Garlock bought the Feather River Village mall using $5 million from investors, promising a high rate of return. However, the mall was not fully leased as claimed and was losing money. Garlock stopped making payments to investors and on the property's mortgage. The investors lost their $5 million investment and one lost her home and piano, having to work as a grocery checker. Garlock is accused of fraudulently misrepresenting the property and siphoning funds for his own benefit.

1. Feather River Village
(From the legal complaint)
In the autumn of 2007, Garlock bought the Feather River Village retail mall in Oroville,
near Sacramento, using about $5 million of investor money, and apparently none of his
own. The original owners Margaret Scheinman, Melvin Scheinman, and Alyce McLeod
participated in the deal, and are co-defendants with Garlock in the lawsuit.
PROMISES
Garlock represented that the mall, which consisted of a number of stores and restaurants
in 38,000 square feet of rentable space, was worth $10 million, using an appraisal made
by an appraiser allegedly operating in collusion with the owners. He also said that it was
fully leased to about 23 lessees occupying essentially 100 percent of its rentable space.
Three units were purportedly leased for five years to an affiliate of Garlock’s.
Garlock promised a rate of return of 9% to 15%, depending on the individual investor. He
represented that the property produced sufficient cash every month to cover expenses and
the payments to the investors, providing financial statements and analysis of the values of
various leases to plaintiffs. Among other income, Garlock and the owners claimed that an
easement permitting access to the adjoining parcel would pay the investors $869,000 over
five years.
CRUEL REALITY
A prominent local real estate agent was hired by the owners as sales agent, but was
terminated when he refused to tell prospective purchasers that they could not view all
parts of the property, and refused to conceal negative facts.
In fact, the mall was not fully leased, and the leases with Garlock LLC entities were a
sham since they intended neither to occupy the property nor pay rent. About 6,000 square
feet were unusable due to mold and lack of improvements, which Garlock did not redress
despite his promises. At the time of offering, it was not even generating sufficient cash to
service its mortgage and other operating expenses.
MODUS OPERANDI
The investors’ lawsuit claims that in this case and numerous others, Garlock would first
purchase plaintiffs’ properties pursuant to a Starker Exchange, thus acquiring all of their
real estate. He persuaded the investors to re-invest those proceeds with him, permitting
him to acquire their properties for no cash outlay. After the investors purchased the
property, Garlock eventually quit paying association dues, quit paying taxes, ceased
making payments on the mortgages, and quit paying the investors.

2. SIPHONING MONEY
Garlock's wife and fellow defendant Rosemarie Garlock, the primary shareholder of
Karlo LLC and other business entities, is accused in the lawsuit of siphoning revenue
from the mall owners’ operational and loan accounts for the benefit of her husband and
his business entities. She is also accused of moving money in and out of the various
accounts in order to make the funds difficult to trace, to evade income taxes, and to
deprive plaintiffs of their equity in the property.
THE END
Garlock had raised about $5 million from six investors, promising to keep and invest
millions into this rehab shopping center, but didn't bother. He must have had better use
for those millions, so he stopped paying the owner-investors in early 2008. The loan went
into foreclosure with Bank of the Orient and the investors were completely wiped out.
One of them, a former music teacher who had previously enjoyed a comfortable
retirement, has lost her beloved Steinway grand piano and her house and is now working
as a checker in a grocery market.
San Mateo County Superior Court: Ella Thomas et al. vs. Margaret Scheinman, Melvin
Scheinman, Alyce Macleod, William F. Garlock, et al. Case #CIV509160, filed Oct. 20,
2011