Finance operator in Marin sued by creditor for bankruptcy plan

A creditor involved in a significant bankruptcy case regarding a San Rafael lending operation has taken legal action to halt the discharge of the debt owed to them. David Robert Stone, operating as Cornerstone Financial Services, filed for Chapter 7 bankruptcy on April 15. This specific chapter of the bankruptcy code pertains to the sale of a debtor’s nonexempt assets and the subsequent allocation of the proceeds to creditors. Stone’s liabilities exceed $70 million, while his assets amount to approximately $24.9 million. Of note, a significant number of his creditors are residents of Marin County.

One creditor, Janet Simkins, who resided in Novato with her husband Harry Simkins for over two decades, decided to sue Stone in bankruptcy court to prevent the discharge of his debt. In addition to this action, Simkins is seeking more than $1 million in compensatory damages along with an unspecified sum in exemplary damages. She has accused Stone of engaging in fraudulent activities, larceny, and elder abuse by convincing her and her late husband to invest in excess of $1 million in his business, with a considerable portion originating from her retirement account. Following Harry Simkins’ passing in 2003, Janet Simkins now resides in San Diego County.

Stone, however, has refuted these allegations, contending in a motion to dismiss Simkins’ complaint that the theory of fraud presented is implausible. Nonetheless, his bankruptcy filing is under heightened scrutiny from another creditor, Robert Vogl of Fairfax, who revealed that the bankruptcy trustee appointed an attorney from the U.S. Department of Justice to collect evidence regarding the case’s potential referral to the U.S. Attorney General’s Office.

Legal documents have also indicated that the U.S. Securities and Exchange Commission issued subpoenas to Columbia Bank, previously known as Pacific Premier Trust, to obtain documentation related to securities issued by Cornerstone Financial Services and linked entities – Stoneway Capital Corp. and Calzona Truck Sales Inc.

Cornerstone Financial Services, as depicted on its website, emphasizes the ability to invest retirement funds through its “self-directed IRA facilitator, Pacific Premier Trust.” Simkin’s lawsuit specifies that she invested over $550,000 from her self-directed retirement account into Stone’s business through Pacific Premier Trust. Similarly, Vogl, who invested $450,000, is among approximately 60 “secured” creditors, with 20 of them hailing from Marin County. The total claims by secured creditors amount to more than $62.8 million, with roughly $12.6 million in loans as collateral owed to Cornerstone.

Simkins’ legal action outlines Stone’s strategy of enticing investors with appealing marketing materials and promising returns and security associated with investments in Cornerstone Financial Services. Stone’s response contends that the funds garnered from investors were utilized to procure “big rig” trucks leased out to truckers nationwide. Investors would obtain a 10% interest on their contributions, while Stone would execute finance agreements with lessees that were irrevocable and spanned up to three years. If a lessee defaulted, the trucks were repossessed, and either re-leased or consigned to Calzona Truck Sales, based on the truck’s condition, with finance agreements pledged as collateral to private lenders.

More clarity on this situation should emerge as the case progresses in the U.S. Bankruptcy Court for the Central District of California in Riverside. Ultimately, the legal proceedings and outcomes will shed light on the veracity of the allegations leveled against Stone and the resolution of the debt owed to affected creditors.