Updated: Sargent Ranch belly up

Sargent Ranch sits along Highways 101 and 129.

The company looking to develop the 6,400-acre Sargent Ranch just
south of Gilroy filed for Chapter 11 bankruptcy on Monday, owing
more than $90 million on the property at the time.
The company looking to develop the 6,400-acre Sargent Ranch just south of Gilroy filed for Chapter 11 bankruptcy on Monday, owing more than $90 million on the property at the time.

La Jolla resident Wayne Pierce, who along with his wife Marci owns 85 percent of Sargent Ranch LLC, filed reorganization papers in San Diego bankruptcy court Monday. Alamo resident Gregory Griffin owns the other 15 percent and is also involved in a separate bankruptcy proceeding.

“I’m surprised that (the ranch) lasted this long before it went into bankruptcy,” Santa Clara County Supervisor Don Gage said Wednesday.

The bankruptcy filing is just the latest blow to the beleaguered project, which has faced massive debt, a forgery scam involving a Native American tribal leader and outcries from environmentalists over potential development.

Sargent Ranch attorney John Smaha said the company had tried to work with lender Danville-based First Blackhawk Financial through last week, but failed to reach a deal that prevented the property from going into foreclosure.

The ranch owes its lender more than $71 million, according to court papers. Now, Sargent Ranch intends to file a plan of reorganization and a disclosure statement, likely within the next four months.

“We’re very hopeful that we’ll work out a plan that’s largely consensual,” Smaha said.

The ranch also owed more than $20 million to other unsecured claimants, including lawyers, Gilroy engineering firm Ruggeri-Jensen-Azar and various consultants. The ranch company also owed $330,760 in back taxes to Santa Clara County and $53,034 in back taxes to Santa Cruz County at the time of the bankruptcy filing.

Papers filed with the bankruptcy court indicate that the ranch company had $716.1 million in assets, including a $400 million sand extraction sales company and nearly $200 million in habitat mitigation credits.

In the early 2000s, the Pierces used about $35 million from dozens of investors to develop a plan for Sargent Ranch through Santa Clara County, according to Dispatch archives.

When this plan failed, Wayne Pierce teamed up with the Amah Mutsun Indians and Congressman Mike Honda (D-San Jose) to help the tribe gain federal recognition and reclaim Sargent Ranch, where their ancestors fished, hunted, and raised families. This arrangement could have potentially entitled the development to bypass county planning regulations.

However, forgery of papers that were allegedly written on behalf of the tribe and federal scrutiny of Wayne Pierce’s past dealings appear to have killed the project.

Wayne Pierce’s former office line was not operational Wednesday and when reached on an apparent cell phone, he said, “I’m losing bars,” before the line went dead. He did not return subsequent phone calls.

Pierce was one of many developers linked to one of the most abusive land scams in recent California history, according to state and local authorities.

The FBI, the Internal Revenue Service, the U.S. Securities and Exchange Commission, and a host of state authorities have targeted David Fitzgerald – the man Pierce recruited to orchestrate a Contra Costa County land development deal known as Roddy Ranch – for securities fraud. Authorities estimate that Fitzgerald’s schemes throughout the state have cost investors more than $250 million.

Then, in 2007, federal officials said Irenne Zwierlein – who inked the deal with Wayne Pierce to bring development to Sargent Ranch – forged and mailed documents to the government in what her rival called an attempt to cling to power. At the time, Congressman Honda had sponsored legislation that would have fast-tracked federal recognition of the Amah Mutsun tribe.

Zwierlein could not be reached for comment this week. Dispatch archives indicate that Zwierlein had resigned as a tribal council leader several years before submitting the documents.

Sacramento resident Valentin Lopez, who said he is the actual chairman of the tribe, said the real tribe never wanted to develop the land in the first place.

“There is an effort to obfuscate who the legitimate tribe was, but there is no dispute,” he said Thursday.

The land is sacred to the Amah Mutsun tribe, he said, adding that spiritual renewal ceremonies had taken place there before Spanish settlers arrived. The tribe is still in the process of obtaining federal recognition, he said. The Bureau of Indian Affairs did not return phone calls.

Gilroy City Councilman Bob Dillon, who served as a spokesman for Sargent Ranch for about four months in 2006 when he was not on the council, said the project had experienced challenges for a while. The development proposal had included about 200 senior housing units as well as a Native American cultural center when he was involved in the project, he said. There also had been giant mortgages on the property, he said.

“It had been a shirt-tail operation for some time,” he said.

Dillon is not owed any money by the company, he said.

Plans to develop Sargent Ranch have long been unsuccessful. County zoning regulations, environmentalists and local politicians have thwarted plans for hotels, golf courses and housing developments for two decades.

Former Gilroy City Councilman Paul Kloecker, one of the few people who favored a development project proposed by a property owner prior to Wayne Pierce, described the property as “gorgeous.” It contained deer, wild pigs and various other wild animals, he said.

“Growth being what it is, I think eventually it will probably be (developed),” he said. “Either that or some land trust will buy it and preserve it. That would be OK, too.”

Others were not so sure. Gage said he has seen cattle ranches that are about the same size as Sargent Ranch that sold for as low as $12 million to $15 million, and he felt project owners owed far more than the property was worth. He did not expect any future development there as it could only legally contain about 200 homes.

“There’s been talk about harvesting sand and gravel there,” he said. “That’s something that’s realistic.”

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