Arrested development 

How the Circle H Ranch went from "the greatest story in western Montana" to a cautionary tale

Page 4 of 4

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.

click to enlarge PHOTO BY ERIC ORAVSKY

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."

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