Hanbleceya and its leaders fined for investment law violations
by Jack Mayne
Two people involved in Hanbleceya, the now defunct Normandy Park mental health treatment and housing program, and the ownership corporation have been fined assessed costs totaling $18,500 by the State Department of Financial Institutions for violating state securities sales laws.
The fines were included in a consent order issued by the state on July 2.
The department said Kerry Paulson, managing partner of Hanbleceya, headquartered in the San Diego suburb of La Mesa, Calif., was fined $3,500 an a $2,500 investigative charge. The department also fined Seattle area resident and volunteer Elizabeth Browning $2,500 and a $2,500 investigative charge.
The state also fined Hanbleceya and its umbrella corporation, Seattle Business Associates, $5,000 and a $2,500 investigative charge.
What the state probe found
The state Financial Institutions investigation found the that Paulson and Browning offered and sold limited liability corporation units that violated the law. The two, and the Hanbleceya corporate entity violated “the securities registration section of the Securities Act of Washington, because no registration for such an offer and/or sale is on file with the Securities Administrator, state of Washington.”
The agency said Paulson and Browning violated the law “by offering or selling said securities while not registered as a securities salesperson or broker-dealer.”
Browning, the consent order said, “became involved with the Hanbleceya Investment through her work as an advocate for mental health. Her not-for-profit organization, Browning Communities, is dedicated to providing therapeutic living facilities for the chronically mentally ill.
“Browning was impressed with Hanbleceya San Diego,” the state said, “so in mid-2009, Browning contacted Paulson inquiring whether Paulson would consider opening a Hanbleceya facility in the Seattle area. Paulson told Browning that if she was able to secure the funding, he would consider it. In 2009, Paulson estimated that $1.2 million needed to be raised to cover start-up costs for Hanbleceya Seattle. Browning took charge of raising the funds. Paulson took charge of handling all of the business details.”
They raised a total of $835,000, the state says.
The Financial Institutions agency order said that around Aug. 31, 2011, Paulson distributed the final Business Plan to investors, which offered cash investors “50 percent ownership in (the umbrella corporation) for $1.2 million. A minimum investment of $100,000 would yield a 4.2 percent ownership interest…”
The investment would be “partially secured by an ownership interest in a minimum of three four-bedroom single family houses in the Seattle area which, the business plan explained, would reduce investor risk of loss.”
Paulson: lawyers ‘didn’t warn us’
“We hired a law firm to represent us in the process of setting up the business (in Normandy Park), writing the operating agreements and just making sure the work complied with all of the laws,” Paulson said in a telephone interview Friday (Aug. 9). “This … violation is the result of just, frankly, not knowing the law. In retrospect that was really our job to know the law. That is why we hire attorneys.
“What the state is essentially saying, is that if you are going to raise money with a small number of qualified investors,” you have to know the law.
He added that all of the investors were “friends or family of the Browning’s.”
Browning said accepting the state’s consent order “without admitting or denying any violation” was “to close this matter in the most timely way.”
“The charges imply a failure to know the law, but the charges do not imply any kind of intentional misconduct,” Browning said in an email statement and a follow up telephone interview.
‘Deeply regrets choosing Normandy Park’
Browning was instrumental in getting Hanbleceya to come to the Seattle area, but also in choosing Normandy Park for its location.
“I deeply regret being instrumental in choosing the Normandy Park neighborhood for Washington state’s first private therapeutic community for the mentally ill,” she said. “I never anticipated such determined neighborhood resistance could create the maelstrom that would cause us to close our doors. Naively, I believed we would be welcomed, supported and a contributing member of the community.
“Furthermore I sincerely hope that those Normandy Park residents who fought our presence will rest easy now that we are gone and they can return to the ‘pre-Hanbleceya’ days of peace and harmony with their neighbors.
“In conclusion I am mostly happy that our staff (and clients) have returned to doing what they do best: working together for independence and productivity at the Hanbleceya San Diego location as it enters its 35th year.”