Investors Bilked of $1.4 Million, SEC Says : Investment Firm Charged in Civil Fraud Case
The Securities and Exchange Commission filed civil fraud charges Tuesday against a Costa Mesa investment firm that allegedly bilked more than 35 investors out of $1.4 million over a period of 18 months.
The complaint charges that Alpha Trust and its two trustees--Robert J. Corsaut and Omega Management Network Inc.--sold unregistered securities to investors, promised a high rate of return through conservative investments and then pocketed or misspent the bulk of the money.
The charges were filed in U.S. District Court in Los Angeles.
Corsaut is also president of Omega Management, court documents said. Without admitting or denying the charges, Corsaut agreed in a settlement to have the court appoint a temporary receiver to take control of the companies’ assets and investigate their operations.
The receivership will effectively close the two Costa Mesa firms, said Thomas A. Colthurst, an SEC assistant regional administrator.
“We consented . . . because we don’t want any problems with our clients,” Corsaut said. “If there are some things we did wrong, we’ll stop everything and correct them. . . . We don’t want any problems with the SEC.”
Corsaut said that he will offer to return his clients’ money in full by the end of July.
Investors in five states including California placed their money into the Alpha Trust through notes that promised a 12% annual return, Colthurst said. Company brochures said the return would be generated through conservative investment strategies employed by the trust.
“We allege that a material portion of the offering proceeds were not invested conservatively,” Colthurst said in an interview. “The material portion was used for the defendant’s expenses and used to pay the return to investors.”
While Corsaut said the trust was unregistered, he vehemently denied that he used the money of some investors to pay off others.
“If that was true, we wouldn’t be able to give everyone their money back by the end of the month,” he said.
In addition, company literature lauded Corsaut’s qualifications and his 20 years of investment experience. But the flyers left out the fact that during those decades, Corsaut had pleaded guilty in Michigan to federal bank fraud charges, spent 18 months in federal prison and was fined $10,000. Corsaut that most of his clients did know of his background.
The brochures also did not mention that, during the 1970s, Corsaut was ordered by Michigan officials to stop selling unregistered promissory notes and had his insurance license suspended permanently for allegedly misappropriating an estimated $144,000 in premiums, according to the SEC complaint.
A federal court judge still must approve the complaint and the settlement, Colthurst said. That could happen as soon as today.