4 Executives of Defunct O.C. Firm Accused of Fraud

The leaders of a defunct Irvine-based investment firm have been charged with defrauding about 700 victims of nearly $22 million and spending much of the money on themselves, the U.S. attorney’s office announced Friday.

Four former executives at Cross Financial Services Inc. were arrested Thursday and charged with 46 counts of securities fraud, mail fraud, wire fraud and money laundering, according to Anthony Pacheco, assistant U.S. attorney in Los Angeles.

According to a federal indictment, the Irvine company solicited investors during a 16-month period in 1993 and 1994.

The company promised investors big profits, saying it would use their money to make short-term loans to businesses that had won government contracts, a practice known as “factoring.”

Instead, Cross officials spent much of the money on big salaries and luxury items, including boats and an airplane, according to the indictment.

Cross founder and former president Douglas S. Cross, 47, of Laguna Niguel, was arrested by FBI agents in Kentucky, where he was conducting business.

Also arrested were Owen R. Fox, 55, of Rockaway Beach, Mo., who acquired Cross Financial in 1993; Carroll E. Siemens, 66, of Peoria, Ariz., who worked as a company consultant; and Michael J. Colello, 46, of New Rochelle, N.Y., who allegedly helped divert investor funds.

An attorney for Cross could not be reached Friday. He is expected to be returned to Los Angeles shortly.

Cross and the other three defendants face a maximum sentence of 20 years in prison, according to Pacheco.

In 1994, the U.S. Securities and Exchange Commission sued the four men and eventually won a court order requiring them to repay more than $20 million to victims.

So far about $2.2 million has been recovered and returned to victims, according to the SEC.

Some of the money was allegedly transferred to bank accounts in Switzerland.