Articles Tagged with Business Fraud

photo-PDC-EB5-scam-300x200It’s never a good thing to have a federal judge order a freeze on your business’ assets. That’s what happened to an Orange County firm that federal officials claim stole money from foreign investors, mostly Chinese citizens, who hoped their cash would lead to permanent U.S. residency, the Los Angeles Times reports.

Newport Beach lawyer Emilio Francisco and his investment firm, PDC Capital, face civil fraud charges filed by the Securities and Exchange Commission (SEC). It claims Francisco spent at least $9.5 million of investors’ cash on personal expenses (some going to help pay for a yacht, a yacht-club membership and his credit card) instead of investments that would qualify investors for the EB-5 visa program, which offers permanent residency to foreigners who make job-creating investments in the U.S.

Investors provided PDC with more than $72 million from 2013 to 2016, according to the SEC’s suit. More than a hundred investors put in $500,000 each. They believed the money would be spent building assisted-living facilities and opening new locations of Caffe Primo, a Los Angeles coffee shop and restaurant chain. The SEC states some of the money went to the promised projects, but millions of dollars were invested in other projects and more than $2 million went to pay Francisco’s personal expenses.

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photo - hold the mayoNew companies seeking investment and funding are under a lot of pressure to show success. One such company is facing an investigation by the Securities and Exchange Commission (SEC) to see if it tried to boost its sales numbers by hiring contractors to buy their product then reimburse them for the purchases.

The SEC is looking into San Francisco based Hampton Creek, Inc., according to Bloomberg, which broke the story about the potentially bogus sales numbers in order to impress potential investors. The agency is trying to determine if the startup broke federal law by failing to disclose it was buying its own vegan mayonnaise from stores, making it appear to be more successful than it actually was, according Bloomberg’s sources.

At issue is whether company founder and CEO Joshua Tetrick improperly recognized revenue from purchases made with company money. Bloomberg reported Hampton Creek started an operation to purchase its own mayonnaise starting as early as 2014. The SEC has jurisdiction over the closely held company because it has raised money from outside investors.

Investors have come up with more than $220 million for Hampton Creek and Tetrick told employees in August he expects to raise another round of financing by September that will increase the value of the company to $1.1 billion, according to Bloomberg.

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photo - Michigan scamCon men are very good at sales. They know the importance of trust and how to gain it. They may be charming, tell a great story and be very convincing about the investment opportunities that are available for just the right people. And you are just the right person! That may have been the pitch to 84 year old Elsa Prince-Broekhuizen before she made her investment.

The president of a western Michigan investment company has agreed to plead guilty to stealing about $16 million from Prince-Broekhuizen, a prominent western Michigan philanthropist according to the Lansing State Journal . She’s also the widow of billionaire industrialist Edgar D. Prince.

The fraud occurred over a period of 16 years according to the felony information filed in U.S. District Court in Grand Rapids. A plea agreement states 68-year-old Robert Haveman admits to wire fraud, money laundering and causing $16.2 million in losses to Prince-Broekhuizen and the Elsa S. Prince Living Trust.

Haveman is president of EDP Management in Holland, Michigan, which managed investments for Prince-Broekhuizen and the trust. It’s alleged that at least $1 million of the ill-gotten gains were used as partial payment for a real estate purchase. Court documents state that starting in 1999 Haveman moved money into a personal account and also spent it on personal expenses and investments. Haverman falsified accounting records to hide the fraud.

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photo - if it sounds too good to be trueIf you’re offered solid returns on an investment that carries little or no risk you may want to pass. It may be a Ponzi scheme. A Ponzi scheme is a fraud dressed up as an investment. There is no real investment of funds, instead returns for earlier investors are paid by newer people thinking they’re investing. The scheme usually falls apart when new “investment” slows or stops, so the supply of money to pay investors ceases.

As part of a plea bargain Adam Jay Boskovich of Laguna Niguel in April pleaded guilty to false statements made in the sale or purchase of securities, a felony, according to the Orange County Register. He was involved in a $200 million dollar Ponzi scheme ($150 million coming from Orange County residents), the largest in Orange County history, according to law enforcement.

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photo - fraud & football by 401(K) 2012

Potential wrongdoing by business partners can happen in companies large and small, in industries you’ve never heard of and the well known world of profession sports. One such dispute became known when a lawsuit was filed in federal court for the Central District of California Southern Division in early December. It involves alleged double dealing, hidden debts, rock and roll and football.

The managing partner of the LA KISS Arena Football League team, Brett Bouchy, is accused of mismanaging the arena football team he previously owned, the Orlando Predators, and diverted funds from the business.

Bouchy sold his majority interest in the Predators to co-owner David Pearsall, then started the LA KISS team with Gene Simmons and Paul Stanley of the Rock and Roll Hall of Fame rock group KISS along with the band’s manager, Doc McGhee.

The suit filed by Pearsall Holdings, was reported in the Orange County Register. It contends Bouchy,

  • Defrauded the business by profiting from tickets sold by scalpers, and
  • Failed to disclose all of the team’s debts when he sold his majority ownership to Pearsall.

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Anticipatory BreachEarlier this month Judge Wynne S. Carvill in Alameda Superior Court found in favor of eight District attorneys from eight different California counties who sued for its fraudulent pricing practices. The judge slapped the online retail giant with a $6.819 million civil penalty and issued an injunction to prevent Overstock from continuing its deceptive advertising practices.

Overstock had bet that it would be able to escape with much less civil liability, it had refused an offer from the District attorneys to pay a $7.5 million settlement in March 2010. Overstock is expected to appeal the ruling.

According to the company, in a statement it released to the SEC it only has an additional $1.2 million in assets set aside to cover its litigation risks, including the California litigation and an issue with the Ohio Tax Commissioner.

The Lawsuit

The lawsuit was first filed in November 17, 2010 alleging that Overstock had claimed to consumers that it had the lowest prices available online for products, when in fact it Continue reading

Anticipatory BreachProtesters gathered outside California Assemblywoman Diane Harkey’s (R-Dana Point) holiday party earlier this month to bring public awareness to her husband, Dan Harkey, and his allegedly fraudulent business activities in connection with Point Center Financial.

Dan Harkey was sued by his investors for elder abuse, breach of fiduciary obligations, fraud, unfair business practices, violation of California Securities laws, and several other types of misrepresentations. The jury found Dan Harkey was liable for $4.5 million but more than doubled the award to $11.6 million due to egregious facts of the fraud.

The investors claimed that Dan Harkey used print ads and direct mailings to send notices of his investments to targeted audiences, which included many senior citizens. He also sent invitation only seminars to potential investors to garner their trust. The investors say that Dan Harkey’s investments were essentially a Ponzi scheme, meaning that the dividends of older investors were paid through the investments of new investors, all the while funds were allegedly mismanaged so that they never produced real returns.