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Golf course closed; multiple problems cited

Fallbrook’s newest golf course, The Golf Club of California, a private members-only club that adjoins homes in the Sycamore Ranch development at the corner of Gird Road and SR76, has closed its doors.

Owner and general manager Kay McLaughlin sent an e-mail to members October 31 stating that would be the last day of golf play, as she had “no alternative but to close the club” because “significant issues have surfaced” threatening the club’s operation.

Rumors swirled about the closure; some former members speculated the club would declare bankruptcy and turn public. Others said the closure had to do with longstanding environmental and financial issues.

The Golf Club of California was built in 2002 by developer Lyon Homes in order to increase the value and sales price of homes in the Sycamore Ranch community. To play on the prestigious greens, members had to sign up for a corporate membership, which cost $90,000, or a family membership at $25,000.

“It’s a nice place – a wonderful place to play golf,” said Parker Mahnke, a member since the club opened. “The developers had a vision for the course and it is the most magnificent course in San Diego County.”

While the course naturally integrates ancient oaks, majestic sycamores, towering eucalyptus trees and beautiful red-top grasses into its manicured fairways and undulating greens feature white sand bunkers with colorful wildflowers, corporate membership sales did not reach the level of expectation Lyons Homes had dreamed of.

In an attempt to increase membership sales, the management began “dialing for members,” sources reported, offering memberships for as little as $1,000 down, with the club financing the remainder.

It was also stated that members were permitted to create “hybrid memberships,” where they would resign from their executive membership, set up a bogus corporation and re-sign with a corporate membership in order to have lower dues and membership fees.

“A lot of deals went on,” said Mahnke. “The management tried to increase membership, but all it did was convolute it. It brought in people who probably wouldn’t have been here.”

There were no cart fees, range fees or food and beverage minimums for members, which are normally standard at golf clubs, making the Golf Club an “ideal playground” for members.

The management’s lax financial management of members’ dues and fees worried Denis A. Grierson, another longstanding member.

“[The lack of management] could be the demise of any club. I told the club’s advisory committee we needed to have a food minimum and couldn’t give away free carts but they didn’t want to hear it,” he said. “They didn’t want to rock the boat.”

Lyons Homes was subsidizing millions to run the club, members said, but not because they were seeking to please members. The housing developers had quietly begun looking for a buyer.

In February 2007, Lyons Homes sold the Golf Club to Irvine-based Magnus Investment Group, McLaughlin’s family investment corporation.

McLaughlin’s corporation began looking at the finances, trying to unwind the different types of memberships held by club members, as well as reviewing the accounts receivable situation. McLaughlin said she found that many members were six to eight months behind on their payment of dues. Members with outstanding balances were given about a year to pay back what was owed to the club.

Vince Orlando, a member since 2002, said a handful of members wanted to show Magnus Investments how to run the course, and when they couldn’t, began placing themselves on the resignation list, pushing the list up to more than 80 members.

“For whatever reason, they thought Magnus Investments wasn’t the right company to run the course,” he said. “Members putting themselves on the resignation list really hurt the club.”

The Golf Club’s standard resignation list policy was to buy out, or release a club member only after four new memberships were sold, but with such a high resignation list and an economic downturn, membership sales were slow.

JC Resorts, a well known golf management company, was hired to take charge of running the Club, but McLaughlin did not understand why members on the resignation list with outstanding balances were not making payments.

Believing the management company incompetent, McLaughlin stepped into the general manager’s role when the six-month contract with JC Resorts ended.

To her surprise, McLaughlin found certain members believed that once they were on the resignation list, they did not have to pay their financial obligations to the club anymore and were not aware that they were amassing a large debt.

Some members were as much as 33 months behind on their dues.

“They thought it was an escape from their financial obligations,” said McLaughlin. “When I communicated that they needed to still meet their financial obligations, they refused.”

McLaughlin also put an end to having multiple types of memberships by raising all memberships to $40,000 – the price of executive memberships.

Some members resented McLaughlin’s changes and “felt things were being taken away from them that they had enjoyed under the former ownership,” explained Mahnke.

“They resented little things, like [McLaughlin’s] insisting they pay their dues on time – that they pay for bills charged at the club on time,” he said.

According to McLaughlin, only about 20 percent of the resigning members were current with their dues and the rest were using the course without paying any dues.

The golf course carried non-paying members for almost a year while still paying the fixed costs of course maintenance and service personnel.

McLaughlin said she did not want to send her members to collection agencies; she simply wanted them to pay what was owed to the club.

In October 2007, McLaughlin made the controversial decision to buy out all resigning members in order to sell more memberships. If there were no members on the resignation list, she thought it would be a better reflection on the club.

McLaughlin could not pick and choose members from the resignation list to buy out, even though there were members in good standing on it. If they did not want to have their membership revoked, they shouldn’t have been on the list, she said.

McLaughlin’s former executive assistant, who handled the resignation list, said that every one of the members who were bought out had a resignation letter on file, save a few who were discharged for disorderly conduct.

The members on the resignation list had a month and a half to rescind their resignation, making McLaughlin’s decision to buy them out “black and white” clear.

Former members began talking around town about how they were “thrown out” of their own club but did not want to admit they were on the resignation list when they were bought out, said Mc Laughlin.

Once the upset of former members finally began dying down, environmental permit violations began popping up.

When Lyon Homes submitted their original request to build the Golf Club project, the San Diego County Department of Planning and Land Use (DPLU) gave the developers specific guidelines, as they were close to areas that were part of a mitigation put into place to protect the area’s endangered species.

When the plans were taken to the DPLU for finalization, however, it was found that the course was not built according to the guidelines and the building permits.

