SEC accuses West Chicago businessman of $41 million fraud
In 2017, the city of West Chicago gave a "Brilliance in Business Award" to the owner of Timber Lake Apartments, for what it called outstanding achievement in health, safety and environment.
Glenn and Cordelia Mueller and their employees at Timber Lake Apartments LLC had bought and transformed the 44-year-old, 576-unit complex through repairs and renovation, but also with "a genuinely caring philosophy of compassion for its residents and staff," according to a city news release. That included partnering with Wheaton Bible and Community Fellowship churches to provide on-site educational and social services to residents, and taking kids on a multistate college tour.
But the federal Securities and Exchange Commission paints a different picture of Glenn Mueller in a Sept. 5 lawsuit. It says he and several companies he owns and runs defrauded investors of at least $41 million since 2014 in two ways: By running a Ponzi scheme where money from new investors was used, in part, to pay previous investors, and to prop up his business.
The suit, filed in the Northern Illinois District, charges Mueller and seven of his companies with selling unregistered securities in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934.
It also says he sold promissory notes to 319 "unsophisticated" investors, oftentimes senior citizens, in at least 32 states.
Mueller could not be reached for comment.
Promotional materials from Northridge Holdings LLC promised investors returns of 3% to 12%, depending on the type of investment. The money would be used to purchase and rehabilitate apartment complexes; doing so would result in higher occupancies and rents, which would pay back the investors. The investments were sometimes called "CDs," but they were not insured certificates of deposits. And he cited the church-based social services to support how well-run Northridge's properties were, according to the suit.
The lawsuit says Northridge last bought anything in 2012 -- an office building for $535,000. It has assets of $100 million and liabilities of $113 million, the suit says, with most of the properties heavily mortgaged. The six other corporations listed as defendants were essentially shells with few assets, funneling money to Addison-based Northridge, the suit says. Its books showed annual net cash and asset losses, including $1.8 million in 2017, according to the suit.
"Northridge has been propped up by a precarious foundation of new investment money," the suit states, calling Northridge "a landlord struggling to make ends meet."
The suit also accuses Mueller of using $1.7 million of investors' money for his personal stocks and options trading, and another $647,000 on loans to relatives.
It says after the SEC notified him in March about the investigation, Mueller obtained $650,000 in new investments, and persuaded two previous investors to roll over their investments.
Judge John Z. Lee will hear arguments Wednesday on prosecutors' request to have a federal receiver take over Northridge and the other companies, and seize Mueller's personal assets.
On Aug. 1, Northridge posted this note on the home page of its website: "Dear note holders and limited partnership members: In June, we sent out a letter informing you that previously scheduled distributions and interest payments were being put on hold while the inquiries and allegations by several agencies was pending. We have resumed those payments and there has been no pause in our management and daily operations of the properties. The regulators inquiries are still ongoing. We hope to resolve such inquiries."
It also posted links to complaints and orders filed in Illinois, Massachusetts, New Hampshire and New Jersey, by authorities alleging Northridge had violated laws regarding licensing of brokers and financial advisers and the selling of unregistered securities.