Rathbun Realty must pay $1 million to creditors

Homeowners, tenants doubt realty company has the assets
2013-07-13T00:00:00Z Rathbun Realty must pay $1 million to creditorsEmily Bregel Arizona Daily Star Arizona Daily Star
July 13, 2013 12:00 am  • 

Karen and John Lewis own a rental property in Solano Estates and are owed $16,000 by Tucson-based Rathbun Realty, the massive property-management company that declared bankruptcy last fall.

But the Washington-state-based couple - clients of Rathbun for a decade - is not optimistic about recouping their losses, despite this week's order from the U.S. Bankruptcy Court that Rathbun pay almost $1 million to 300 creditors.

"There's a long list of creditors, and it's unfortunate. But we, as the owners of the home, who have suffered the most, are kind of at the bottom of the list," Karen Lewis said in a phone interview Friday. "I don't think we'll see a whole lot."

Rathbun, which managed nearly 800 properties in Tucson before losing its license in February, was ordered this week to pay $950,000 to creditors after filing for Chapter 7 bankruptcy in September. A Chapter 7 filing - liquidation bankruptcy - allows the debtor to sell nonexempt property and transfer the proceeds to creditors.

Bankruptcy law determines who gets the first crack at that money: Those involved with administrative expenses of the estate - like attorneys, Realtors and those involved in recovering estate assets - are first on the list. After that come company employees and then deposit-holders, including tenants and homeowners, said Isaac Rothschild, attorney for the Chapter 7 bankruptcy estate.

If the $950,000 judgment were paid in full, all creditors would likely get what they are owed. But that's unlikely considering Rathbun's resources, Rothschild said.

"It's my anticipation that they just don't have that many assets," he said.

The bankruptcy settlement is the latest in a string of difficulties for Rathbun and its owners.

In February, the Arizona Department of Real Estate revoked the licenses of designated brokers George Glover and Cassandra Arnold and their two companies - Rathbun Realty and Rathbun Property Management - in part due to "failure to keep records, perform accountings, respond to complaints and respond to the department's request for documents." Rathbun Realty President Bette Glover's broker's license were revoked in 2006 for trust account irregularities.

That followed a cease-and-desist order from the Arizona Department of Real Estate in September 2012 for trust account irregularities.

Rathbun reported to the state last fall that an internal audit revealed its trust accounts were $1.8 million short but failed to respond to the state's requests for records when the state tried to conduct its own audit, the cease-and-desist order said.

In August 2012, the Glovers filed a police report saying a former employee had embezzled money from its trust accounts that held rent and deposit payments that go to the company's clients. At the time, Rathbun's Bette Glover said the company was committed to paying back its clients. But soon after, Rathbun filed for Chapter 7 bankruptcy.

A criminal investigation into the embezzlement charges is ongoing. The FBI is leading the inquiry and the Tucson Police Department's fraud unit is assisting, said Sgt. Chris Widmer, spokesman for the police. FBI spokeswoman Jennifer Giannola said she could not comment on an ongoing investigation.

Adam Bleier, criminal defense lawyer for the Glovers, said his clients would not comment for this article.

Victims of the company's closure include local tenants who have not gotten back their security deposits.

Tucson resident Denise Wiebers lost her $1,000 security deposit when she and her three daughters moved out of a two-bedroom Star Pass condo managed by Rathbun. Wiebers said Bette Glover assured her in August she'd get her deposit back. But the next month, Rathbun filed bankruptcy. Wiebers has not been able to reach the Glovers since.

"I kind of came to the realization that I'm never going to see that $1,000 again," Wiebers said. "When I left, we cleaned that place so nice because I needed that security deposit back. I don't even know if anybody ever went and looked at it."

Contact reporter Emily Bregel at ebregel@azstarnet.com or 807-7774. On Twitter: @EmilyBregel.

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