An Anointed Son, A Reporter Scorned
The financial crash was ten years ago this fall. It seems like yesterday. The meltdown was the inevitable result of the Federal Reserve keeping interest rates too low for too long, enticing one and all into real estate and stocks. The low rates also sent those with cash to invest in higher yielding (riskier) assets just as Alan Greenspan and his successor Ben Bernanke had hoped.
Dana Gentry’s “The Anointed Son: A True Story of Greed, Power and Blind Trust” is a book, not about low rates, but high ones. While the prime lending rate was 4 percent in 2003, Las Vegas real estate developers would borrow at rates of 12 percent up to 15 percent in pursuit of cashing in on the real estate boom.
I eagerly awaited Gentry’s book and was not disappointed. I could not put it down. However, readers should know “Anointed Son” is very much an inside Vegas baseball book. For those of us in the real estate or lending business at the time, every page produces someone you likely knew or have heard of.
Gentry’s anointed son is Jeff Guinn, progeny of then-governor, the late Kenny Guinn, who was the focus of veteran Las Vegas political reporter Jon Ralston’s book, “The Anointed One.” To tangle the web further, Gentry was producer of Ralston’s TV show until Ralston buried his knife (metaphorically) in Gentry’s back near the end of her story.
The author stitches together deposition and court transcripts with blog posts and Las Vegas Sun articles she wrote contemporaneously as the Vegas boom turned to bust and Guinn’s misdeeds were exposed. Gentry’s story is rich with drug abuse, police and political corruption, failure to fulfill fiduciary duties, and even child abuse. What is lacking is boomtime context illustrated by the company having two jet airplanes despite most all loans originated being in Las Vegas, conspicuous consumption of Guinn driving a Maybach, and an office party atmosphere that included drug sharing in the office.
Jeff Guinn owned and operated Aspen Mortgage, arranging high interest loans (hard money) primarily for real estate developers and speculators. Funding came from individuals seeking higher yields on their money than their bank would pay. Investors’ funds would collectively be secured by first trust deeds on real estate, or in some cases, second trust deeds.
Many of the loans were for construction and thus, investors’ collateral was based on as-completed project values. These loans also contained interest reserves in the budget and so investors would receive an interest check each month from funds they had loaned. Although the author demonizes both practices, there is nothing unusual or untoward about about either custom.
However, when interest reserves ran dry and projects weren’t completed, instead of starting foreclosures and guarantors being sued, more loan funds were extended in hopes the market would recover. It didn’t. Lawsuits ensued, providing the narrative for Gentry’s story.
While Guinn’s father was in Carson City being a very popular governor, his name was used by Aspen to raise loan funds. Guinn’s not-so-blind trust was in each and every deal, at least for a few hours or days. The governor even had an office at Aspen, yet was never there.
While governor, Aspen brokered $300 to $400 million in loans a year. Many investors, writes Gentry, “admit now that they were lulled into a false sense of security by the Guinn name or their personal relationships with Kenny and Dema [his wife], not to mention the portrait of the governor hanging in Aspen’s office.” Gentry quotes an investor who said “Kenny and Dema were on all the loans. Who thought anything could go wrong investing with the governor?”
Meanwhile, the governor’s son was reportedly ingesting a hundred prescription pain pills a day, and would spend a month in rehab.
The author sees Guinn Senior as a numbers man who should have seen the crash coming. However, while he may have had a firm grasp of the state’s budget numbers, he was not clairvoyant. Neither were Fed chairs Greenspan and Bernanke.
Greenspan said in 2002, “The ongoing strength in the housing market has raised concerns about the possible emergence of a bubble in home prices. However, the analogy often made to the building and bursting of a stock price bubble is imperfect.”
A few years later in 2005, when asked about a housing bubble the Fed Chair Bernanke dismissed the notion, “Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize…”
The author herself becomes the story in the second half of “Anointed Son.” The owner of the Las Vegas Sun (Gentry’s employer), Brian Greenspun, who happened to have the same attorney as the subject of her book, demanded she drop the story.
Guinn sues Gentry to name her sources (Aspen investors) and learns about “litigation privilege.” She explains, “it amounts to a license to lie--technically, it’s a privilege to not be liable for factually untrue information--in the one place where truth is supposed to prevail: the courtroom.”
Ultimately the case goes to Nevada’s highest court. The Las Vegas Review-Journal reported, “Gentry had received a subpoena to testify in an ongoing defamation lawsuit filed by Jeff Guinn and Aspen Financial Services against investors in his company who appeared on Ralston’s program.”
The Nevada Supreme Court sided with her.
After the real estate market collapsed, Jeff Guinn and his wife filed Chapter 7 bankruptcy. One of his investors, who was Gentry’s key source, Donna Ruthe, would file suit claiming bankruptcy fraud. The trial was two years ago.
Why did Aspen investors lose money? Were they victims of the crash or ripped off by a fraudster? Ms. Gentry believes she knows the answer.
The visiting judge from Alaska, evidently, is not so sure. He has yet to rule.