The first thing visitors notice when driving through the iron gate of the 972-acre Circle H Ranch just west of Missoula is an emptiness. Large earth-toned homes rise up from the rolling hillside, but after the first few "clusters," the roads turn empty and abruptly end. Circle H developers originally planned 76 upscale homes here at the portion of the development called "the Ranch," a gated enclave that lies two miles from Lolo National Forest. Only 24 were built. Those homes sold for upwards of $750,000 at the real estate market's peak. Today, they are valued at roughly $300,000.
To the south of "the Ranch," back toward Interstate 90 along Butler Creek Road, an open gravel pit sits where developers said nearly 20 years ago that they would build an equestrian center. The stables never came.
Farther south, inside Circle H's proposed "West Pointe" subdivision on Macarthur Drive, there's more empty space where homes were supposed to be built. The hillside is exposed not far from a downslope home; a retaining wall was never constructed, leaving the adjacent house vulnerable to soil erosion. Signs advertising lots and homes for sale dot the snowy ground.
Cal Pickens stands inside the living room of a house on Macarthur Drive and, gesturing at the panoramic view, talks up the development like he has so many times before.
"On a clear day, you can see to Idaho," he says.
The Circle H Ranch owns this home. Pickens, a 58-year-old attorney based out of New Mexico, uses it as his Missoula office. Over the years, he's acted as a real estate pitchman and an advisor for the Circle H developers, primarily the New Jersey-based Circle H managing partner, Howard F. "Buddy" Seale.
"My relationship really is an arms-length advisor to him," Pickens explains.
On this chilly afternoon before Christmas, Pickens wears a light purple shirt with suspenders and a flower print tie. His mustache is tidy and his white hair combed back. Pickens, who says he owns property in several states and one foreign country, offers a primer on the interpersonal dynamics among the Circle H stakeholders before launching into the nitty gritty of the development's financial problems.
"You're not going to make friends being involved in this," he says. "It's so polarized that everybody thinks there's a side—there is one side, and there is no other side."
It's natural that there would be strong feelings. Circle H homeowners and investors have lost a significant amount of money and equity on the development. Pickens, for one, says he has cash in the project, though he won't disclose how much, aside from saying that it's "quite a bit."
He's just one of many. The story of the Circle H involves a convoluted paper trail that includes multiple lawsuits against developers, one felony theft prosecution, thousands of dollars in back taxes owed to Missoula County and an alleged securities fraud of historic proportions.
All of that has culminated with Wells Fargo now moving to foreclose on the Circle H. The bank says the development defaulted on a $5.7 million loan in 2009. With fees and interest, the Circle H owes more than $9.5 million. If the partners don't come up with the cash, Wells Fargo says in its foreclosure filings that it wants the property sold at auction.
There's more to the story of the Circle H than just unsavory financial dealings, however. The embattled development reveals a cast of characters chasing big dreams that have now been tainted by broken promises.
"It's too bad," says Circle H investor Ralph Swinburne, "because it could have been the greatest story in western Montana."
During the Great Depression, Howard Raser came to Montana with cash earned working as an auctioneer selling off properties that had been foreclosed on in Iowa, Nebraska, Oklahoma and Kansas. His goal when he reached Big Sky Country was to build a ranch where he could raise Appaloosa horses.
Originally from Nebraska, Raser stood a lean 6 feet 1 inch tall and, with his high cheekbones, cut a handsome figure. His grandson, Jay Raser, says that people were naturally drawn to him.
"He had a twinkle in his eye," Jay says.
Charisma is a good quality in an auction house owner. Such men acted as the investment bankers of the day, charged with handling what was at the time many a Montanan's most important investment—livestock.
Howard Raser first settled in Bozeman before making his way in the 1940s to Missoula, where he bought the Missoula Livestock Auction Company. He ran cattle across multiple county lines and, over the years, grew a livestock empire.
Part of that empire included a sprawling property west of Missoula blanketed with lupine, camas and bunch grasses. Raser saw it as the perfect place to fulfill his dream of continuing the Appaloosa horse bloodline. But a stroke in the mid-1970s made it harder for him to raise the horses he loved and tend to his businesses.
After Howard Raser's death in 1984, the ranch went to his three grandchildren. When the family opted to sell eight years later, Jay Raser, who is an architect and had served for several years on the Missoula Consolidated Planning Board, helped oversee the transaction.
"One of the first people that wasn't local, but out of state, that was interested in this property was this group out of New Jersey," Jay Raser recalls.
Howard Raser's grandchildren agreed to sell the land for $1.25 million to the four New Jersey partners: Howard "Buddy" Seale, Howard Seale Jr., Jeff Howard and Regina Hague. They named their new property the "Circle H" because all of the partners had Hs in their names.
