Ventura-based developer Ronald W. Hertel has filed for personal bankruptcy, listing assets of $591,000 and debts of $118.4 million, likely signaling the final chapter in the spectacular collapse of his business empire.
At his peak, Hertel claimed large stakes in homebuilder R.W. Hertel & Sons, private jets, vineyards and a thoroughbred horse ranch. He tried but failed to purchase a 130-foot yacht.
Along with business partner Bob Fowler, Hertel built more than 1,100 homes throughout the region. The business collapsed in the summer of 2008 when the company’s cash flow dried up and it couldn’t pay its bills.
Reached by telephone, Hertel declined to elaborate on his personal Chapter 7 filing, saying the document “speaks for itself.”
In early 2009, three small creditors forced R.W. Hertel & Sons into an involuntary bankruptcy proceeding. During the proceeding, creditors filed only $2.8 million in claims, and the bankruptcy trustee was able to locate only a few thousand dollars in assets before the case was closed.
What came out in hearings was that Hertel and Fowler controlled a heavily compartmentalized empire, with nearly every development and venture held in a separate LLC.
Under oath during the R.W. Hertel & Sons proceedings, Hertel told U.S. Trustee Sandra McBeth that money flowed freely from that company’s accounts for everything from plane payments for the duo’s charter flight business to mortgages on homes they owned to the attempted yacht transaction. But the accounts were always settled, he told the trustee.
“It’s possible a check has been written by R.W. Hertel & Sons with the expectation that [the yacht’s holding company] would reimburse them,” Hertel said at the 2009 hearing. “It happened occasionally.”
Ultimately, what tied together most of the duo’s business ventures were personal guarantees that Hertel and Fowler made on the debts.
“In the development industry, one has to put their personal assets on the line,” Fowler told the Business Times in a 2010 interview.
In 2010, Fowler filed for personal Chapter 7 bankruptcy, which entails liquidating assets to repay creditors, listing assets of $4.8 million, most of which was Fowler’s personal home in Santa Margarita, and debts of $127.6 million.
By the time Fowler filed his personal bankruptcy, the planes and many of the duo’s other assets were in the process of being sold or returned to lenders. “I’ve been working for the last two years to mitigate as much of it as I could,” he said at the time of his filing.
Fowler’s $127.6 million in debts were all discharged and the cased closed in 2011.
On April 8, Hertel filed his own personal Chapter 7, listing relatively few assets and a staggering $118.4 million in debts.
The largest single creditor is Point Center Financial, an Aliso Viejo-based hard money lender listing a $30.2 million claim. Point Center is headed by Dan Harkey, the husband of State Assemblywoman Diane Harkey.
R.W. Hertel & Sons donated $5,000 to Diane Harkey’s unsuccessful 2005 bid for state senate, according to campaign records, a little more than a year before Point Center started making loans to Hertel.
Point Center’s investors are suing the company and the Harkeys in a $43 million fraud case that is now playing out in Orange County Superior Court, according to reporting in the Orange County Register.
Point Center did not return a request for comment.
The second largest single creditor was Ventura-based Affinity Bank, which loaned Hertel $18.2 million. Affinity Bank, owned by then-Montecito resident Stephen Adams, was shut down by regulators in 2009, about a year before Adams defaulted on a major gift to Westmont College. Another now-failed institution, IndyMac Bank, loaned Hertel $4.3 million.
San Francisco-based California Mortgage Realty loaned Hertel $14.5 million, First Bank & Trust of Newport Beach lent $9 million and East West Bank lent $8.7 million.
The rest of the debts include loans from banks throughout the the Tri-Counties. Paso Robles-based Heritage Oaks Bank is owed $2.4 million, Mission Community Bank lent $2.6 million, Ojai Community bank is listed at $750,000 and Rabobank is owed $500,000.