Wayne Pierce never knew the rodeo clown who died.
Nevertheless, a rodeo clown’s funeral put the developer in a
position to forever change the face of the South Valley, and to
alter the lives of hundreds of Native Americans. Who is this
unknown man that has forged a multi-million-dollar pact with local
Indians to unlock 6,500 open acres just west of San Benito County
for development?
Wayne Pierce never knew the rodeo clown who died.
Nevertheless, a rodeo clown’s funeral put the developer in a position to forever change the face of the South Valley, and to alter the lives of hundreds of Native Americans. Who is this unknown man that has forged a multi-million-dollar pact with local Indians to unlock 6,500 open acres just west of San Benito County for development?
To many Amah Mutsun Indians, Pierce represents the tribe’s greatest hope of achieving a decades-old dream: gaining federal recognition and reclaiming Sargent Ranch, thousands of acres of rolling hills and streams where their ancestors fished, hunted, and raised families.
To several dozen investors who have followed the mortgage banker into high-risk land deals, Pierce is a man deeply in debt. In the last seven years, various combinations of those investors have advanced him at least $35 million against the Sargent Ranch property while foreclosing on another project, according to bankruptcy filings and county land records.
To a group of less forgiving investors, Pierce is one culprit in a failed Contra Costa County land deal that cost them nearly $40 million. They have sued Pierce and his associates for fraud and negligent misrepresentation. He has thus far escaped those charges as part of a bankruptcy settlement, but may still be called to account for millions of the missing dollars.
To state and federal authorities, Pierce is one of many developers involved in one of the most abusive land scams in recent California history. The FBI, the Internal Revenue Service, the Securities Exchange Commission, and a host of state authorities have targeted David Fitzgerald – the man Pierce recruited to orchestrate the Contra Costa deal known as Roddy Ranch – for securities fraud. Authorities estimate that Fitzgerald’s schemes throughout the state have cost investors more than $250 million.
And to his former friend and business partner Jack Roddy, a rodeo hall-of-famer and by all accounts a genuine cowboy, Pierce is the man who entangled him in a real estate deal that cost him nearly all of his 2,200-acre ranch. Worse, it sullied his good name.
“That’s more important than anything to Jack,” said his lawyer Clem Glynn. “It’s more important than the money.”
Pierce has declined to conduct phone interviews, but in an e-mail response to inquiries he countered that he is as much a victim as the people who lent him money and partnered on his deals. He wrote that he simply wants to help a band of landless Indians reclaim their rightful heritage. He credits his wife, who has been seriously ill for six months, with changing his perspective on life and business.
A year before the couple met, the pieces of the current development proposal for Sargent Ranch began falling into place.
Amah Mutsun tribal leader Irenne Zwierlein first heard of Pierce in May 1999 at a wake in Sacramento for beloved rodeo clown Benny Bennifield. His death drew out a host of veterans from the rodeo circuit, including Zwierlein’s husband, Harold, who spent three decades as a rider and farrier, and his longtime friend Jack Roddy, a one-time world champion steer wrestler.
“My husband and Jack were small-talking from the car to the casket,” Zwierlein said, and Roddy commented: “By the way, Harold, my cattle are grazing at Sargent Ranch.”
Roddy knew of her Indian heritage, and Zwierlein could tell the rodeo star was “trying to harass” her with a sly remark.
“I just jumped in his face and said, ‘Jack, that is my ancestral homeland,’ ” she recalled. He laughed and stood back awhile, before asking her more about the tribe’s connection to the land.
“He kept coming over … as he thought of more questions,” Zwierlein said. “The funeral was an all day thing.”
The memory stuck in his mind, because Roddy brought the issue up again the following year at a livestock show.
“Roddy comes up to me and says, ‘Hey, I know somebody that owns the Sargent Ranch,’ and he walks away,” Zwierlein said. “He comes back and whispers in my ear and walks away again.”
In his playful way, Roddy was hinting about Wayne Pierce, a developer he had teamed up with to transform his ranch in northeast Contra Costa County into a lucrative real estate project.
