Equity Based Services (EBS), a San Diego-based private real estate company specializing in the acquisition and management of self-storage properties, has been accused by some of its investors of mismanagement and fraud, according to a report by “The San Diego Union-Tribune.” EBS, along with chairman Howard Kaplan and his son Stephen Kaplan, CEO, have been named in several lawsuits during the last few years, alleging excessive fees, commingled funds between different storage projects and the raising of more money than necessary for acquisitions.
Some investors have accused EBS of being set up like a Ponzi scheme, alleging the excess capital was used to pay off investors involved in other projects who were told they would receive a preferred rate of return, according to the report.
Several suits have been settled out of court, some with confidentiality agreements prohibiting plaintiffs from speaking about their settlements, the Union-Tribune reported. Former investor Scott Rogers filed suit in 2010 alleging fraud and telling prosecutors he believed investor losses could exceed $100 million. Rogers and his family reportedly invested $5 million and lost 80 percent of it. He reached a confidential settlement, according to the source.
Attorney Michael Lipman, who represents both Kaplans, told the Union-Tribune the complaints were from a small group of disgruntled investors who are trying to gain control of EBS. According to Lipman, EBS is not a Ponzi scheme because the money was invested in actual businesses.
The company’s self-storage portfolio did well for investors until the real estate collapse and Great Recession, Lipman said, adding that excess capital raised was used to cover costs beyond the purchase price and was disclosed in investment documents. “All fees were disclosed up front,” he said. “And that’s what the money was used for.”
EBS began acquiring self-storage properties in 1995, reaching a height of about 70 facilities in a dozen states operating as American Mini Storage. The Kaplans would like to create a publicly traded real estate investment trust with the remaining properties that would give investors company shares in exchange for their existing interests, but struggle for control of the company has delayed that plan, Lipman said.