All of the practice putting green, one-third of the golf course’s lake and holes 1, 2, 3, 4 and 12 encroach on protected land, with parts of the encroachment in areas that need to be restored to their original state. Other areas simply needed modification, with the requirement that the Golf Club donate land for endangered species protection.

“The current owner knew about the environmental problems before she bought the property, but she said that she did not know the seriousness of the matter,” said DPLU Regulatory Planning Chief Brian Baca.

There have been meetings between the DPLU and McLaughlin to rectify the situation, but McLaughlin has not made “sufficient progress,” so there may have been some citation by the Department of Public Works, said Baca.

“We did not tell her to shut down her course, though,” said Baca. “All we want is the permit violations to be rectified.”

McLaughlin said she was “totally shocked” when she found out she was solely responsible for the improvements.

“I didn’t understand why it was all my responsibility – why I have to fix it all now if [the DPLU] gave Lyon Homes all the permits,” McLaughlin said.

Orlando, a longtime contractor, believes someone at the DPLU did not do their job, especially since the golf course was open and ran for several years with what appear to be significant environmental violations.

“It seems to me that someone at the DPLU or Lyons Homes pushed off overseeing the construction and following the permits,” he said.

McLaughlin spent a large sum of money on independent research, she said, and admits to delaying renovations in order to determine where the responsibility of the violations lies.

The Golf Club is now also facing a lawsuit from the Fallbrook Union High School District (FUHSD) because of an encroachment issue on the district’s neighboring 50-acre parcel of land. It appears that parts of FUHSD’s property have been used to grow turf, as golf cart paths and were developed into part of hole 12.

McLaughlin was made aware of the use of FUHSD’s property before she bought the golf course but was told that it was permitted, as the Golf Club had been in on-and-off negotiations to buy the involved land from the district.

With no agreement between the Golf Club and FUHSD, Assistant Superintendent Chet Gannet said FUHSD surveyed how much of their parcel was being used by the Golf Club and began working toward figuring out a licensing agreement that would recognize the use of the two acres as well as an annual basis of compensation, the cost of the contract of agreement, and the necessary land survey.

When McLaughlin did not agree to the terms offered, FUHSD took legal action to protect the district’s interests.

“We were anticipating that the lawsuit would go in our favor, but since the Golf Club has gone out of business, we believe a lien will be put on the property until the compensation has been met,” said Gannet.

Unable to understand why FUHSD waited to take legal action, McLaughlin said she questioned Gannet, who said the lawsuit was formulated because a “concerned citizen” had approached the board, advising them to “do something” about the Golf Club’s encroachment.

McLaughlin said the agreement would not allow her to insure the land, which is necessary to permit the use of golf carts. She went on to say course renovations could cost millions of dollars and are significant enough to possibly affect play.

Still treated with hostility by some former members, McLaughlin said she believes disgruntled former members tipped off FUHSD and the DPLU about the encroachments.

Former employees agree with McLaughlin, saying she was “more than generous” with both club members and employees, but certain members were “anything but cordial” to her.

Even when placing themselves on the resignation list, some members were rude and malicious in the way they spoke about McLaughlin, employees said.

“I have never seen such hatemongering before,” an executive assistant said. “I have lived in Fallbrook since high school and I have never been so ashamed of living here.”

McLaughlin, who is Korean, believes people judge her by her work and not who she is, but after some of the threats and letters she has received from members, she’s not as certain as before.

Former member Bill Woodcock is offended at McLaughlin and her employees’ comments that McLaughlin’s race has anything to do with the resignations or disgruntled behavior of former members.

Woodcock says the way McLaughlin distanced herself from members and continually elected to make management choices without asking members’ opinions led to the resignations.

“We felt that we were possibly being discriminated against,” Woodcock said. “People left not because of expense or quality of food or service; it was simply because [McLaughlin] was unbearable to the extent that we felt she wanted us to leave.”

Grierson and Mahnke said they saw several members treat McLaughlin with disrespect and hostility on several occasions.

Shortly after Magnus Investments bought the Golf Club, several members requested a meeting with McLaughlin. Mahnke said he was “embarrassed” by the members’ treatment of McLaughlin during the meeting, as there was an “absolute venomous nature to them.”

The meeting was in the early evening and many members had been drinking all afternoon, explained Mahnke.

“People were belligerent, hostile, loaded for bear and drunk,” he said. “It was a sad statement on the Fallbrook community.”

Grierson said there were times when the Golf Club staff would advise McLaughlin not to come out of her office because they were concerned for her wellbeing if she were to be confronted by hostile club members.

McLaughlin chose to concentrate on keeping up the golf course, trying to maintain it in top condition for use. Still, with the high school district’s pending lawsuit and DPLU permit violations, McLaughlin found herself in a situation guaranteed for financial deficit.

McLaughlin shut the Golf Club’s doors, she said, in an attempt to gain an overall perspective of the situation, gather remaining resources and find a way to move forward with her plan for the club.

McLaughlin says her focus is on reopening the club as soon as possible, regardless of what rumors are circulating.

“It breaks my heart to see the club this way,” said McLaughlin, eyes welling with tears. “[Closing the club] isn’t me going out of business; it’s a prudent way to keep from going out of business.”

McLaughlin said she is not filing bankruptcy but trying to find a way to strengthen her financial backing, reason with the school district and appeal to the DPLU to be more lenient with her and the club.

“Maybe [McLaughlin] was ignorant when she bought the club and didn’t look into things as diligently as she should have, but everything has existed without being an issue for all these years,” said Mahnke. “It seems totally unfair.”

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