United Development Funding IV fka UDFI

[Enterprising Investor]

Grapevine’s United Development Funding offers investigation that refutes fraud claims (5/17/16)

By Steve Brown

A Grapevine investment and lending firm that’s been under federal scrutiny says an independent investigation by Dallas law firm Thompson & Knight finds no wrongdoing.

United Development Funding has been accused by a Dallas hedge fund investor and investigated by federal agents over claims of fraud.

UDF halted trading of one of its real estate investment trusts earlier this year after federal agents seized documents at the company headquarters.

The shut down of the United Development Funding IV came after Dallas’ Hayman Capital said the firm of mishandled investor funds, overstating the value of its assets and making improper loans to developers.

UDF officials have denied Hayman’s claims that the company was running a “billion dollar house of cards” and a “Ponzi-like real estate scheme.”

UDF said Tuesday that its audit committee composed of three of its independent directors in December hired Thompson & Knight to perform “a rigorous and exhaustive review of allegations made by Hayman Capital Management L.P. and others.”

The directors are Steven J. Finkle, J. Heath Malone and Phillip K. Marshall.

While UDF did not disclose all the details of the investigation, it said the “team searched over 1.7 million e-mails and reviewed thousands of documents.”

It said that the study by Thompson & Knight showed “no evidence of fraud or misconduct on the part of the trust, its management, or its advisor.”

The company went on to say that there was “no evidence of deception, no evidence that auditors were misled, and no evidence that efforts were made to defraud investors.”

However, UDF did say that the forensic accounting and legal research “did identify areas to be considered for remedial action.”

Thompson & Knight representatives confirm that they did the investigation of UDF IV’s operations at the bequest of the firm’s audit committee. The Dallas law firm provided no further details.

A spokesman for UDF said that Thompson & Knight was not hired by the firm and does not represent the firm in ongoing legal matters. “They did this at the request of the independent trustees,” said Jeff Eller.

He said the company has still not hired a full-time outside independent auditor.

The real estate investment trust also has not yet filed its 10-K financial statements for 2015.

UDF is facing multiple shareholder lawsuits. And company officials say they were called to give testimony to a federal grand jury.

http://bizbeatblog.dallasnews.com/2016/05/united-development-funding-says-investigation-refutes-claims-against-grapevine-firm.html/?_ga=1.255738440.1528246408.1462720517