Raser remembers the summer after closing the deal when Howard Seale Sr. and his partners came to Missoula and walked the rolling property together. "They asked me what my ideas were," Raser says. "I explained to them how I thought the property should be developed."
First and foremost, Raser wanted to minimize the development's impact on the natural environment. He talked about "smart growth" before it became an industry buzzword. The partners hired Raser to be the Circle H project manager.
In slick mailers, the Circle H billed the project as "Missoula's first and only 'Ranch Preservation Residence.'" To lure wealthy out-of-state residents, the brochures painted a picture of wild yet tranquil beauty. The literature compared the scenery of the Circle H and its surroundings with images from iconic films such as A River Runs Through It, The Horse Whisperer and Lonesome Dove.
New homeowners would be awarded a maroon bag that prominently featured the development's logo and was filled with a Circle H polo shirt, a cap and a copy of the subdivision's 23 pages of covenants that govern everything from where mailboxes may be placed (clustered rather than dispersed) to how clotheslines could be hung.
Raser advocated for clustering the new homes, better to preserve native grasses and wildlife habitat. Owners granted a conservation easement to Five Valleys Land Trust to protect the North Hills elk herd, which uses the Circle H as a winter calving range. Whitetail deer, fox, coyotes, black bears, bluebirds, meadowlarks, hawks, great horned owls and ducks also roam the Circle H.
Since the whole idea was to create the feel of a ranch, Raser arranged to continue a longstanding lease agreement with neighboring rancher Paul Hanson, who for years had run his cattle on the property. Potential Circle H residents were wooed with promotional materials that said, "Expect cattle will be freely grazing on the ranch in the late spring to early summer months."
As for the horse stables, they would be scattered across a 90-acre lot. Residents would be allowed to board up to two horses. Even the animals would live the good life; their stalls were to be attached to partially covered outdoor corrals.
"It was upscale," Raser says.
Elected officials and conservationists lauded the plan. Former County Commissioner Barbara Evans proclaimed in a 1994 Missoulian article, "I've been here since Noah came over on the ark. But I have never seen a finer subdivision before us."
Raser says he devoted a significant amount of time and money to the project because he'd witnessed too many poorly planned developments fail. In 2000, when the first Circle H residents moved in, he wanted to ensure that they, along with his friends, neighbors and family, could be proud of what Raser had helped create.
"I didn't want them—or my family—to be embarrassed with what happened," he says.
Talking on the phone from his automotive service shop in Summit, N.J., 71-year-old Howard "Buddy" Seale remembers how he fell in love with Montana. It happened while he and friends came west to hunt mule deer, antelope and pheasant.
"We began to absorb the fabric of Missoula and it was a very pleasant thing," Seale says.
In addition to the natural beauty, Seale was particularly drawn to western Montana's laidback culture. With the Circle H, he aimed to embody "the whole idea of the romantic west...Everybody wanted to be a part of something that was very beautiful."
The idyllic vision started falling apart, Seale says, when too many of his former associates tried to eke out hidden financial gain.
"We get kicked in the teeth one time after another," Seale says. "On a personal level, it's been disappointing dealing with people out there."
Seale admits it was hard for him to keep an eye on things from New Jersey. What was he supposed to do, he wonders now, abandon the automotive business that had financially sustained him for so many years?
It was especially painful, Seale says, to learn that Jay Raser stole from Circle H. In 2007, Missoula County prosecuted Raser for stealing thousands of dollars from the project.
According to Missoula County District Court records, Raser admitted to taking gravel from the property's pit and selling it to local contractors on three different occasions. Those transactions were valued at $18,766.
Prosecutors also alleged that Raser kept a $28,000 rebate check from Northwestern Energy that was meant to go into company coffers.
Once Northwestern Energy found out that Raser cashed the check, it threatened legal action against Raser, court documents say. Raser repaid the money.
In September 2008, Raser entered what's called an "Alford plea" to felony theft charges. Such a plea isn't an admission of guilt, but an acknowledgement that the state has enough evidence to secure a prosecution.
Raser received a two-year deferred sentence. The judge also ordered he stay away from the Circle H.
Sitting at Bernice's Bakery in Missoula on an early January morning, Jay Raser can't hide his anger. Although he's years removed from his official work as project manager, he's still upset about what happened to his grandfather's land.
He says Circle H's problem is not opportunists in Missoula, but Seale and his partners. Raser calls them "extremely greedy people" who wanted to "wring every nickel out of the project."
Raser denies taking the Northwestern Energy check. As to the other allegations, he says that the partners owed him money that he had personally fronted to keep the project going. The gravel pit sales helped him recoup those losses.
If anything, Raser says it was his ideas that stood to make Seale and other investors tens of millions of dollars. "It seemed that these partners wanted to use me as the local yokel to get this done," he says.
