Tue09022014

News

A flood of candidates seek seats on high school board

Two incumbents and five newcomers are vying for seats on the Mountain View Los Altos Union High School District Board of Trustees – a significant increase in the number of candidates who have run over the past 10 years.

According to data from the Sa...

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Schools

One more candidate joins MVLA race

When longtime incumbent Judy Hannemann declined to run again, the deadline to file for the upcoming Mountain View Los Altos Union High School District Board of Trustees election was extended by a few days. Mountain View resident Sanjay Dave registere...

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Community

CSA salutes 'Hometown Heroes' at breakfast

CSA salutes 'Hometown Heroes' at breakfast


Mendoza

The Community Services Agency’s 2014 “Hometown Heroes” fundraising breakfast is scheduled 7:15 a.m. Sept. 19 at the Computer History Museum, 1401 N. Shoreline Blvd., Mountain View.

“Hometown Heroes” honors individuals and businesses for...

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Sports

No suit, no sweat

No suit, no sweat


Courtesy of the Gallagher Family
Joe Gallagher – a 12-year-old from Los Altos Hills – swims from near Alcatraz Island to the San Francisco shore. His uncle, Joe Locke, an accomplished open-water swimmer, accompanied him.

For his recent s...

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Comment

Back to school, back to thumbs: Editorial

The kids are back in class at our local schools and a new political campaign season is underway, so we have our thumbs out and ready to go.

Thumbs-up: To last week’s community workshop for rebuilding the Los Altos Community Center. The Aug. 19...

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Business

Sweet Shop celebrates five-year anniversary

Sweet Shop celebrates five-year anniversary


Ellie Van Houtte/Town Crier
The Sweet Shop at 994 Los Altos Ave. marks its fifth year in business Sept. 7. The shop is a popular after-school stop for families and students.

When Stacy Savides Sullivan opened the Sweet Shop at 994 Los Altos...

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Books

"Jack London" chronicles author's adventurous life


Much has been written about American author Jack London, primarily known for his early-20th-century Western adventure novels, including the classics “White Fang” and “The Call of the Wild.”

In Earle Labor’s biography of the literary icon, “Jac...

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People

JEFF JOHNSON

JEFF JOHNSON

Jan 10, 1967 - Aug 10, 2014

Jeff was born and raised in Los Altos. He was a graduate of Los Altos High School. He then went to Foothill College where he had an opportunity to spend 3-months in Europe through a study abroad program. That experience...

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Travel

Visiting Vancouver Western Canada's premier destination has much to offer

Visiting Vancouver Western Canada's premier destination has much to offer


Photos courtesy of TOURISM VANCOUVER
Outdoor adventures abound in and around Vancouver, including a boat excursion into Horseshoe Bay and a jaunt on the Cliffwalk at Capilano Suspension Bridge Park, among the most popular attractions in British Col...

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Stepping Out

'Water' rises in Mtn. View

'Water' rises in Mtn. View


Kevin Berne/Special to the Town Crier
Elliot (Miles Gaston Villanueva) struggles to understand Odessa’s (Zilah Mendoza) online activity in TheatreWorks’ regional premiere of the award-winning drama “Water by the Spoonful.”

TheatreWorks’ regiona...

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Spiritual Life

Spiritual Briefs

Meditation group meets at Foothills Congregational

A Weekly Meditation Practice group meets 7-8:15 a.m. Tuesdays at Foothills Congregational Church, 461 Orange Ave., Los Altos.

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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 o...

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Seeking answers, local investors remain uncertain whom to trust (2)


Photo By: Town Crier File Photo
Photo Town Crier File Photo SB Capital advertised an “easy to grasp,” “Wall Street-free” opportunity in the Town Crier.

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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