Investment Firm Misused Millions, SEC Alleges
Federal authorities obtained an injunction Thursday in U.S. District Court in Dallas freezing the assets of a Universal City-based investment company that allegedly misused at least $3 million invested by more than 500 people in 12 states, in part by exploiting members of churches.
The Securities and Exchange Commission alleged that Comstock Financial Services, which filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code on Oct. 30 in Los Angeles, and Irving, Tex.-based Preferred Financial Consultants obtained about $9 million from clients by promising returns ranging from 15% to 36%.
Much of that money allegedly was obtained by salesmen from people they met at church functions, including those of the First Baptist Church of Van Nuys and Faith Evangelical Church in Chatsworth. One Comstock official raised $1.1 million after preaching at a church in Little Rock, Ark., the SEC said.
The SEC said the firms misstated to investors that their money was backed by government securities.
Funds Funneled
From August, 1984, to August, 1985, at least $2.5 million of the money was funneled into Hitech Recovery Systems, a Van Nuys-based oil-service company headed by David L. Wiksell, Comstock’s vice president of investments, “contrary to the representations made to Comstock and Preferred investors,” the SEC alleged.
The temporary injunction freezing Comstock’s assets was issued one day after the SEC filed a civil suit in Dallas seeking a permanent order barring Comstock, Preferred Financial and six individuals from engaging in securities fraud, selling unregistered securities and acting as unregistered broker-dealers.
According to a statement from an SEC investigator, filed with the suit, investors were told that their money was used to buy certificates of deposit at an overseas bank that would be used to back up the purchase of U.S. Treasury bonds. Those, in turn, supposedly would be traded in the international bond market, and yield the high returns, the SEC said.
The SEC suit was not the first government action against Comstock Financial. The California Department of Corporations issued an order Oct. 29 prohibiting the company from offering or selling securities. The department said then that the company had collected $5 million from 600 individuals.
Defendants in Suit
Named as defendants in the SEC suit were Comstock Financial Chairman Roy L. Comstock of Granada Hills and Wiksell of Van Nuys. Wiksell’s company also is a defendant.
Also named were three Texas men and Abraham Boldt of Walnut, Calif., who the SEC alleged was primarily responsible for the creation of the scheme and who received investors’ funds from Comstock and Preferred.
Creditors have been told that Roy Comstock is in Europe attempting to raise money to pay them, according to an attorney for some creditors.
Comstock could not be reached for comment.
A hearing on the SEC suit is scheduled Dec. 23.
