1) In 2006, Garlock purchased a partially occupied commercial building in Oakland for $14 million using no money of his own and a risky loan from a bank. He began marketing the building to investors for $24 million by misrepresenting its occupancy and financials. 2) Garlock also purchased the adjacent run-down property and created a fraudulent parking agreement that inflated the value of the first property by millions on paper. 3) Garlock sold nearly all of the first building by 2007, raising $24 million, and operated it as a Ponzi scheme by using new investments to pay old investors rather than properly managing the property. The fraud ultimately unraveled in 2008.

1. 1500 Broadway & 1538 Broadway, Oakland
In June, 2006 Garlock and his old friend and “consultant,” Michael Conte, who in 2004
had to surrender his broker's license and was operating without one, purchased 1500
Broadway for $14,060,000.00 – using none of their own money. The building was only
about 45% occupied.
United Commercial Bank was somehow convinced to loan Garlock $12 million for the
deal at a very risky loan-to-value ratio. The “As-Is” version of the appraisal by Garlock's
longtime friend Ken Matlin of Cushman-Wakefield valued the property at $15.2 million
(warning of a marketing period of about 12 months), while the “Hypothetical Condition”
version appraised it at $17.6 million, assuming 100% occupancy within 3-12 months.
Half the remaining $2M purchase money Garlock raised with a $1 million seller carry-
back second deed of trust, which was not recorded until after close of escrow. It was
probably done this way so that the bank would not discover it. Several different Garlock
properties have recordings that were late or invisible (on title reports), in a manner that
suited Garlock's purposes. Millie Espino, a former escrow officer at North American Title
Company has been accused of collaborating with Garlock.
Garlock borrowed the other million from short-term lenders who received notes at 25%
interest, representing that they would be secured by second deeds of trust on the property.
The deeds were never recorded, but Garlock paid off those loans with investor funds.
MARKETING FRAUD: While still in escrow, Garlock and Conte began marketing the
building to investors for $24 million. Their prospectus (in several versions, which touted
the property as 95% to 100% leased) showed purported existing and projected financial
data which misled investors to think the property income was almost double what the
tenants were actually paying.
THE 1538 BROADWAY SCAM: Garlock also purchased the run-down building next
door, which had no parking space. As part of his marketing for 1500 Broadway, Garlock
created an “Ingress/Egress and Parking Easement and Cost-Sharing, Construction and
Restrictive Use Agreement” between the 1538 and 1500 Broadway properties, whereby
1538 was to pay 1500 Broadway $12,000 per month for parking in Year 1, escalating to
$21,000 in Year 3. This phantom money inflated the value of 1500 Broadway by
millions. The investors never received copies of the easement document, though it was
recorded, so they remained ignorant of its terms, which were astonishingly onerous. The
easement payments were to stop after five years, and upon sale of 1500 Broadway, all
those payments had to be repaid, in addition to an “easement fee” amounting to five
years’ worth of payments.
PONZI SCHEME: From summer 2006 through 2007, Garlock sold off nearly 99% of the
building to investors, raising almost $24 million altogether, while he managed the
building and the finances “creatively.” New purchase money covered the negative cash

2. flow and paid the 8-percent return to the earlier investors – the classic Ponzi tactic. New
money also paid off his $2M in down-payment loans. Millions in later investor money for
1500 Broadway left the building altogether and went to his wife Rosie’s entity Karlo,
LLC, and to a $700,000 “consulting fee” paid to Garlock & Co., which Garlock claimed
at deposition was only “for tax purposes.”
GARLOCK-STYLE MANAGEMENT: Garlock found only one new tenant, for the
fourth floor. The remainder of the building was never leased. Property and business taxes
eventually went unpaid and accrued with penalties. Yet Garlock’s construction company,
2G Corporation, took hundreds of thousands in “construction management fees.” A
million dollars in “premiums” and “construction coverage” were paid to his new
insurance company “Credit National Bermuda,” which he claimed in deposition was
created “for tax purposes.”
THE PLOT UNRAVELS: In deposition Garlock later admitted that he had been
commingling investor funds and tenant rents to pay other investors who had nothing to do
with 1500 Broadway. By the summer of 2008, when he could no longer find enough new
investors to cover all the costs of this and the other properties he was mismanaging, he
stopped paying the investors of 1500 Broadway. The investor-owners began to
investigate, and to uncover the pervasive fraud. Their investment survived shakily until
July 21, 2011, when the bank loan matured and the owners received notice of non-judicial
foreclosure.
Alameda County Superior Court, Case RG09448171, Hutchings, et al. vs Garlock, et al.,
filed April 21, 2009.