Tracy Smith, the former Turlock resident who was convicted of torching the Red Steer and involved in a host of shady business and investment transactions, has been charged with allegedly running a fraudulent real estate investment program in various parts of the state.
Smith is accused of defrauding more than $ 1.3 million from seven victims, according to the California attorney general’s office.
A 13-month investigation into the activities of Smith and his company, Downkicker Inc., resulted in a special indictment by a statewide criminal grand jury on 38 counts, including one count of operating a fraudulent securities system, 19 counts of securities fraud, 17 counts of grand theft and one count of elder abuse. He was arraigned Monday in San Diego County Superior Court. The alleged crimes took place in San Diego, Riverside, San Francisco, and Santa Clara counties between August 2017 and September 2018.
An investigation by the California Department of Financial Protection and Innovation found that Smith, through Downkicker, allegedly offered his private clients the opportunity to invest in various real estate projects. During this time, he presented himself as a successful investor and entrepreneur, but did not reveal to his victims the facts that his investors had a right to know, including that he and the companies he owned and ran had. filed for bankruptcy, that he had been successfully sued several times, that the Internal Revenue Service and the California Franchise Tax Board had issued liens against him for non-payment of taxes, and that his contractor’s license had expired in 2008 .
Smith is also accused in some cases of simply taking money from his clients and walking away from projects, according to the attorney general’s office. Smith also abandoned several projects, resulting in the foreclosure of these properties. As a result of his alleged fraud, Smith’s seven victims lost $ 1,363,809.80.
âInvesting can come with various risks, but getting scammed by unqualified people shouldn’t be one of them,â said Attorney General Rob Bonta. “We are grateful today [Monday] to the Investigative Office and Department of Financial Protection and Innovation of the DOJ, as well as to the United States Attorney’s Office for the Eastern District of California and the Santa Clara District Attorney’s Office for their assistance and the continuation of their partnership.
In 2014, Smith and his cousin Jeremy Britt both argued without dispute the arson charges against them following the 2009 fire at the Red Steer, which at the time was located on Golden State Boulevard in Turlock. and partly owned by Smith.
The two men were sentenced to 180 days in jail for the fire, according to the Stanislaus County District Attorney’s Office. They were also ordered to register as arsonists for the rest of their lives and had to pay compensation.
The prosecution said Smith was motivated to set the restaurant on fire because he was heavily in debt and wanted the insurance money back. He recruited his cousin Britt, who was also an employee at the restaurant, to help him.
During the preliminary hearing, Turlock Police Detective Jason Tosta said he discovered Smith had a mountain of debt, “well over a million dollars”.
Tosta testified that during an interview after the fire, Smith told him that many of the restaurant’s paychecks were rejected and that he was “bleeding dry” in an attempt to save his framing business, which was struggling with the collapsing housing market.
Tosta said he spoke to a few salespeople and business owners who said they owed Smith and / or the Red Steer large sums. A food business owner told Tosta that Smith owed him $ 58,000 and that his food was only deliverable in cash, plus an additional payment of $ 1,000. The day before the fire, food was not delivered because the money was not there, Tosta said.
Suspicion over Smith’s involvement in the fire grew when investigators learned he was seeking an advance payment on the facility. The insurance company representative told Tosta it was “absurd” because Smith would get a lot less money than if he just waited for his payment.
At a preliminary hearing for the two men, Turlock Fire Department captain Jason Bernard testified that there was a strong smell of gasoline present inside the building. Bernard testified that he found at least nine sites in the restaurant and the attic that tested positive for gasoline. He also testified that the point of origin was traced to the attic.
The same year that Smith burned down the Red Steer he was renting a Turlock house to a family, but instead of using the money to cover the mortgage he used it for other things and the family started to receive notices of default from the bank. 10 months after the start of their three-year lease.
After his arson conviction, Smith started Consolidated Reliance, an investment firm that pledged to build “200 high-quality low-income housing units in Stanislaus County.” as well as small claims and collections.
In 2012, charges were filed against Smith and Manuel Arroyo over allegations that they fraudulently obtained $ 800,000 from a 69-year-old Turlock woman for an investment opportunity that never materialized.
According to court records, the woman gave Smith and Arroyo $ 800,000 to invest in a large plot of land in Atwater that would become the home of a racetrack, housing, restaurants and other businesses.
The woman said she was promised she would get back $ 912,000 within eight months of her investment. Instead, she was paid $ 3,500 over an 18-month period, according to court records. She told the investigator that she obtained the money by taking out home loans on some of her properties and because she had not been repaid, two of the properties had been foreclosed. The 69-year-old received handwritten notarized notes promising return on her investment and profits.
These charges were ultimately dropped against the two men.