As the hundreds of people who powered Ken Mattson’s real estate acquisitions struggle with lost monthly income and the possible erasure of their retirement funds, the indicted investment adviser and his wife continue to live in a 6,000-square-foot home behind a locked gate on Castle Road, overlooking the city of Sonoma.
The contrast is a source of deep resentment among the investors, many of whom met Mattson in church circles and welcomed him into their homes to hear his financial pitches.
They may get vindication. Ken and Stacy Mattson’s bankrupt former company, KS Mattson Partners, which is now administered by Robbin Itkin, a court-appointed neutral party, has moved “to pursue all remedies available under applicable law” to gain possession of the Castle Road estate — including eviction.
Itkin has asked the judge overseeing the bankruptcy case, Charles Novack of the U.S. Bankruptcy Court of the Northern District of California, to begin that process by waiving the automatic stay that currently locks most of the company’s finances in place.
“A person of good conscience would not continue living in a multimillion-dollar home for free while the victims of his alleged fraud wait for recoveries,” lawyers representing KS Mattson Partners, known as KSMP, wrote in a Nov. 25 motion.
They believe they have legal recourse.
The 50-acre property, which has an estimated value of more than $6 million, is owned not by the Mattsons, but by KS Mattson Partners, formerly controlled by Ken and Stacy.
Prosecutors have accused Ken Mattson of orchestrating a “classic Ponzi scheme”, and he was indicted in May on nine counts of wire fraud, money laundering and obstruction of justice. Before KSMP declared bankruptcy in June, “its assets were used as instruments of that fraud,” according to the lawyers now running the company.
The courts are working to maximize KSMP’s holdings for possible recovery by defrauded investors. The Castle Road property is among the most valuable of those assets. And the Mattsons are living there rent-free.
RELATED: CHP: Embattled Bay Area businessman blacked out during drive that preceded August crash near Sonoma
The KSMP attorneys, at Hogan Lovells in Los Angeles, claim the home would command as much as $22,000 per month on the open market. They say the Mattsons owe more than $240,000 and climbing in unpaid rent.
Dozens of properties have been sold in a parallel bankruptcy case that got underway nine months earlier — filed by LeFever Mattson Inc., the company Ken Mattson co-founded with his former business partner Tim LeFever. Some of the proceeds are going into a trust to compensate wronged investors.
The same process is underway for KSMP’s bankruptcy. But it’s being hampered on Castle Road by the Mattsons’ occupation of the house, which prevents brokers from taking photographs and staging the property, the Hogan Lovells lawyers assert.
“They have no legal right to occupy the Property, have never paid rent, and have refused to vacate to facilitate its sale,” the motion states.
No change in Mattson’s bail
It isn’t just the Castle Road estate that’s in dispute. That parcel adjoins two others owned by KSMP, a 30-acre vineyard property listed for $2.5 million, and a 5,300-square-foot home on over 80 acres listed for $3.5 million. Nearby, on Rachael Road, is a house currently occupied by the Mattsons’ adult daughter, who is also not paying rent, according to the KSMP filing.
The company wants access to all of them, and is taking steps to remove the daughter as well.
A real estate broker approved by Novack has been in contact with two interested buyers, both of whom want to purchase all four sites, according to the motion.
That document is one in a flurry of recent court filings, across multiple bankruptcies and Mattson’s criminal case, that have begun to box the Sacramento County native into a corner.
The same day that KSMP initiated action on the Castle Road properties, the judge in the criminal case — Jon Tigar of the U.S. District Court for the Northern District of California —denied Mattson’s request to modify the terms of his bail.
When Mattson was charged in May with seven counts of wire fraud and one count each of money laundering and obstruction of justice, a magistrate judge set his bond at $4 million, secured for the most part by two real estate properties.
One of them is a stately house on La Salle Avenue in Piedmont, owned by Stacy Mattson. Ken Mattson’s attorneys have argued that the couple should be allowed to sell the property and use the money to fund his legal defense. They frame it as a 6th Amendment issue, which gives every citizen the right to counsel.
Tigar previously denied the request, twice. The first time, he said Mattson failed to demonstrate an inability to pay his attorneys. The second time, it was because Mattson presented no evidence that the bankruptcy court would approve the sale of the La Salle property, which has messy ownership records.
