Motto Comes Back to Haunt

Shane Albers, chief executive of an Arizona real-estate fund that raised close to $1 billion from small investors during the boom years, frequently cited in letters to investors his conservative investment strategy: "Rule 1: Don't lose the money. Rule 2: Don't lose the money. Rule 3: Don't forget Rule 1 and Rule 2." But this core philosophy was no match for the downturn. IMH Financial Corp.'s booked losses since the third quarter of 2008: $474 million. Last year, Mr. Albers and other IMH managers persuaded fund investors that the best way to salvage their investments would be to take the fund public. Investors in June approved the first step of that strategy, a deal that involved paying Mr. Albers and other managers $14 million in restricted stock for their management business. But the second part of the strategy, the actual initial public offering, has been delayed by a Securities and Exchange Commission investigation into the fund, the company told investors in October. The company had said in August that the SEC "appears" to be interested in transactions and relationships IMH has with the broker-dealers who sold their units. An IMH spokeswoman said the company believes it has been "in compliance with all regulatory requirements, and that the SEC investigation will not uncover any violations of federal securities laws." The SEC declined to comment.

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