In the Raser and Seale feud, it can be tough to glean the truth. It is clear, however, that Seale and Circle H had been accused of running out on the tab prior to Raser's prosecution.
In May 2004, former Circle H partner Jeff Howard alleged that Circle H did not abide by a severance contract crafted seven years prior. According to the lawsuit, Seale, his son and the third partner, Regina Hague, agreed in 1997 to buy Jeff Howard out of the partnership for $150,000. Circle H paid the first installment of $10,000 just after negotiating the deal, court documents say. But no other payments were made. Months after filing the lawsuit in 2004, Jeff Howard and Circle H settled the case.
Seale and the Circle H were also accused of not living up to financial commitments in 2006, when James Cozzetto, an Oregon builder who owned a company called Blue Skies Development, also filed suit. Cozzetto alleged that Seale and Circle H violated contractual obligations. According to the lawsuit, Cozzetto loaned $500,000 to the project in 2002 and helped secure $3 million in outside financing from Sterling Savings Bank.
Cozzetto, like other investors, alleged in his lawsuit that he hadn't been repaid money owed by Seale. According to a lawsuit filed in Missoula County, "Eventually Circle H stopped paying its vendors, including Sterling, and Cozzetto and/or Blue Skies were forced to begin to make payments on behalf of Circle H..."
The court ordered Seale and the Circle H pay Cozzetto $95,000 and awarded him two Circle H lots.
There have been at least four other civil lawsuits filed against the Circle H since 1999.
Ralph Swinburne, who invested $100,000 in the Circle H, was among the men from New Jersey who joined Seale on hunting trips to Montana. It was hard not to fall for the area, Swinburne says. He still has an "I love Montana" sticker on his car.
Swinburne had hoped to own a lot at the Circle H one day, but he admits it doesn't look like that will happen now. He also doesn't expect to get his money back.
"It just didn't have the right people at the helm," he says.
In the summer of 2008, RE Loans manager Barney Ng arrived in a small private plane at the Missoula International Airport from Jackson, Wyo. Seale met him at the airport and, because Ng was on a tight schedule, drove him directly to the Circle H.
"Barney was a fast and loose person," Seale says.
Ng, his brother, their father, and a fourth partner, attorney Bruce Horwitz, operated several enterprises, including B-4 Partners and Bar K Inc., that specialized in investments and mortgage lending.
Barney Ng presided over the group's lending business. Desperate for cash, Circle H saw Ng as a savior for the development. Seale and Cozzetto had entered into an agreement to build the West Pointe portion of the property, but the deal went bad and Cozzetto's lawsuit put Seale in a tough spot.
At the time, Seale says, it seemed like Ng could be trusted. Hindsight, however, provides a different perspective.
"I think that you may have considered him a predator," Seale says. "We got trapped at absolutely the worst time."
During his visit to Missoula, Ng appeared to be exactly what the Circle H partners needed. Seale found him to be detail oriented and encouraging. He sketched the terms of a new mortgage agreement on a yellow legal pad at Seale's living room table.
To say the terms were flexible would be an understatement. According to the mortgage note crafted by the California-based lender, monthly payment installments on the $5.7 million loan would cover interest only, "from time to time."
At 12 percent interest, payment in full was due within 60 months. The mortgage agreement conceded that the liberal loan terms left it unlikely that Circle H would be able to pay within the allotted time. According to the mortgage, "The payments required under this note are not sufficient in amount to reduce the principal to zero on the maturity date, therefore there will be a balloon payment equal to the unpaid principal plus all accrued and unpaid interest and other charges."
Seale says that he could have made it work.
"It sounds worse than what it is, I guess," he says. "Nobody anticipated what happened to the country... At the time, I didn't see the real threat."
There was a threat brewing in California. As Seale signed off on the mortgage, the Ng family was under scrutiny.
In 2002, RE Loans began raising money to finance mortgages through private investments. Concerns about the legality of the company's investment protocol in 2007 prompted it to stop soliciting investments.
Legal issues left RE Loans with limited cash flow. In July 2007, the company took out a $50 million line of credit from Wells Fargo Foothill, now called Wells Fargo Capital Finance. According to a civil suit filed in Alameda County's California Superior Court, RE Loans used its entire mortgage portfolio and other assets, valued at more than $700 million, as collateral.
According to court documents, Barney Ng received $2 million of the line of credit as a finder's fee for securing the Wells Fargo Loan.
Within months of taking out the line of credit, RE Loans defaulted. Wells Fargo inherited the company's long list of bad mortgages. It was valued at hundreds of millions of dollars. According to court documents, nearly all of the properties with outstanding balances owed to RE Loans in 2008 defaulted. Among them was the historic Olympia Brewery in Tumwater, Wash., and the Canyon Club, also known as the Snake River Sporting Club, near Jackson, Wyo., which defaulted on a $61 million loan.
