ALBANY - The FBI, one bankruptcy trustee and 88 investors are hot on the money trail behind Albany real estate developer Joe LaCoste, court records show.

As CEO and major shareholder of the now-defunct Willamette Development Services, LaCoste amassed $17.8 million from bank loans and investors for 10 projects in Western Oregon. But he failed to complete a single project and now the money can't be accounted for, according to the FBI and court records.

"The investor money was all gone. We don't know where it was spent. They have pretty messy books," said Corvallis real estate agent Rebecca Yu, whose family lost $225,000 in investments.

The Albany-based company, which lasted only two years, left dozens of lawsuits, foreclosures and bankruptcies in the wake of its January 2008 collapse. It also abandoned partially built houses in a gated community near the Sandpines Golf Course in Florence and another in the Santa Clara area north of Eugene.

Now, civil and criminal investigators are trying to determine where the money went and who - if anybody - should pay for the loss and misery caused by the company.

Two years ago, while Willamette Development Services was still in business, Oregon securities investigators formed a secret task force that included the FBI and the U.S. Treasury Department to scrutinize company dealings.

The investigation culminated in May in a raid by FBI agents on LaCoste's house in an upscale Albany neighborhood, a storage unit at the Albany Municipal Airport and the family's Silverado and Escalade SUVs, a search warrant shows.

Agents seized 57 items, including computers, hard drives, paper files and $1,000 in $100 bills.

Agents were investigating LaCoste on suspicion of operating a fraudulent investment scheme, using manipulation or deception to sell securities by way of mail and/or wire fraud, according to the FBI's statement of probable cause.

The U.S. Attorney's office is overseeing the case and has declined to comment.

Investors, in suits filed in Linn and Multnomah counties, accuse Willamette Development Services of operating a Ponzi scheme - an illegal business deal in which new investors are constantly recruited and their investments are used to pay earlier investors, until there are no more investors to recruit and the operation collapses.

The company had no other source for money because it never finished any of the 10 subdivisions it was building, said Portland attorney Robert McGaughey, who represents investors in a Linn County Circuit Court case. And, near the time of collapse, it was paying out $100,000 a month in interest payments, he said. "There's no question that it was a Ponzi scheme," he said.

But LaCoste attorney Joe McDonald said there's no way Willamette Development Service ran a Ponzi scheme. The investor payments sometimes came from LaCoste's own pockets, he said.

"Joe LaCoste put a lot of his own personal money in and lost it in these ventures. He wasn't making money out of these things.

"Mr. LaCoste has a number of people who are angry at him and want to blame him for the failure of this WDS company - and they've made a lot of false allegations against him.

"Maybe (the owners) were too ambitious. I don't know. But this was a venture designed to acquire real property and build out subdivisions and it was doing that. That's where the money was going and it just failed. It was not a Ponzi scheme. It was just another failed venture."

LaCoste sought protection from creditors in U.S. Bankruptcy Court beginning in January, so the job of finding money to repay creditors, including investors, falls to bankruptcy trustee Ron Sticka.

Many of the investors got monthly payments equal to 13 percent of their total investment - which ranged from $25,000 to $350,000 - for a period ranging from several months to about a year. When the company collapsed, they lost their principal.

Sticka has yet to find it. "I'm still investigating but we're not finding lots of assets yet," the trustee said in a recent interview.

LaCoste owes $6.8 million to unsecured creditors, $350,000 to a bank (secured by real estate) and $80,000 in unpaid taxes.

Sticka is searching for equity in Willamette Development Services-related real estate that he might be able to tap on behalf of creditors. But so far that's not too promising, he said.

So attorneys for the investors have now trained their sights on professionals who helped LaCoste and Willamette Development Services set up operations.

"Going after someone who is good at hiding money is not a good way to make money," said Michael Esler, who represents 25 Oregon investors in a case filed in Multnomah Circuit Court. "But the professionals who are involved can't run and hide. They generally have insurance and they generally have a profession they want to return to."

LaCoste, 44, and the six other owners of Willamette Development Services brought in investors through meetings of up to 50 people at places such as a Portland hotel or an Albany country club.

His Willamette Development Services projects promised monthly interest payments equaling 13 percent per year, the return of principal in three years and an additional 37 percent payment in a year or two, witnesses said.

Eugene-based Prudential agents Steve and Nancy Phillips put up - and lost - $100,000.

"For us, it seemed like a sure deal. We didn't realize the money would be handled as it was," Nancy Phillips said.

Some of the investors are weathering the loss, McGaughey said. Others are devastated - in bankruptcy, or facing foreclosure.

"The worst part of the whole deal is LaCoste talked people into borrowing money to invest," McGaughey said.

Investors Jeff and Jacqueline Walston, ages 65 and 66, retired in Central Point and bought a house free and clear but made "two tremendous bad errors of judgment," they said. They borrowed $200,000 against their house and $150,000 from their individual retirement accounts to invest with LaCoste.

The payments on the home loan - which was arranged by one of LaCoste's companies - are $1,568 a month, which is more than half the couple's monthly Social Security income, Jeff Walston said.

To close the gap, the couple started a small-scale moving business. They've got more business than they can handle, but the heaving lifting is hard and they're skirting the edge of exhaustion, Jeff Walston said.

LaCoste shouldn't bear the blame, attorney McDonald said.

"Basically what you have here is a highly leveraged effort to build during a real estate boom, and then we hit a bust and these projects went down like a lot of others when the market turned.

"It's unfortunate because people lose money in these ventures. They gambled. People wanted to get into the real estate market when it was hot. And people got into the market who didn't know much about it and probably should have stuck their money somewhere else. If they had put it in the stock market, they would have lost half of it instead of all of it. It's just the way it goes."

LaCoste, meanwhile, is back in business.

His Witham Investments - launched the same month that the old company crumbled - is "a full service start to finish Development Services Company," according to its Web site.