Compliance

Former President Of California-Based Investment Firm Charged With Fraud By SEC

Eliane Chavagnon Deputy Editor - Family Wealth Report 25 September 2013

Former President Of California-Based Investment Firm Charged With Fraud By SEC

The Securities and Exchange Commission has charged the former president of a
purported private equity real estate firm based in San Bernardino, CA,
with defrauding some 500 investors.

The SEC alleges that investors purchased promissory notes under the false
premise that they were secured by specific properties or other collateral.

According to a statement yesterday from the US authority, Larry Polhill used
his firm, American Pacific Financial Corporation, to buy and sell real estate
and distressed assets.

He offered investors the opportunity to invest in the company through
unregistered notes that would yield them interest payments of 5 to 17 per cent
per year. 

“However, the collateral that Polhill and APFC claimed made the investments
secure was often non-existent or otherwise impaired.  The properties
underlying the investments were sometimes even sold without notice to
investors.  When APFC eventually filed for bankruptcy, it named the investors
as unsecured creditors who were owed nearly $160 million.  None of
Polhill’s investment offerings were registered with the SEC,” the authority
said.

Investors could also invest in APFC-sponsored funds that pooled investor
money to make loans to the firm. The company’s investor base grew as a result and
it began making larger investments in distressed assets by buying numerous
companies out of bankruptcy. 

But while some investments were successful, the “vast majority failed
unbeknownst to investors,” the SEC said.

Polhill has agreed to settle the SEC’s charges and be barred from acting as
the officer or director of any public company. 

The settlement is, howeber, subject to the approval of the US District Court
for the Central District of California.

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