The secret pact
Pierce and Roddy first met through a mutual friend in 1997, when the rancher was looking to refinance his land to avoid foreclosure, Pierce wrote. As a mortgage banker, Pierce thought he could help find new lenders for Roddy. But after failing to find anyone willing to invest, Pierce decided to buy a 70 percent stake in the property, purchasing a majority share in Sept. 1997 for more than $6.3 million, according to county land records. Together, Pierce and Roddy envisioned building a championship golf course surrounded by 1,000 homes. They dubbed the project Roddy Ranch.
Pierce had a similar vision for the hills of the South Valley. Santa Clara County supervisors had twice rejected his development proposals for golf courses and homes when Zwierlein called to tell him about the tribe’s ancestral ties to the land. In the ensuing months, she chipped away at the developer’s doubts and ultimately convinced him to invest hundreds of thousands of dollars in cultural historians, genealogists, and lawyers needed to give the Amah Mutsun Indians a fighting chance at gaining federal recognition – a notoriously complex and time-consuming process.
“Like others who are just starting to hear the tribe’s story now, at first I was skeptical,” Pierce wrote. “But the meticulous ancestral records and historical documentation my team has gathered, showed me that the land we own was indeed the ancestral land of the Amah Mutsun of the Mission San Juan Bautista Indians. As a man who is part Native American myself, I was compelled by both the way this tribe was mistreated throughout the years by the federal and state governments, as well as their persistence to forge a future that honors their heritage and builds a brighter tomorrow.”
But Pierce, who traces his ancestral roots to both the Creek Indian Nation and Choctaw Indian Nation, has been promised more than just good will in exchange for helping the Indians. A secret pact formed with the tribe, first disclosed in Sept. 2004, would potentially allow him to sidestep county zoning laws and develop Sargent Ranch.
Since the late 1990s, Santa Clara County supervisors have rebuffed three attempts by Pierce to rezone the land to permit hundreds of hillside homes and two golf courses. Existing zoning does not allow either use. In 2001, Pierce withdrew his last application to amend county zoning in the face of clear opposition from county supervisors.
“From my perspective, I think it’s premature to do anything out there,” said Santa Clara County Supervisor Don Gage, whose district includes Sargent Ranch. “I’m concerned because it’s going to have a significant impact – if you’re building the kinds of homes that he wants – on our schools, our roads, on our resources. That’s just too far out. Development needs to occur in the city first, not in the county… I’m not against development, but it has to be sensible.”
If the Amah Mutsun gain federal recognition, that decision will be out of local hands. An economic plan submitted to the Bureau of Indian Affairs as part of the tribe’s application for acknowledgment describes an arrangement that would crack open the door to development of Sargent Ranch. As part of the plan, Pierce would provide the tribe with 3,500 acres of land and $21 million to build a cultural center. The tribe would keep 500 acres to build homes and lease back 3,000 acres to Pierce, allowing him to develop. The entire deal hinges on the tribe gaining federal recognition and placing the land in trust, under the governance of tribal law.
For the moment, Pierce said he has shelved his earlier plans for a golf course and homes at Sargent Ranch. Instead, he is considering “senior housing ranging from active adult living to congregate care facilities.” But even those plans, he says, take second seat to his main goal of helping the Amah Mutsun “secure the recognition they deserve.”
It remains unclear, however, if a trail of bankruptcies and spiraling debt will affect Pierce’s ability to make good on that promise. Since 1998, he has leveraged the Sargent Ranch property for tens of millions while fending off investors of the Roddy Ranch project, according to bankruptcy filings, county land records, Pierce, and other sources.
Sargent Borrowing
A Danville-based mortgage company called First Blackhawk Financial Corporation has figured prominently in both the Roddy Ranch and Sargent Ranch deals. Pierce was listed as a real estate broker with the company until his license expired in Oct. 2004, according to the California Department of Real Estate.
