General Crime

* Gary Lynn Mountain pleaded no contest of defrauding investors

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A South Bay man is due to be sentenced in Santa Clara County Superior Court on Dec. 15 to five years in prison for defrauding investors in two failed real estate projects of $1.2 million. Gary Lynn Mountain, 61, pleaded no contest before Superior Court Judge Philip Pennypacker in San Jose on July 25 to five felony counts, including securities fraud for failing to tell investors material facts and grand theft of the funds entrusted to him.

Deputy District Attorney David Ezgar said Mountain admitted during the plea to taking $1.2 million from 16 Bay Area investors for two projects in Coos Bay, Ore., in 2005 and 2006 and causing the investors to incur a “total loss” of that amount. The plea agreement calls for Mountain to be sentenced by Pennypacker on Dec. 15 to five years in prison, Ezgar said.

Mountain has been in custody since he was arrested in Costa Rica and transferred to the United States in September 2009, Ezgar said. The prosecutor said Mountain formerly lived in Cupertino and San Jose at various times but went to Costa Rica after learning that the investors had notified authorities about his activities.The investors included employees of Mountain’s mortgage company, California Star Properties Inc. of San Jose; clients; and fellow members of his church, Bethel Church of San Jose, Ezgar said.

The two projects were the renovation and expansion of a commercial building, for which Mountain took $950,000 from investors, and the conversion of a former hospital to luxury condominiums, for which he took $250,000, according to the criminal complaint filed against him. Ezgar said the commercial building turned out to be “beyond repair” and was demolished by Coos Bay officials in 2010.

Mountain failed to tell investors that both a private architect and a city building inspector told him in 2005 that the structure was substandard and unsafe, Ezgar said.”The investors were kept in the dark regarding the fair market value of the property and the condition of it,” Ezgar said. “This is not a case of the real estate market dropping. It’s a case of a building being unsafe and beyond repair and not telling investors about it,” he said. In the case of the condominium project, Mountain failed to tell investors he had a final balloon payment due on a $650,000 building loan within a year, Ezgar said.

Mountain defaulted on the loan in 2007.Ezgar alleged Mountain embezzled the money he received and said he is not aware of any plans for investors to get their money back.”He’s depleted the funds,” Ezgar said. The five charges to which Mountain pleaded no contest were two counts of securities fraud for making untrue statements to investors and failing to tell them material facts, one count of grand theft and two counts of offering unregistered securities for sale. Mountain’s defense attorney, Anupam Sharma, of Redwood Shores, was out of town on vacation today and was not available for comment.

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