American Spectrum Realty Inc., a real estate investment-management company that operates self-storage facilities under the 1st American Storage brand, recently filed for Chapter 11 bankruptcy protection in Texas, while the firm is also in the middle of involuntary bankruptcy proceedings in California. U.S. Bankruptcy Judge Scott C. Clarkson, presiding over the California case, has merged the two cases after threatening American Spectrum’s lawyers with civil contempt and a $50,000 fine, according to the “Houston Business Journal.”
Clarkson called the Texas filing “a blatant attempt to forum shop and control the orders of this U.S. federal bankruptcy court,” according to the source.
The California case began earlier this year when funds managed by Dunham & Associates Investment Counsel Inc., an investment adviser and broker to the Dunham Mutual Funds, alleged that American Spectrum owed more than $20 million to the funds’ investors. American Spectrum CEO William Carden is accused of “misappropriating funds, improperly co-mingling assets and engaging in improper self-dealing," according to court documents.
The documents indicate third-party witnesses have alleged Carden “paid himself $400,000 from the sale of one of the debtor’s managed properties, which should have been distributed to investors," and former employees have testified that Carden charged “large amounts” of personal expenses to his company credit card, the source reported.
The bankruptcy cases are the latest in a string of organizational problems for the company. American Spectrum filed for Chapter 11 bankruptcy protection on its Texas headquarters last September in an effort to keep a limited partner from taking control while the property was for sale. The company also has had issues staying compliant with NYSE Regulation Inc. to keep its listing on the New York Stock Exchange. The firm received six non-compliance notices between August and September last year, with the latest for failing to file its Form 10-Q quarterly financial reports on time.
Headquartered in Houston, American Spectrum is a real estate investment, management and leasing company that owns self-storage, office, retail and multi-family interests across the United States through an operating partnership. The company has been publicly traded since 2001.
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