First Blackhawk and varying combinations of its investors loaned Pierce more than $30 million using Sargent Ranch as collateral, according to Santa Clara County land records. The loans included:
n Nearly $4 million in 1998 to enable Pierce to buy majority ownership of a portion of Sargent Ranch
n $3.5 million in May 2000 to buy out a partner with partial ownership of Sargent Ranch. The deal was part of a bankruptcy case involving the property.
n $15 million in May 2000
n $10 million in Nov. 2000
Pierce also borrowed $3 million against Sargent Ranch in 2003 from a different set of lenders, bringing total borrowing against Sargent Ranch to at least $35.5 million.
First Blackhawk and its investors also followed Pierce into the Roddy Ranch deal. Nearly $40 million was raised for that project, but so far only the golf course has been constructed. County politics have prevented the construction of homes, the most lucrative aspect of the project.
According to bankruptcy filings, First Blackhawk and its investors hold more than $10 million in senior claims on Roddy Ranch. If the property is liquidated before the land is developed, they get repaid before any of the people who later bought up the $40 million in bonds.
A bankruptcy settlement approved last month avoids that outcome, which could spell big losses for bondholders. Instead, the settlement provides First Blackhawk and the bondholders equity shares in a new group that has taken over the project. As part of that settlement, Pierce lost control over Roddy Ranch and any potential profits – conditions required by the bondholders.
Pierce declined to discuss the details of the Sargent borrowing, which took place as Roddy Ranch spiraled toward a July 2002 bankruptcy. He denied shifting any of the Sargent Ranch money to Roddy Ranch. He also denied using any of the $40 million in Roddy Ranch bonding to sustain operations at Mare Island Golf Course in Vallejo, yet another project saddled with debt.
According to bankruptcy filings and county land records, First Blackhawk foreclosed on the Mare Island project sometime around 2000, after Pierce began defaulting on payments to a golf course construction company and other vendors.
Greg Griffin, president of First Blackhawk, did not return repeated phone calls for comment.
Roddy Ranch and David Fitzgerald
The problems that led to the Mare Island foreclosure didn’t hold a candle to the financial disaster that took place at Roddy Ranch. From the start, the project was a gamble.
When Pierce and Roddy joined forces in 1997, development-happy cities like Antioch and Brentwood – in the East Bay between Walnut Creek and Stockton – were in a tug-of-war with Contra Costa County supervisors worried about “leapfrog” development. Roddy’s 2,200-acre ranch was a focal point in the debate, lying just outside the cities’ borders but inside the urban limit line – the farthest edge where development could occur.
At the time, county supervisors were debating whether or not to redraw the line. If the developers could convince officials to retain the project within the urban limit, the roll of the dice could be worth more than $40 million, according to appraisals later provided to investors.
As the development debate heated up, Pierce set about arranging financing for the project. He ultimately recruited David Fitzgerald, a securities dealer “he had met through a mutual friend,” according to an IRS investigation of the deal.
Fitzgerald and his Alameda company, Pacific Genesis Group, had come up with a complex financing scheme that allowed developers to fund real estate projects with bond money. The scheme pushed the limits of a California law known as the Marks-Roos Bond Pooling Act of 1985.
The law was originally designed to enable cities to come together to raise funds for hospitals, schools, and other public projects they may not have been able to finance on their own. The Marks-Roos law allowed two or more public agencies to form a Joint Powers Authority and issue bonds.
Under Fitzgerald’s creative vision, the Marks-Roos law was used to form roving JPAs that were composed of agencies that, in some cases, were hundreds of miles apart.
When Fitzgerald formed the Roddy Ranch Public Financing Authority in 1998, it was initially made up of the Merced County Board of Education and the City of San Joaquin. More than 65 miles separate the two cities and neither are within 90 miles of Roddy Ranch.
For signing onto the deal, the City of San Joaquin and Merced School District were to receive $100,000 and $520,000, respectively, according to the IRS investigation. A Merced school district administrator confirmed the city profited from the arrangement, but would not specify how much the district received. An attorney for San Joaquin said the city pulled out of the Roddy deal before ever collecting its fees, but said the city received funds in similar land deals also involving Fitzgerald.
