Developer linked to mall accused of securities violations

Whether any of the alleged violations are related to the Blue Mountain Mall purchase is unknown.

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A Western Washington real estate developer with ties to Walla Walla's Blue Mountain Mall reconstruction is accused of misleading investors by selling unsecured promissory notes, as well as unregistered securities, that raised him more than $100 million.

King County resident Michael R. Mastro, one of the developers behind the original proposal to convert Walla Walla's languishing shopping mall into a destination retail hub, misrepresented information to investors and in some cases omitted it completely, according to the Washington State Department of Financial Institutions.

He reportedly sold to "friends and family" investors, though the charging documents say many of the 175 investors were neither. In the 15-page charging documents filed by the Department of Financial Institutions, Mastro, who worked as a commercial banker for 20 years before starting his four-decade history in real-estate development, is also accused of breaking the law by selling unregistered securities.

The DFI intends to fine Mastro $100,000 and order him to stop accepting money from the individual investors. Mastro is expected to contest the charges and proposed penalties by requesting a hearing before a state administrative law judge. He could not be reached for comment.

The charges come on the heels of the 84-year-old real-estate magnate's thrust into bankruptcy, a case characterized in The Seattle Times last month as so large and complex it may take five or six years to resolve.

Whether any of the alleged violations are related to the Blue Mountain Mall purchase in early 2008 was unknown by the DFI's Securities Division on Friday. Since many of the notes were unsecured, they are not identified with a particular property, said Michael Stevenson, director of Securities.

"In conducting the investigation we did note the Blue Mountain Mall property, but at this time we have no indication that this property played any special role in the matter we are investigating," Stevenson wrote in an e-mail.

Mastro built a reputation over four decades as a prolific Seattle developer of largely low-profile projects, including residential subdivisions, apartment or condominium complexes, warehouses and office buildings.

Though listed as an ownership partner when Blue Mountain Plaza LLC purchased the Blue Mountain Mall, he was not at the forefront of dealings with the city, said Walla Walla Development Services Assistant Director Brian Walker. Given the shopping center's stalled development and the subsequent foreclosure on a second mortgage at the property, Mastro's link to the local project was unclear Friday.

In early 2008, Mastro and Blue Mountain Plaza partner Winston Bontrager had planned to bring life to Walla Walla's nearly empty shopping center by redeveloping it into an open-air retail destination known as Walla Walla Town Center. A bevy of retailers, including Michael's, Bed, Bath & Beyond, Famous Footwear and Ross Dress For Less, were said to be moving in as the old mall was demolished for the revival.

But halfway through 2008, with the old mall in rubble and the shells of new buildings taking form, construction crews began to vacate the land when the developers failed to pay them.

Blue Mountain Plaza officials said the financing on the redevelopment had fallen through, an effect of the U.S. financial crisis. But when months passed and they failed to secure funding, the second mortgage on the property was foreclosed.

Another limited liability company known as Walla Walla Holdings I LLC submitted the land's only bid, about $1.8 million, last February. City planning officials said Bontrager remains involved in that company, along with Seattle-area resident David Iseminger.

Work has not yet resumed at the Rose Street property, which is currently home to just three businesses -- Shopko, Sears and Pizza Hut.

Vicki Hillhouse can be reached at vickihillhouse@wwub.com or 526-8321.

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