

Meet the Mountain View City Council candidates

Meet the Mountain View City Council candidates


Nine candidates have filed to run for three open seats on the Mountain View City Council in the Nov. 4 election – none of them incumbents. The Town Crier asked them to introduce themselves to readers in the following Q&A format. We knew the...

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Schools

LASD committee looks to rank campus improvement projects

LASD committee looks to rank campus improvement projects


Traci Newell/Town Crier
The Los Altos School District’s newly expanded Facilities Advisory Committee met for the first time last week. The 28-member committee’s first task is to prioritize campus improvement projects.

The Los Altos Scho...

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Community

Sports

New-look Lancers find their footing

New-look Lancers find their footing


Ellie Van Houtte/Town Crier
St. Francis High’s Jenna Adams, left, and Carly Deale attempt to bump the ball Friday night. The juniors combined for 28 kills.

This year’s St. Francis High girls volleyball team faintly resembles last season’s squad ...

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Special Sections

MV Whisman teachers cite low pay

MV Whisman teachers cite low pay


Ellie Van Houtte/Town Crier
An estimated 75 supporters of higher teacher pay turned out for the Sept. 4 Mountain View Whisman School District board meeting.

Teachers, trustees and administrators are recovering from a dramatic Mountain View Whism...

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Business

Skin rejuvenation studio joins Rancho

Skin rejuvenation studio joins Rancho


Ellie Van Houtte/Town Crier
Esthetician Marjan Kashi showcases one of the treatment rooms at her new studio, Pure Serenity Skincare at Rancho Shopping Center. Kashi provides services including microdermabrasion and various light and heat energy the...

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Books

A woman's perspective on the Greatest Generation

A woman's perspective on the Greatest Generation


During World War II, Virgilia Short Witzel, a young mother and U.S. Navy officer’s wife, grappled on the home front in Menlo Park with wartime rationing, shortages and loneliness. During the ensuing Cold War, she experienced adventure and misadventur...

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People

JERALD (JERRY) NELSON CHRISTIANSEN

JERALD (JERRY) NELSON CHRISTIANSEN

Resident of San Jose and Los Altos, California

July 21, 1931 to August 4, 2014

Born in Arimo, Idaho, to Jerald Emmett and Rebecca Henderson Nelson Christiansen. Raised in Davis and Riverside, California, with summers in Downey, Idaho, and in Loga...

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Travel

LA photographer spends a night with cranes – and moose – in Alaska

LA photographer spends a night with cranes – and moose – in Alaska


Sandy Powell/Special to the Town Crier
Los Altos resident and bird photographer Sandy Powell recently visited Homer, Alaska, to photograph Sandhill cranes, below. While there, Powell also encountered moose, left.

Los Altos resident Sandy Powell, a...

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Stepping Out

Pear puts on a pair of plays

Pear puts on a pair of plays


J. Smith/Special to the Town Crier
Dan Kapler (as Teddy) and Betsy Kruse Craig (Trish) star in Pear Avenue Theatre’s “House.”

The Pear Avenue Theatre production of two interlocking comedies by Alan Ayckbourn – “House&...

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Spiritual Life

Back to Church Sunday offers opportunity to recommit

The children in Los Altos are back to school, and I can still hear parents cheering. Summer is officially over, even if the calendar doesn’t quite think so.

Parents have attended Back to School nights to meet their children’s teachers. B...

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Magazine

Los Altos Hills home showcases resort-inspired living

Los Altos Hills home showcases resort-inspired living


Courtesy of Spectrum Interior Design
In place of a more traditional fireplace, this modern living room features a linear-flame firebox that emits heat while offering a sculpturelike design element.

After traveling the world and visiting a host...

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Seeking answers, local investors remain uncertain whom to trust

Bearing canes and worn leather briefcases, local seniors were among those filing into a San Jose courtroom Friday to watch the Los Altos man they’d entrusted with their savings argue his innocence.

The Securities and Exchange Commission alleges that the investors are victims of a Ponzi-like scheme. But some don’t want to believe they’ve all been hoodwinked. If the government is right, they’ve lost their dream of 7.5 percent annual returns, and a good chunk of their initial investment.

Mark Feathers, founder of the Los Altos-based Small Business Capital Corp., continues to maintain that the investments were safe, performing and could still be salvaged.

Some of those who sank money into SB Capital were seasoned investors, but many were financially inexperienced local residents looking to invest relatively small nest eggs. They faced the question: Do you trust the funds manager who paid you steady returns throughout the recession, or the court-appointed receiver delivering bad news?

