The champagne and glitz of an event held at a tony wine bar in New York City on Feb. 21 to announce the kickoff of a Montauk resort joint venture became a painful hangover this week when the Securities and Exchange Commission charged an Old Westbury financier who had sought to save the Panoramic View Oceanside Resort from foreclosure in a $74 million fraud case.
On Monday, the S.E.C. filed charges against Brian Raymond Callahan, a financial advisor, claiming, among other things, that he bilked at least two dozen investors in order to funnel $21.8 million to the Montauk resort owned by his brother-in-law, Adam Manson. Mr. Manson’s company Distinctive Ventures acquired the oceanfront property on Old Montauk Highway through a stock transaction in 2007. Mr. Manson told The Star in 2007 that the acquisition differed from a fee-simple land purchase in that control was achieved via the purchase of all outstanding shares in the Panaramic View cooperative. Following the purchase, Distinctive Ventures began a major renovation to turn the buildings there into luxury cooperatives. The property boasts more than 60 units in two, three, and four-bedroom villas, duplexes, and triplexes ranging in size from 2,000 to 4,000 square feet.
According to a 2008 article in The East Hampton Star, a four-bedroom villa there sold early that year for $4.1 million, but with the sharp downturn in the real estate market since then, the project was “facing foreclosure,” according to the S.E.C. complaint filed in federal court in Islip.
The complaint alleges that Mr. Callahan promised his investors “that their money would be invested in liquid assets, but instead diverted it to the Panoramic View “and in return received unsecured, illiquid promissory notes.” The S.E.C. also claims that Mr. Callahan used some of his investors’ money “to pay other investors and to make a down payment on the $3.35 million unit he purchased at his brother-in-law’s real estate project.”
According to a statement from the S.E.C., Mr. Callahan operated five offshore investment funds through his firms Horizon Global Advisors Ltd., and Horizon Global Advisors L.L.C. Where the Panoramic View was concerned, the commission claims that in return for diverting funds to the resort, he received “unsecured, illiquid promissory notes,” and used them “to hide his misuse of investor funds.”