The U.S. Securities and Exchange Commission has charged the company that owns the main strip mall at Belleville Crossing shopping center and its CEO with fraud for allegedly engaging in a multiyear scheme to “misappropriate” more than $35 million in investor funds.
The strip mall, which has shown signs of neglect and mismanagement in recent years, and five of the company’s shopping centers in other cities have been in court-ordered receivership since May due to defaults on bank loans.
The SEC filed charges on Nov. 28 in U.S. District Court for the District of Arizona against Architerra Companies, described as a “complex of entities (mostly limited-liability companies) involved in commercial real estate, development and management,” based in Phoenix; its CEO, Jonathan M. Larmore; and some of the entities.
“Instead of protecting client assets, Larmore and his related entities took advantage of investor trust for his and his family’s personal gain,” SEC Asset Management Unit Co-chief Andrew Dean stated in a press release.
The agency’s complaint lists five claims, which are similar to counts in state lawsuits. It’s a civil case involving alleged violations of antifraud provisions of federal law, including the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.
The case remains under investigation, according to the press release. It’s unknown if the allegations will result in criminal charges by the FBI.
Larmore couldn’t be reached for comment.
More than 1,000 investors
Architerra Companies owns 81 retail properties in 26 states, according to its LinkedIn page and promotional materials. Larmore, 50, divides his time between Arizona, Indiana and Florida.
The SEC complaint alleges that Larmore raised about $45 million from 1,045 investors for two private investment funds, beginning in 2006, but started diverting much of the money to Arciterra Strategic Retail Advisors, a company he owns with his mother, Marcia Larmore, as early as 2017.
“(Jonathan) Larmore used the (ASRA) account as his multi-million-dollar slush fund, taking money from the various entities he controlled — including from real estate holdings owned by the (private investment funds) — to pay for other cash needs of his businesses, and to fund his lavish lifestyle of private jets, yachts, and expensive residences,” the complaint states.
This mirrors claims made by four Belleville Crossing investors in May, when they filed a civil lawsuit in U.S. District Court for the Southern District of Illinois against Jonathan Larmore, his mother (identified as “Marsha” Larmore in that case), his wife, Michelle Larmore, two of their companies and four other executives.
The shareholder derivative complaint alleged that the defendants had been breaching their duty to properly maintain the strip mall for five years while transferring cash to pay for “exorbitant family expenses,” and that they had stopped paying dividends to 177 investors in 2019.
The complaint pointed to the Larmore family’s 12 residences, two airplanes, boats, vehicles and other “luxury toys” and accused Jonathan and Michelle Larmore of hosting “six-figure” parties, including one for their dog’s birthday.
The investors voluntarily dismissed the lawsuit, which had asked for $2 million in damages, in October without prejudice, meaning it could be refiled at a later time or in a different jurisdiction.
“We believed that the SEC was going to be coming in and filing an action, and it would have essentially halted our lawsuit,” said their Indiana-based attorney, Mark Maddox. “And we were probably going to have to refile in Arizona anyway due to a jurisdictional issue.”
Mall owner for 12 years
Belleville Crossing is on the northeast corner of the intersection of Illinois 15 and Frank Scott Parkway West. The 50-acre shopping center consists of a main “inline” strip mall of retail stores, two smaller “outlot” strip malls and several free-standing businesses, mostly restaurants.
AT Belleville Crossing IL Inline bought the main strip mall (excluding The Home Depot and Target) in 2011, according to St. Clair County records. Belleville IL Outlot 6 owns one of the smaller strip malls. Both limited-liability companies are part of Arciterra with the same Phoenix address.
For the past few years, Belleville Crossing tenants and city officials have complained about chronic problems such as tall grass and weeds, malfunctioning signs, overflowing trash receptacles, potholes in the parking lot, leaky roofs and empty storefronts. In addition, delinquent property-tax bills were sold at auction before being redeemed.
Jonathan Larmore gave up managerial duties at Arciterra in September and quickly created another limited-liability company, Cole Capital Funds, for a new “scheme” involving stock manipulation, according to the SEC complaint.
“On November 3, 2023, Larmore sought to have disseminated through a wire service a press release riddled with false and misleading statements announcing a purportedly imminent Cole Capital tender offer for WeWork shares, a transaction that Larmore did not have the actual intent or ability to execute,” the complaint states.
“Larmore mistimed how long it would take to have the press release published, and it did not go public until 5:12 p.m. EDT. Shortly after the press release was published, WeWork’s stock price increased by close to 150% in afterhours trading.
“Unbeknownst to the public, however, two days before dropping his press release, Larmore had purchased a large quantity of out-of-the-money WeWork call options that could have made Larmore hundreds of thousands to millions of dollars if the price of WeWork stock had increased significantly before they expired. Because he mistimed the press release, however, his options expired just over an hour before the WeWork stock price spiked as a result of his manipulative conduct.”
Long list of penalties
The other defendants in the SEC case are the limited-liability companies Arciterra Note Advisors II, Arciterra Note Advisors III, Arciterra Strategic Retail Advisors and Cole Capital Funds.
The complaint names Marcia Larmore, 77, and Michelle Larmore, 50, who now is in divorce proceedings with Jonathan Larmore, as “relief defendants,” meaning they aren’t being charged with wrongdoing but allegedly benefited from it. Other relief defendants are the limited-liability companies CSL Investments, MML Investments, Spike Holdings and JMMAL Investments.
The SEC is asking the court to:
Prohibit defendants from further violating security laws.
Appoint a receiver over defendant companies.
Stay pending cases and stop filings of any new bankruptcy, foreclosure or receivership actions.
Freeze assets of defendants and relief defendants.
Limit acceptance, deposit, disbursement, withdrawal, transfer or other movement of funds.
Request a verified accounting of assets by defendants and relief defendants.
Permit expedited discovery.
Order defendants not to destroy, alter, conceal or otherwise interfere with SEC access to relevant documents, books and records.
Require defendants and relief defendants to give back “ill-gotten gains” from wrongdoing.
Levy fines, as specified in securities laws.
Prohibit Jonathan Larmore from serving as officer or director of any entity with SEC-registered securities.
“Protecting investors from fraud by their financial advisers is a priority for the SEC, as is protecting the market from false press releases aimed at manipulating the stock of a publicly traded company for personal gain and leaving unknowing investors to lose out,” Dean stated in the press release.
The main strip mall at Belleville Crossing is now being managed by Trigild, a national company appointed as receiver for six of Arciterra’s shopping centers in May by the U.S. District Court for the Western District of Louisiana. Trigild had been serving as property manager since December 2022.
It’s unclear how the SEC charges will affect civil lawsuits against Arciterra by banks and investors in other cities and states or the default case that led to the receivership. First Guaranty Bank in Hammond, Louisiana, alleges that Larmore and 11 companies under the Arciterra umbrella defaulted on more than $35 million in loans, including a $8.6 million loan in Belleville Crossing’s name.