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Turlock Red Steer arsonist accused of $1.3 million real estate scam
tracy smith
Tracy Smith

Tracy Smith, the former Turlock resident who was convicted of burning down the Red Steer and implicated in a multitude of shady business and investment dealings, has been indicted for allegedly running a fraudulent real estate investment scheme in various parts of the state.

Smith is accused of scamming more than $1.3 million from seven victims, according to the California Attorney General's Office.

A 13-month investigation into Smith's activities and his business, Downkicker Inc., resulted in a special statewide criminal grand jury indictment for Smith on 38 counts, including one count of operating a fraudulent securities scheme, 19 counts of securities fraud, 17 counts of grand theft and one count of elder abuse. He was arraigned Monday in San Diego County Superior Court. The alleged crimes took place in the counties of San Diego, Riverside, San Francisco and Santa Clara between August 2017 to September 2018.

An investigation by the California Department of Financial Protection and Innovation found that Smith, through Downkicker, allegedly offered his private clients an opportunity to invest in various real estate projects. During this time, he presented himself as a successful investor and contractor, but failed to disclose to his victims facts that his investors had a right to know — including that both he and the companies owned and run by him had gone bankrupt, that he had been successfully sued multiple times, that both the Internal Revenue Service and California Franchise Tax Board had issued liens against him for failure to pay taxes and that his contractor’s license had expired in 2008.

Smith also is accused in some instances of just taking his clients' money and walking away from the projects, according to the Attorney General's Office. Smith also abandoned multiple projects, resulting in the foreclosure of those properties. As a result of his alleged fraud, the Smith’s seven victims lost $1,363,809.80.

“Investing may involve various risks, but being swindled by unqualified individuals should not be one of them,” said Attorney General Rob Bonta. “We are grateful today [Monday] to the DOJ’s Bureau of Investigation and Department of Financial Protection and Innovation, as well as the United States Attorney’s Office for the Eastern District of California and the Santa Clara District Attorney’s Office for their assistance and continued partnership.”

In 2014, Smith and his cousin Jeremy Britt both entered no contest pleas to the arson charges against them stemming from the 2009 fire at the Red Steer, which at the time was located on Golden State Boulevard in Turlock and partially owned by Smith.

Both men were sentenced to 180 days in jail for the fire, according to the Stanislaus County District Attorney’s Office. They also were ordered to register as arsonists for the rest of their lives and had to pay restitution.

The prosecution said Smith was motivated to set the restaurant on fire because he was heavily in debt and wanted to collect the insurance money. He recruited his cousin Britt, who also was an employee at the restaurant, to help him.

During the preliminary hearing Turlock Police Detective Jason Tosta testified he found Smith was under a mountain of debt, “well in excess of $1 million.”

Tosta testified that during an interview after the fire Smith told him that numerous payroll checks from the restaurant had bounced and that he was “bleeding it dry” in an effort to save his framing company, which was struggling with the tanking housing market.

Tosta stated he had spoken to a couple of vendors and business owners who said they were owed substantial amounts of money from Smith and/or the Red Steer. One food company owner told Tosta that Smith owed him $58,000 and that his food was only deliverable by cash payments, plus an additional $1,000 payment. The day before the fire the food was not delivered because the money was not there, Tosta said.

Suspicions about Smith’s involvement in setting the fire grew when investigators learned he was seeking an early pay-out on the establishment. The insurance company representative told Tosta that was “absurd” because Smith would get far less money than if he just waited for his settlement.

During a preliminary hearing for the two men, Turlock Fire Department Capt. Jason Bernard testified there was a strong odor of gasoline present inside the building. Bernard testified that he found at least nine sites in the restaurant and attic that tested positive for gasoline. He also testified the point of origin was traced to the attic.

In the same year that Smith burned down the Red Steer, he was renting out a Turlock home to a family, but instead of using the money to cover the mortgage, he used it for other things and the family started getting delinquency notices from the bank 10 months into their three-year lease.

After his arson conviction, Smith started up Consolidated Reliance, an investment company that promised to build “200 high quality low-income housing units in Stanislaus County." Instead, of houses, Smith found himself named in multiple lawsuits alleging breach of contract, as well as small claims and collections.

In 2012, charges were filed against Smith and Manuel Arroyo on allegations they fraudulently obtained $800,000 from a 69-year-old Turlock woman for an investment opportunity that never materialized.

According to the court records, the woman gave Smith and Arroyo $800,000 to invest in a large parcel of land in Atwater that would become the home of a racetrack, lodgings, restaurants and other businesses.

The woman said she was promised she would get $912,000 back within eight months of her investment. Instead, she was paid $3,500 over an 18-month period, according to the court records. She told the investigator she got the money by taking out home loans on some of her properties and because she wasn't paid back two of the properties were foreclosed upon. The 69-year-old was given handwritten notarized notes promising the return of her investment and profits.

Those charges were eventually dropped against both men.