Ohio-Based Financial Managers Indicted for Defrauding Investors of $72 Million
Ohio Attorney General Dave Yost and Ohio Department of Commerce Director Sherry Maxfield announced that the managers of a Lucas County investment firm have been indicted on multiple felonies in a decade-long scheme to deceive and defraud investors, cheating at least 200 clients out of $72 million.
The indictment, filed last week in Lucas County Common Pleas Court, names eight defendants with dozens of felonies including James DelVerne, Doug Miller, Gary Rathbun, Colleen Hall, Nancy Rathbun, Adam Solon, John Walters, Brad Konerman.
The felony charges include engaging in a pattern of corrupt activity, unlawful securities practices, telecommunications fraud, aggravated theft, perjury, money laundering and several other financial charges.
Seven defendants were arrested, while a final defendant is in the process of turning himself in, according the Ohio Attorney General’s office.
The case centers on Northwest Capital, a Toledo investment firm that serves as an intermediary between investors and businesses raising capital by selling accounts receivables.
From January 2011 to December 2021, the indictment says, the defendants solicited investment advisory clients to purchase alternative investments from securities issuers without fully disclosing the managers’ conflicts of interest. The defendants also manipulated funds among interrelated entities to make the investments appear successful.
To continue raising additional capital from investors, the Northwest Capital managers and their business associates created new, affiliated entities for investment without disclosing to existing investors the poor financial condition of these companies and the monitoring fees skimmed by the defendants. They then certified false investment values, which were shared in annual statements issued to investors.
A total of 741 investments from at least 200 people, roughly $72 million combined, were allegedly mismanaged.
Besides Northwest Capital, other entities and investment funds associated with the indictment include Briarfield Capital, ThunderRoad Partners, TRF Fund 1, TRF Fund 2, Kings Point Leasing and Winding Creek Partners.
The Ohio Division of Securities previously revoked the investment advisor representative licenses of two of the defendants, Doug Miller and Gary Rathbun, for misconduct related to this action.
In 2016, the Financial Industry Regulatory Authority investigated the practices of Miller and Rathbun, revealing that they participated in the sale of investments in limited liability companies to clients of their registered investment adviser firm, who collectively invested approximately $25.5 million, without providing written notice of their participation to their member firm or notice that they were compensated by some of the LLC’s.
The case is being prosecuted by the Special Prosecutions Section of the Attorney General’s Office.
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