Ken Mattson and his KS Mattson Partners had up until now remained out of bankruptcy even as more than 60 entities tied to the embattled Sonoma Valley real estate baron declared bankruptcy earlier this year.
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More than 60 entities tied to embattled Sonoma Valley real estate barons Ken Mattson and Tim LeFever declared bankruptcy in August and September, the start of another bitter chapter in the monthslong dissolution of their long business partnership and friendship.
Those individual limited liability corporations and limited partnerships were investment funds — pools of money, built on the contributions of investors, that financed the partners’ acquisition of hundreds of properties in California, worth an estimated $400 million in total. The bankruptcies effectively locked down assets of the partnership, LeFever Mattson, preventing money from coming in or going out before a federal court can determine who is owed what.
But two names were glaringly absent in those filings — Ken Mattson and his sole proprietorship, KS Mattson Partners.
Though implicated in several lawsuits, they had remained out of bankruptcy even as LeFever Mattson acknowledged its troubles. That may be about to change.
On Nov. 22, attorneys representing LeFever Mattson Inc. filed petitions of involuntary bankruptcy against Ken Mattson and his company, seeking to compel them into the same level of transparency and control the parent corporation is operating under.
The petitions were filed in U.S. Bankruptcy Court’s Northern District of California, the same jurisdiction overseeing the Chapter 11 proceedings of LeFever Mattson.
The moves could bring further order to a once-chaotic situation that has become a source of anxiety for the investors who funneled hundreds of thousands — or in many cases, millions — of dollars to LeFever Mattson over the years, and now aren’t certain what it is they own. Many of those investors are elderly people who have relied on monthly dividends to pay their bills.
A document recently filed in the main LeFever Mattson bankruptcy identifies more than 600 individuals, couples and family trusts who may have claims.
As of Oct. 9, they have been represented in the bankruptcy court by an Unsecured Creditors Committee, now composed entirely of investors or their family members. And on Oct. 31, that committee introduced attorneys with the firm of Pachulski Stang Ziehl & Jones, hired to represent the legal interests of the investors.
The Pachulski lawyers have filed requests to receive notices for all hearings and document filings in the involuntary bankruptcy cases.
Members of the firm did not respond to an interview request. Nor did the attorneys representing LeFever Mattson, at Keller Benvenutti Kim.
Ken Mattson did not respond to a request seeking comment.
The involuntary bankruptcy cases could wind up being an important development for LeFever Mattson investors and local community activists, as it was KS Mattson Partners that drove most of the duo’s real estate purchases in Sonoma Valley — a buying spree that drew the interest, and ultimately the deep suspicion, of many Sonoma residents.
When The Press Democrat profiled the partners in March 2023, the newspaper documented 116 properties owned by Mattson and LeFever in and around the city of Sonoma; 88 of those had been purchased by KS Mattson Partners, though some were later sold to other LeFever Mattson entities.
At the time, the portfolio was worth an estimated $250 million, an unmatched real estate empire in the valley. Their portfolio statewide, according to LeFever, was valued at more than $400 million.
Investors have feared that Ken Mattson, who recruited most of them and for years served as the point person for their financial transactions, might be moving money around to shield assets from creditors. If a federal judge approves the involuntary bankruptcies, it could put a stop to any leakage of money.
In May, LeFever publicly accused Mattson of financial wrongdoing, allegations he has denied. Mattson’s Sonoma home was searched weeks later by the FBI and Mattson began selling dozens properties around the same time. He and LeFever filed dueling lawsuits against each other; many others have been brought by investors.
Involuntary bankruptcies were for several centuries the norm for all bankruptcy cases. In that period, only creditors — those owed money — could initiate a bankruptcy filing, according to a 2020 paper in the Iowa Law Review written by Richard M. Hynes and Steven D. Walt.
Insolvent debtors couldn’t file for “voluntary bankruptcy” in the United States or England until the middle of the 19th century, and American corporations didn’t have that option until 1910.
Today, involuntary petitions are rare, accounting for only about 5% of all bankruptcy filings. “And most of those are summarily dismissed without any court order formally commencing a bankruptcy case,” Hynes and Walt wrote.