Tigar’s most recent rejection got to the heart of Mattson’s argument.
“The Court finds no basis to conclude that the Sixth Amendment prevents a court from imposing financial conditions for pretrial release that encumber assets that a defendant might otherwise use to hire counsel,” the judge wrote in his order.
Mattson’s criminal lawyer, Randy Sue Pollock, did not respond to a query about whether she would challenge that ruling.
Next up: a tussle over a federal subpoena.
On May 22, 2024, following his arrest by FBI agents, Mattson handed over his laptop at the Oakland offices of his lawyers at Fennemore Law, which represented him at the time. Prosecutors subsequently found that digital files had been deleted. Now a grand jury has subpoenaed Fennemore for copies of those files, and for any records that might identify who at the law firm was responsible for transferring them.
Mattson wants to quash the subpoena, arguing the grand jury order was issued primarily to gather evidence for pending litigation — an improper use of the legal tool, Pollock wrote. A hearing is set for Dec. 19 in Tigar’s courtroom.
Unified front starts to fracture
As Mattson is targeted from without, fractures have also begun to form among groups of investors seeking to recover the money they say he stole from them.
One of those cracks showed up Oct. 7, when a pair of family trusts that had invested in Live Oak Investments LP — one of the 60 partnerships established under LeFever Mattson — signaled their intent to wrest control of Live Oak from the parent company, and to replace the LeFever Mattson legal counsel with their own, Thomas P. Kelly III.
They accused LeFever Mattson of distributing more than $2.3 million to itself from the Live Oak accounts following the sale of a Vacaville apartment complex in September 2024, without paying any of the fund’s other partners.
Forensic accountant Bradley Sharp, now effectively running LeFever Mattson, countered that Live Oak’s move would violate the automatic stay established under the bankruptcy. The two family trusts moved forward anyway.
Novack, the bankruptcy judge, sided with LeFever Mattson in a Nov. 20 order. Ten days later, Kelly appealed on behalf of Live Oak Investments.
While that was playing out, the Chase Family Trust on Oct. 28 filed its opposition to the settlement agreement the creditors committee in the bankruptcy cases reached with the largest single creditor, Socotra Capital, the private lender that financed the at least 77 of Mattson’s real estate buys.
The settlement gave Socotra the ability to foreclose on 22 of those properties. One of them is an office park at 414 W. Napa St. in Sonoma, which Dr. John Chase, a retired orthopedic surgeon, and his wife Susan helped purchase. The family argues that LeFever Mattson and the committee should pursue litigation, rather than deciding “to look the other way.”
The Chase Trust’s losses are estimated at $6 million to $11 million, according to their legal filing, which would make them one of LeFever Mattson’s biggest individual investors.
A week after filing that opposition, the Chases filed another, this time against the LeFever Mattson bankruptcy liquidation plan.
They called the plan’s disclosure statement inadequate in numerous ways, and complained that the bankruptcy has already racked up an estimated $25 million in professional fees paid to lawyers, accountants and real estate professionals.
Finally, a group of investors representing at least 16 households filed a Nov. 12 challenge to the procedures for settling investor claims. They are collectively referred to as “the Tillman Opposing Investors,” after Ruth Tillman, a former LeFever Mattson employee and investor who lives in Sonoma Valley.
The Tillman group wants the liquidation plan guiding the compensation process to be voted on before individual payouts are are offered. Doing both things in parallel, as the plan’s authors have proposed, would “put the cart before the horse,” the Tillman group said, and is likely to result in wasted effort.
Underlying this disagreement is the payment formula endorsed by the creditors committee. The Tillman group says it favors longtime, “legacy” LeFever Mattson investors, to the detriment of newer investors, because it subtracts dividend payments received in a recent seven-year period but ignores years of monthly payments that came earlier.
The creditors committee opted to analyze only those seven years because older bank records have been purged, it has said.
Attorneys for the committee and the bankrupt companies filed a rebuttal Nov. 25, arguing that investors should see what’s slated to come to them before voting on the plan, and noting that the hard work of calculating has already been done. Breaking up the claims process will delay final distributions by more than three months, the committee estimated.
You can reach Phil Barber at 707-521-5263 or phil.barber@pressdemocrat.com. On X (Twitter) @Skinny_Post.