Realtor to Repay Plan for Bad Real Estate Investment

Pursuant to a consent judgment entered into by the Department of Labor (DOL), the Portland-based Georgetown Realty Inc., the company’s owner, John Mahaffy, and the Georgetown Realty Inc. Profit Sharing Plan and Trust, will pay $420,127 to the plan for losses due to imprudent real estate investments directed by Mahaffy. In addition, Mahaffy is barred from serving any employee benefit plan covered under the Employee Retirement Income Security Act.

An investigation by the DOL’s Employee Benefits Security Administration found that, from 2005 to 2007, Mahaffy used the plan’s assets to purchase property to develop it into a resort, known as the RiverGate project. The project involved purchasing parcels of land overlooking the Crooked River and the Meadow Lakes golf course in Prineville, Oregon.

By the end of 2008, Mahaffy had spent most of the plan’s cash and sold off most of its securities to fund RiverGate. Mahaffy’s actions left the plan with more than 80% of its assets in the RiverGate project, an illiquid investment. The project failed, the lenders foreclosed on the plan’s properties throughout 2009 and 2010, and the plan participants lost substantial retirement assets.

The DOL filed a lawsuit, Perez v. Georgetown Realty Inc. (civil action number 3:12-cv-01164), in the U.S. District Court for the District of Oregon.