U.S. Attorney's Office
Southern District of California
(619) 557-5610
March 16, 2015

Self Storage Managers Plead Guilty to Investment Fraud

SAN DIEGO—The three owner/operators of Equity Based Services (EBS), Howard Kaplan and his two sons, Stephen and Eric Kaplan, pled guilty today to conspiring to commit wire fraud. According to the charging documents, the three principals admitted stealing over a half million dollars from investors while operating the business.

EBS (operating as American Mini Storage) was formed, in 1995, as a San Diego-based private real estate company specializing in the acquisition and management of self-storage properties. According to the plea agreements filed in court, beginning in or about 2001 and continuing to sometime in 2010, the company and its affiliates offered individuals the opportunity to invest in syndicates comprised of approximately 77 self-storage projects in a dozen different states. In doing so, they failed to disclose material information about the source of periodic return payments and the actual past performance of the self-storage projects.

Investors in the various syndicates were convinced to invest with the Kaplans, in part, by the representation that they would be entitled to a “Preferred Return,” usually in the amount of 8 percent per annum. This Preferred Return would generally be paid on a monthly, quarterly or other periodic basis; and, if not paid, would accrue until the property was sold. Investors were also promised that the defendants would not share in or be paid their fee (consisting of 25 percent of the profits) unless and until all other investors had received their eight percent return. From approximately 2002 through August 2010, EBS regularly distributed the eight percent periodic return to investors. Based, in part, on these regular eight percent Preferred Returns, many earlier investors invested in one or more subsequent projects. These regular payments also attracted new investors.

Unknown to investors, some of the regular 8 percent Preferred Returns were made possible only because defendant Howard Kaplan was diverting funds from better-performing properties or using fees paid to EBS generated by new project syndications. As admitted in court proceedings, defendant Howard Kaplan failed to disclose to investors that their investment project was not generating enough operational profit to justify the eight percent return. Similarly, he concealed from investors that certain individual syndications were, in fact, not generating sufficient funds to even cover their operational costs and debt service. In addition, Howard Kaplan also failed to disclose to investors that he was commingling their funds and using them to pay other projects’ debt service.

In entering his plea, Howard Kaplan admitted he breached his fiduciary responsibility and duty to investors by pre-funding the return payments through a process of raising excess funds for individual projects. Also, he induced investors to invest additional funds in projects without informing these investors as to the true financial condition of the properties, and created new and sometimes undisclosed fees called “capital assignment considerations” and “equity consulting fees”.

Defendants Stephen and Eric Kaplan admitted they were aware of the above misconduct by their father no later than January 2010. Despite this knowledge, they continued to seek and accept investments while failing to disclose the true financial status of the properties and misuse of funds to both new and old investors.

This case is being co-prosecuted with the California Attorney General’s Office, with assistance from the California Department of Business Oversight.

Sentencing on all three defendants is set for June 19, 2015 at 9 a.m. before U.S. District Judge Cathy Ann Bencivengo.


Howard Kaplan Age: 71 El Cajon, CA
Stephen Kaplan Age: 51 La Jolla, CA
Eric Kaplan Age: 43 San Diego, CA


Title 18, U.S.C., Sec. 371—Conspiracy to commit wire fraud. Maximum penalties under the statute include five years in prison, $250,000 fine, three years of supervised release.


  • California Department of Business Oversight
  • Federal Bureau of Investigation
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