Over the course of four “bond” issuances from 1998 to 2000, Fitzgerald would take millions in underwriter’s fees without shouldering any of the legal liability for the debt, according to the IRS investigation of the Roddy Ranch PFA.
“It appears that the Authority represents nothing more than a ‘rent a city/agency’ scheme designed and controlled by the underwriters and bond counsels,” according to IRS documents. “The ‘rent a city/agency’ design worked because the members received a portion of the proceeds with little cost and without risk to the city/agencies … The Authority was used as a vehicle to improperly finance private loans on a tax-exempt basis and enrich various participants to the transactions.”
Pierce told the IRS that he was unaware of the legal and tax issues surrounding the Roddy PFA, according to the IRS findings. In his e-mail response, Pierce said the “red flag” came in 2000, after the Roddy PFA had issued its fourth round of bonding. By that point, the developers had borrowed $38.5 million, according to bankruptcy filings.
Dave Tanner, whose consulting firm designed the Roddy Ranch golf course and initially worked on a course for Sargent Ranch, served on the board of directors for the Roddy PFA. He said his employees were among the first to notify Pierce and Roddy of trouble.
“I think we were the ones who discovered it and pointed out things on the (bond) statements, like Fitzgerald was paying $500,000 for a construction management company that we never heard of,” Tanner recalled. “We demanded – and had to threaten a lawsuit – to get the records (from Fitzgerald). Once we obtained those it was pretty obvious that there were some things wrong. We were able to bring in another bond specialist who said the financing structure was illegal … Then Fitzgerald disappeared.”
Elsewhere in the state, the securities dealer and his roving JPAs had drawn the attention of state and federal authorities. In Dec. 2000, the U.S. Securities Exchange Commission sued Fitzgerald to prevent him from issuing any more bonds related to a similarly structured real-estate project in Southern California, known as Rancho Lucerne. That scheme ultimately led to the suspension of his broker’s license by state and federal authorities, and an additional lawsuit to recover any “ill-gotten gains” from more than $83 million worth of bonds.
At the same time the Roddy PFA’s status came into question, Contra Costa County supervisors struck a death blow to the project. In late 2000, they voted to redraw the urban limit line to specifically exclude Roddy Ranch. The shift left the developers with a partially constructed golf facility and no immediate chance of developing the homes, the sale of which were to provide the funds needed to repay investors.
Merchant Land Fund I LLC, an entity created by Pierce to hold title to Roddy Ranch, ultimately filed for Chapter 11 protection in July 2002. Last month, after a drawn out and highly publicized bankruptcy, creditors signed off on a reorganization plan that excludes Pierce from active participation in the future of the project.
“The Roddy Ranch situation took $3,000,000 of my money and 7 years of my life and did not put one single penny in my pocket,” Pierce wrote in his e-mail response. “In the end, I stepped aside and agreed not to take a single penny at the close of the plan of reorganization, to insure that every investor in this project would be protected. Roddy Ranch is a great project and the bottom line is that I got involved with a company, Pacific Genesis, that was providing bogus financing throughout the state of California.”
Lingering suspicions
“Fitzgerald orchestrated this scheme by selling bonds,” agreed Jack Roddy’s lawyer Clem Glynn. “A good chunk of that money never found its way to the property. It found its way to Mr. Fitzgerald, and Mr. Fitzgerald has found his way to who knows where.”
Glynn confirmed that Roddy has cooperated with the FBI in an investigation of Fitzgerald. The FBI said it does not have a warrant out for Fitzgerald’s arrest. The bureau does not comment on active or closed cases, however, so it remains unclear if they are still investigating Fitzgerald. Sources speculated that he could be in Turkey or Israel, where he is believed to share a home with his wife, an Israeli citizen.