The civil suit in California, Gordon Noble et al v Greenberg Traurig et al, was filed on behalf of 1,400 RE Loans investors and 600 people who placed money in another Ng family entity called Mortgage Fund 08. The class action plaintiffs allege that RE Loans engaged in a "Ponzi scheme" to hide its money problems from investors.
The lawsuit also claims that attorneys hired by the company and Wells Fargo "aided and abetted, encouraged, and rendered substantial assistance," further enabling RE Loans to breach its fiduciary duties.
ABC affiliate KGO TV in San Francisco reports that the RE Loans case could constitute the biggest securities fraud in the state's history. The civil suit was put on hold as RE Loans and its former managers wade through bankruptcy proceedings.
Missoula County District Court records show that Circle H's mortgage was assigned to Wells Fargo in 2008.
John Hubbard always loved horses. The idea of roaming the hills west of Missoula on horseback after retirement sounded nearly too good to be true.
"That was a real attractive thing for my wife and I," he says.
Seven years ago, they sold their University District home and moved into the 5,200-square-foot "green" home at the Circle H that Hubbard, a contractor, helped design and build.
"I thought I was building an investment up on that hill that would return to me at some point," he says.
It hasn't turned out that way. Hubbard says at the real estate market's peak five years ago, his home appraised for $1.6 million. Recently, he had a friend who works in real estate estimate the value of his home. "They came back with a certified market analyses that came in around $650,000," Hubbard says.
Hubbard understands that a variety of forces have contributed to the declining value of his home, not the least among them a fluctuating real estate market. But he can't help but see the Circle H's development woes as partially responsible.
"The big problem is we live basically on an incomplete development," Hubbard says.
Hubbard is friendly with Jay Raser. As with Raser, Hubbard blames Seale for the development's problems.
Circle H Landowners Association President Dallas Neil strikes a more conciliatory tone when discussing the project. "We know it's been tough times for developers in general," Neil says.
Neil played professional football for the Atlanta Falcons and New York Jets. He now owns Reserve Street's Lifestyle Fitness and lives at the Circle H. He says it would be nice if Seale paid his landowners dues—the landowners association has filed a lien against Seale's property for failing to do so. Neil also says that Circle H residents are not happy about the gravel pit. "If you want to talk about where homeowners are pissed, look at the gravel pit," he says. "We have contacted everybody we can to get that removed."
Ultimately, however, Neil says that the Circle H Homeowners Association is continuing to work with Five Valleys Land Trust to be a good steward of the land. "We have been able to manage the property well," he says.
Inside the West Pointe subdivision, just past the home that Cal Pickens uses as an office, the road ends abruptly. Both Macarthur Drive and the roads up by "the Ranch" feel incomplete, with pavement leading to empty lots and open land.
In 2001, the county approved 240 units for West Pointe. Seale estimates that 22 have been built.
It's hard to say who's been hurt the most by the Circle H's downfall. There are the homeowners who were promised amenities that never came to be and must hope that they recoup some value in their property. There's also Missoula County, which has a stake in the development's dealings. Circle H is currently delinquent on more than $23,000 in back property taxes.
As for Raser, he says he's trying to move on. Today, he's 64 and a self-employed architect in Missoula. During one interview with the Independent, he expressed unease at the prospect of having the theft charges aired publicly. He completed a deferred prosecution agreement in 2010 and the case was dismissed. He's got a good reputation in this town, he says. He's not a criminal. Plus, he lost money just like many others, including his original $50,000 investment.
Seale estimates that the Circle H Partners are out roughly $3 million thus far. All of the money generated by the project, Seale says, went back into the development. He makes a point to emphasize that the lawsuits and allegations from people like Raser don't reflect the broader reality—the fact that the Circle H has pumped a significant amount of money into the Missoula economy. With a little help, he says it could again.
"We're still hoping we'll persevere," Seale says.
Over the years, Seale has accumulated 10 filing cabinets full of Circle H plans, diagrams and charts. The project, along with the myriad personal and legal skirmishes, has consumed a significant part of his life. "It's such an upsetting thing," he says. "You stand to lose a lot of your money, a lot of your dreams. You get so pressured that your head starts to spin."
Aiming to protect the remaining Circle H partners from bill collectors, Seale initiated bankruptcy proceedings in May 2012. Months later, he aborted the bankruptcy because he still wants to salvage the project. He's currently trying to negotiate with Wells Fargo to avoid foreclosure.
Ideally, Seale wants to bring in outside investors so that the Circle H may one day become something close to what he originally envisioned.
"The story's not over," he says. "I haven't given up on the dream of Circle H."