The Kansas Supreme Court will hear a case involving two downtown Wichita developers charged with committing securities fraud and selling unregistered securities.
David Lundberg and Michael Elzufon ran Real Development, a real estate company. Beginning in 2004, they bought nearly a dozen vacant buildings in downtown Wichita.
As they redeveloped and leased the properties, they sold interests in the buildings to investors, mostly from California. Lundberg and Elzufon, from the Minneapolis area, were known locally as the “Minnesota Guys.”
The economic downturn in 2008 caused financial problems for the company. In 2015, the Kansas Securities Commissioner charged Lundberg and Elzufon with 61 criminal counts. The state said 60 investors lost more than $3.5 million investing with the two.
But a Sedgwick County District judge dismissed nearly all of the charges, ruling that because most of the sales to investors happened outside of Kansas, the state did not have jurisdiction.
The state of Kansas appealed, and an appeals court reinstated the charges last year. It ruled the Kansas Uniform Securities Act was broad enough to include jurisdiction in the case.
The Supreme Court will hear arguments next week on whether to uphold the Appeals Court ruling, meaning Lundberg and Elzufon could face all 61 original counts.
Tom Shine is director of news and public affairs at KMUW. Follow him on Twitter @thomaspshine.