Bud Byrnes is one of the Roddy Ranch investors hoping to get repaid. As a bond broker and former state technical advisor on bonds, he was aware of the high risks involved in Fitzgerald’s deals. Yet he suggests that he, too, fell victim to Fitzgerald, and in more ways than one. In addition to awaiting returns on several hundred thousand dollars worth of bonds from the Roddy Ranch project, Byrnes is now fending off a lawsuit related to bonds he sold for another project orchestrated by Fitzgerald.
“The Roddy Ranch deal in particular – and the roving JPAs in general – were one of the worst misuses of public finance in the state of California,” Byrnes said. “If we can get through the wreckage of these deals and put this behind us, that’s the best that I can hope for.”
Pierce himself has not been the target of any criminal charges, but his legal travails may not have ended with the Jan. 14 bankruptcy settlement.
“Mr. Pierce is the one who procured Mr. Fitzgerald and presented this opportunity to Mr. Fitzgerald – an opportunity that everyone acknowledges resulted in major theft by Mr. Fitzgerald,” Glynn said. “We will be looking at what extent, if any, Mr. Pierce profited by procuring that opportunity.”
Glynn said another “matter of concern” is a series of transactions between various Pierce-controlled entities and more than a dozen investors.
Similar concerns were raised by Susan Uecker, a court-appointed financial manager responsible for overseeing the Roddy Ranch project while in bankruptcy court. In Dec. 2004, she filed a lawsuit on behalf of bondholders against Pierce and more than a dozen First Blackhawk investors common to both the Roddy and Sargent projects. The suit accused them of “fraudulent” and “preferential” asset transfers in the months leading up to the bankruptcy.
Pierce said the transfers were necessary to protect land titles from David Fitzgerald. He said all land titles were eventually transferred back to Merchant Land Fund I LLC, the entity that ultimately filed for Chapter 11 protection.
At this point, the lawsuit alleging fraud has been dismissed as part of the January settlement. But Glynn said Roddy, who now finds himself with just 40 acres of his ranch and little money to show for it, is contemplating a lawsuit against Pierce and his associates for a full accounting of their pre-bankruptcy transactions.
“As far as a relationship with Mr. Pierce, this experience and a number of things that have happened in connection with it have caused Mr. Roddy to have a very negative view of Mr. Pierce,” Glynn said. “We are currently, as lawyers, evaluating possible avenues of recourse for the financial harm that Mr. Roddy has suffered as a result of his association with Mr. Pierce.”
Amah Mutsun leader Irenne Zwierlein, meanwhile, said she has found a man who is “like a brother” to her.
She was unaware of the $35 million in borrowing against Sargent Ranch, which exceeds the $25 million valuation of the property contained in the tribe’s economic development plan.
Yet Zwierlein did not appear concerned: “I know that when he turns it over to us it has to be debt-free.”
She and Pierce talk “Monday through Friday,” although they speak less frequently as of late, she said, as Pierce focuses on his wife. Marci Pierce was diagnosed last summer with neural uropathy, a life-threatening disease affecting the spine and brain.
As he seeks to emerge from a financial and legal quagmire and copes with his wife’s illness, Pierce presents himself as a man reborn. The credit goes to his wife, “who is not only my soulmate,” he wrote, “but has in fact been the greatest influence in my life with her compassion, understanding and caring and who single-handedly has changed who I am and how I deal with life and business.”
Scheme planned for Sargent Ranch
A high-risk real estate scheme now banned throughout California appears to have been headed for Gilroy, where in May 2000 developer Wayne Pierce established the Sargent Ranch Mutual Water Company.
Pierce created a similar water utility in Contra Costa County to serve as one leg of a public financing authority, or PFA, later found to be in violation of state securities laws. The Internal Revenue Service made that determination after the Roddy Ranch Public Financing Authority issued $40 million in bonds to finance a golf course and 1,000 homes in the East Bay, between Walnut Creek and Stockton.
The Roddy Ranch PFA represented one instance of a complex financing scheme used by developers throughout California to fund real estate projects. The scheme pushed the limits of a California law known as the Marks-Roos Bond Pooling Act of 1985.
