Parent Company Steve Down Cos. Of Elk Grove Falls Event Center Faces Lawsuit From SEC
Steve Down Cos, the parent company of The Falls Event Centers Elk Grove is facing a lawsuit from the Securities and Exchange Commission. The suit alleges that the company falsely claimed that the event centers were profitable as it raised more than $120 million from investors. More than 300 investors invested in more than $120 million since The Falls Event Center LLC was formed in 2011, according to the SEC.
The Falls Event Center in Elk Grove, as well as The Falls Event Center In Roseville is owned by the Salt Lake City-based Steve Down Cos. The parent company also which also operates other other successful businesses including a continuing education program for dentists, a wealth coaching program, and a marketing company.
The Elk Grove Falls Event Center in Elk Grove is located at 8280 Elk Grove Blvd. It cost approximately 12 million dollars to build. There are also Falls Event Centers located in Fresno, California; Salt Lake City, Utah; Littleton, Colorado; McMinnville, Oregon; and Gilbert, Arizona.
Last Thursday the Security and Exchange Commission filed a complaint in Utah federal court alleging that CEO and founder Steven Down “made material misrepresentations to investors concerning the profitability of certain The Falls’ Event Centers.” In continuing education seminars for dentists, Down told attendees that there would be 200 Falls event centers by the year 2022. Furthermore, he indicated that the company would either go public on the stock exchange or be bought out.
The SEC’s complaint contains some eye-opening information. “The Falls’ own accounting records indicate that, from inception through September 2017, the event centers have never been profitable on the basis of generally accepted accounting principles.” Steve Down made some pretty incredible claims in January 2017 at a presentation to investors in Seattle. “We went into Elk Grove and built these two buildings. These two buildings were profitable in month one. We’re getting about 35 percent return this year.”
Important to note, the SEC complaint asserts that Down’s claim was incorrect. The Elk Grove Falls Event Center, which opened in November 2014, had a net loss of $114,268 in its first month. Furthermore, in its second month, its net loss was allegedly $84,186. The SEC complaint also stated that even using a more generous, modified accrual accounting basis, the Elk Grove Falls Event Center lost $67,689 in its first month and $52,813 in its second month.
Most relevant, The SEC complaint indicated that the event center model was unsustainable because of the millions of dollars owed to investors and to the mortgage holders. The SEC complaint states “The Falls’ own accounting records, which Down received regularly from the Falls’ CFO, indicate that, from inception through September 2017, the event centers were never profitable.”
Attempts to reach Steve Down was unsuccessful.
The City of Roseville began Steps to foreclose upon the Falls Event Center in Roseville located 240 Conference Center Drive. However, the was halted after The Falls Event Center paid its outstanding tax bill in January, according to Brian Jacobson, Spokesman for the City of Roseville.
The loans from private investors of The Falls Event Centers bore interest rates of 10 to 14 percent. The Falls took on loans from private investors because it was not able to obtain financing at lower interest rates. The principal amount outstanding on the loans was $33.5 million as of September 2017. The Elk Grove Falls Event Center is currently $79,740 behind on property taxes, according to the Sacramento County Tax Collector’s office.