Investors Seek $28 Million, Firm’s Receiver Says : 6,500 File Claims in ‘Culture’ Case
About 6,500 investors have filed claims totaling $28 million against a cosmetics investments firm that collapsed shortly before its president and 11 others were indicted in September on mail fraud charges, the court-appointed receiver for the firm said Wednesday.
Daniel Foley, a Tustin accountant serving as receiver for Activator Supply Co., said it will be months before the investors see even a fraction of their money. So far, he said, he has been able to recoup only $1.7 million.
Activator Supply of Pahrump, Nev., was one of several firms involved in an investment program that U.S. Postal Service inspectors allege collected about $80 million from 27,000 investors in 30 states. Several companies were involved in buying and selling $35 “lactic culture” kits. Investors were told that, with the kits, they could grow a substance destined for a line of women’s cosmetics. But the market for their lactic culture never materialized.
“Anyway you look at it, it is not going to be good (for the investors),” said Foley, who was appointed receiver in August although the company has not entered bankruptcy proceedings. If the available funds were divided among the investors who filed claims, Foley said, each one would receive about $269. He said most investors ordered $3,500 worth of culture growing kits. Michael G. Roddy, Activator Supply’s attorney, could not be reached for comment Wednesday, and the whereabouts of company President Roland Nocera are unknown.
Funds Withdrawn
Foley said it appears that several hundred thousand dollars were withdrawn from Activator Supply bank accounts before the California accounts were ordered frozen by a San Diego Superior Court judge at the request of the state attorney general. The withdrawn funds were apparently moved to banks in the Cayman Islands, the Isle of Man and elsewhere, Foley said.
State regulators went to court to appoint a receiver after numerous investors complained that they were unable to reach the company for refunds. A related company, Culture Farms Inc. of Lawrence, Kan., was also placed into receivership shortly before company officials were indicted Sept. 11 by a federal grand jury in Topeka, Kan.
The 12 indicted officials of Activator Supply, including two Orange County businessmen, are due to stand trial in Kansas in February. Each individual was indicted on 63 counts of mail fraud and one count of conspiracy. The indictment alleges that they diverted more than $10 million in investor funds for their own use.
Meanwhile, Foley said he spends his time reviewing an inch-thick computer print-out of investors from Beaver Crossing, Neb., to Cherryville, N.C.
“Most claims are coming from rural areas,” Foley said. He said he has also received about 1,000 letters detailing the plight of investors. One divorced mother of four children wrote that one of her daughters is going blind from diabetes and begged Foley to expedite her claim.