The confusion, anger and lingering hope aired outside the courtroom last week demonstrated intriguing loyalty to a man, Feathers, accused of dissipating others’ money while lining his own pockets.

Seeking answers

One couple attended the hearing wondering how to plan, on a fixed income, for frozen investment funds and uncertain losses. They had written the court saying that without access to the principal and interest of the $50,000 they invested with Feathers, they were relying on Social Security and “needed the funds badly” for basic living expenses. The husband, an 88-year-old Los Gatos resident, asked that the Town Crier not reveal his name, as did every investor interviewed. He said watching his remaining savings account tick down filled him with worry, and joked wistfully about finding a job.

The couple found Feathers’ company through an ad in the San Jose Mercury News. SB Capital, which had also advertised in the Los Altos Town Crier, teased an investment opportunity that was “easy to grasp” and “Wall Street-free.”

SB Capital staff included fixtures from the Los Altos banking scene with deep roots in the area. Feathers developed relationships through personal and sometimes fanciful events, including an annual investor dinner he and his wife once hosted in period costume.

“You invest with someone you like, after you meet them,” the wife of the Los Gatos investor told the Town Crier.

Striking courtroom scene

Clutching a worn, green paper folder thick with documents, Feathers sat alone at the front of the courtroom last week, flanked by six representatives of his opposition. As he delivered lengthy explanations of where he believed the SEC had gone wrong, some of his alleged victims laughed along with his jokes and flashed thumbs-up gestures of encouragement.

U.S. District Judge Edward J. Davila denied the majority of Feathers’ motions and took pains to explain to Feathers and onlookers in the courtroom why he was ruling as he did.

The hearing addressed Feathers’ efforts to dismiss the case, discredit the SEC and gain access to $30,000 for six months of living expenses from his frozen assets. He was granted the money but otherwise didn’t prevail.

Feathers referenced letters of support sent to the judge. Davila explained that he couldn’t read any of the approximately 75 letters received regarding the case because they would constitute ex parte communication. Judges are expected to refrain from interacting with third parties in a case, which means investors don’t have much say in the proceedings.

Feathers has written prolifically to investors since the SEC seized his company in June 2012, making dramatic arguments about the SEC’s alleged overstepping, misleading and persecutory actions.

Over the weekend, he wrote another missive sprinkled with dire analysis of the SEC’s intervention and excerpts from court documents, claiming that “YOU ARE NOW AN UNWILLING PARTICIPANT IN A FULL-ON GOVERNMENT SCANDAL” and urged investors to write to local elected officials. Feathers, who describes himself as waging a “David and Goliath” battle for his innocence, wrote to investors that “If SEC wins, you lose.”

The SEC shuttered Los Altos-based SB Capital ostensibly to protect two groups of people: those who had already invested, whose money was allegedly being fraudulently depleted; and those who were considering an investment but had not yet committed their money.

The court receiver managing the seized funds claims that of the $46 million invested, approximately $12 million was “dissipated” through Ponzi-like activities.

The phrase “Ponzi-like” refers to the practice of taking more and more investor money to pay false “returns” to existing investors. In the case of Charles Ponzi, whose scheme first inspired the moniker, no legitimate business underlay the transfers of money.

Use of the phrase caused audible reactions of distress and disgust from some onlookers in the courtroom last week. Some of Feathers’ investors continue to question how a company could be labeled “Ponzi-like” when it maintained a portfolio of more than 60 performing investments. Some wondered if the SEC fully understood the specialty investments SB Capital made in partnership with the Small Business Administration.

The court receiver’s reports provide financial analyses that purport to assess those operations fairly. The SEC maintains that although SB Capital did carry out its stated business purpose – issuing loans using investor money – Feathers’ business spent more money than it generated, meaning that over time investor money was lost.

Stuck between a rock and a hard place

When the hearing recessed, a crowd of investors gathered in the hallway outside Davila’s courtroom, peppering the SEC’s lead prosecutor, John Bulgozdy, with questions that ranged from plaintive to indignant.

Investors already locked into SB Capital stand to lose no matter how the court rules. If Feathers committed the alleged fraud, their money has been at least partially lost. But even if he is innocent, the receiver dismantling the company has still only salvaged a fraction of the money invested, and has drastically changed the way the business operates.

The millions of dollars that remain locked in SB Capital-related accounts may start to change hands by late summer. Investors and creditors must submit claims to the receiver by May 10.

How much of the $42 million in investments may ultimately survive remains unknown, but based on the preliminary forensic accounting, investors like the Los Gatos couple may expect to recover 50 to 75 percent of their money.

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