The California Department of Corporations has halted a multimillion-dollar investment fraud by CanAm Capital Corp. and individuals associated with the Los Angeles-based venture capital and private equity firm.
On Jan. 20, the Los Angeles Supreme Court obtained a temporary restraining order requesting for an injunction, an asset freeze and appointment of a receiver against CanAm Capital and individuals such as CanAm chief executive officer Jay Barnhardt, CanAm’s vice president of marketing relations Kelly Morgan, and Aaron Barnhardt.
The court is alleging that the company raised at least $15 million through fraudulent misrepresentation of investment opportunities from at least 329 investors. Of the 329 investors, 163 were state residents.
“The department is committed to aggressively pursuing and halting these types of investment schemes,” said Preston DuFauchard, commissioner for the California Department of Corporations.
DuFauchard said most of the fraudulent cases took place after a Feb. 11, 2009 court order requesting the company to desist and refrain in unlawful investment activities. DuFauchard said a receiver’s purpose is to secure enough assets for restitution to the wronged investors.
The civil complaint alleges that CanAm, beginning in December 2002, established and operated other companies to fraudulently obtain client funds and divert them for improper purposes. The complaint claims that CanAm depleted more than $1 million of investor funds when the department subpoenaed the account records of a defendant’s personal credit card. It also says that $1.5 million of investor funds were spent on other purposes not stated in the offering materials.
The department said the defendants used funds from their corporate account for a variety of personal expenses, including payments for personal income taxes and personal credit card expenses.
Besides the three individuals, the temporary restraining order is effective against companies who are controlled by any of the defendants, including Premier Equity Fund LLC, Premier Equity Fund II LLC, Premiere Equity Fund IV, Power Research Corp., Santa Rita Partners Inc., Steve Bowling Heraty, CDNX Fund LLC, TSX Venture Fund LLC and Northern Equities LLC.
