Securities Off-Limits to Developer

An administrative law judge has banned David Colton, an Orange County developer who was a key figure in one of Orange County’s costliest real estate scams, from being involved in any securities business in the state.

The state Department of Corporations sought the ban after Colton allegedly failed to comply with a court order in 1995 to repay more than $23 million to investors in the Hill Williams Development Corp., for which he served as an underwriter in several deals.

More than 4,000 investors, mostly Southland senior citizens, lost nearly $90 million by investing in the development outfit, which was supposed to use the funds to build affordable housing and promised returns of 15%. The operation collapsed in 1993.

The company’s founder, Donald Hill Williams Jr., was sentenced last year to 37 months in prison for running a Ponzi scheme in which he used money from new investors to pay those who invested earlier. No criminal charges were filed against Colton.

In August, about 1,000 investors filed a lawsuit accusing Colton of hiding assets to avoid paying the $23-million judgment. They contended that Colton fraudulently shifted his assets, including $4 million in profits obtained through unlawful means, to his wife and several real estate companies after it became clear that Hill Williams was falling apart.

The suit contends that Colton has resumed his real estate career and now controls stakes in several commercial buildings in Orange County.

“As far as we know, Mr. Colton has made no attempt to satisfy that judgment,” said Mark Harman, an attorney for the corporations department.

Colton, who was not available for comment, has until Sunday to appeal the ban. He also can apply for reinstatement in a year, Harman said.