On Sept. 11, 2011, Lisa Sands of Montecito invested her life savings of $300,000 into what she thought was a hedge fund account. Three years later, she discovered that she had invested not in a hedge fund, but a Ponzi scheme.
She has spent the past four-plus years trying to get her money back.
On Thursday, Sands won a $710,000 judgment in Santa Barbara County Superior Court against Welterlen-Kellner Inc. and PAW Asset Management LLC. Judge Donna Geck awarded $200,000 in compensatory damages, $400,000 in punitive damages and $110,000 in pre-judgment interest and attorney fees.
“With a judgment of over $700,000, Mrs. Sands will move to pierce the corporate veil on these sham companies,” attorney John Thyne III said in a statement.
The companies are owned by Barbara Kellner and her deceased husband, Paul Welterlen, who committed suicide, according to authorities, in 2016 by stepping in front of a train in Montecito.
Sands befriended Kellner in a yoga class. Kellner, according to court documents, recommended that Sands invest in Welterlen’s hedge fund for Montecito investors. She was told she would receive between 12 percent and 14 percent in annual returns.
Sands and other investors were informed in 2013 that dividend checks would be delayed because of problems with the Internal Revenue Service. Sands asked for her investment to be returned, and after some haggling, Sands eventually received $100,000 back in payments. Then, on July 31, 2014, Welterlen informed the investors that the fund had “blown up” and that all of the money was lost.
The Santa Barbara Police Department then raided the offices of Welterlen-Kellner Inc. and PAW Asset Management LLC to seize bank records, credit card receipts, quarterly reports and other documents. Welterlen allegedly used investor funds to purchase life insurance policies on himself that covered suicide before stepping in front of the train.
Thyne said that during the past several years Sands has fought to get her $200,000.
“John believed in me and my case, and he has done a great job getting justice for me,” Sands said. “He was playing chess while Kellner’s attorneys were playing checkers.”
According to court documents, bank statements revealed that investors’ funds were used to pay Kellner and Welterlen’s personal expenses, including leasing a luxury vehicle, expenses for several personal trips around the world, and shopping sprees.
Kellner denies that she knew about the scam. Thyne said that “Kellner has reportedly fled to Nicaragua where her son lives and where she and her family purchased 13 oceanfront acres apparently with investor funds.”
The judge ruled in favor of Sands on counts of fraud, breach of fiduciary duty, breach of contract, negligence and other counts.
“Ms. Barbara Kellner had no role or involvement in any of the allegations giving rise to Ms. Sands’ claims against the companies,” said Kellner’s attorney, Michael Amir. “All of the companies’ alleged activities were conducted by her late husband without Ms. Kellner’s knowledge or participation. As far as the judgment, it is only against the companies and is only a ‘default’ judgment, which means no one represented the companies in the proceeding. Ms. Kellner was not part of the proceeding.”
— Noozhawk staff writer Joshua Molina can be reached at jmolina@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.