It was originally designed to enable cities to come together to raise funds for hospitals, schools, and other public projects they may not have been able to finance on their own. The law allowed two or more public agencies to form a Joint Powers Authority and issue bonds.
“I believe it was going to be the intent to follow the same type of path with Sargent Ranch,” said Dave Tanner, a golf course consultant who served as chief executive officer for the Sargent Ranch water company.
“There were one or two meetings that took place but nothing ever really materialized,” he said.
Tanner also served as board member on the Roddy Ranch Public Financing Authority, an entity created in 1998 to raise bond money for the project. Over its four year life, that entity was comprised of Roddy Ranch Mutual Water Company and two other public agencies.
The Roddy Ranch water utility listed Pierce’s personal secretary as the CEO and secretary and his mother as chief financial officer, according to bond statements and records from the Secretary of State. In 1999, the developer’s mother, Peggy, took over as secretary and a third person filled in as CFO, according to corporate filings.
The Roddy Ranch water company was created to step in for the City of San Joaquin, which resigned as a member of the Roddy Ranch PFA toward the end of 1998. In 1999, a state law took effect requiring publicly financed projects under the Marks-Roos law to lie within the geographic area of at least one member agency. The Roddy Ranch water company helped the agency meet the letter of the law after San Joaquin resigned.
The Merced County School District, meanwhile, stayed on as the second leg of the financing authority. The school district, which lies more than 100 miles from Roddy Ranch, was promised $520,000 for participating in the financing scheme.
The entire deal was orchestrated by David Fitzgerald, the man Pierce recruited to raise money for the Roddy Ranch project.
In May 2002, the IRS found the Roddy Ranch PFA to be little more than a ‘rent a city/agency scheme … to improperly finance private loans on a tax-exempt basis and enrich various participants to the transactions.” In July 2002, the state suspended the corporate licenses of both the Sargent Ranch and Roddy Ranch mutual water companies.
Pierce said he was unaware of the legal issues surrounding the Roddy Ranch PFA, according to IRS documents. In an e-mail response to inquiries, he wrote that he became aware of such issues in early 2000, “when it was discovered that Mr. Fitzgerald and his companies were being investigated by the Securities Exchange Commission.”
State and federal authorities ultimately revoked Fitzgerald’s broker’s license for a similarly structured deal in Southern California. The securities dealer is believed to have left the country, and authorities are still trying to recover “ill-gotten gains” for investors who purchased more than $83 million in bonds from Fitzgerald.
According to corporate filings, Pierce established the Sargent Ranch Mutual Water Company in May 2000. The water utility was registered at 321 Kishimura Drive, in a warehouse in the corporate park a few blocks northwest of the Gilroy Premium Outlets. Pierce was registered as the managing agent.
“The Sargent Ranch Mutual Water Company, as far as I understand, is not a valid entity,” Pierce wrote. He added that Sargent Ranch LLC, which he created to hold title to the land, “has no current involvement with, nor will it have any future involvement with, this entity.”
State lawmakers eventually plugged up the loopholes allowing such financing schemes, estimated to have cost investors more than $250 million. But it was county officials who ultimately sealed the fate of the Roddy Ranch and Sargent Ranch projects. In late 2000, Contra Costa County supervisors worried about “leapfrog” development redrew the urban limit line to prevent home construction on Roddy Ranch. Around the same time, Santa Clara County supervisors made clear they would not rezone Sargent Ranch to allow development of golf courses and hundreds of hillside homes.
The Roddy project recently emerged from bankruptcy court with a new group of owners, who hope to complete the development within the next five years.
Meanwhile, Pierce has joined forces with the Amah Mutsun Indian Tribe to unlock the development potential of Sargent Ranch, although he says he no longer wishes to build golf courses and homes. The entire deal hinges on the tribe gaining federal recognition and placing the lands under the governance of tribal law. To date, Pierce has invested hundreds of thousands of dollars in that effort.
