Fraud Suspect Agrees to $11-Million Settlement

A man accused of defrauding elderly investors and using the proceeds to buy racehorses and renovate the stadium at his son’s high school has settled civil charges by agreeing to an $11-million judgment, federal regulators said Thursday.

The settlement requires E. Frank Cossey, former chief executive of TLC America Inc. of Brea, to surrender virtually all his property, including his home and at least two of his three cars. The assets, however, total only about $3 million.

A Securities and Exchange Commission lawsuit claimed TLC had attracted more than $150 million from 1,800 investors by promising safe, liquid investments with typical returns of 12% to 14%. But the SEC said at least $28.3 million was misused.

Cossey’s remaining major assets are his home in Diamond Bar and 200 racing greyhounds. His racehorses, purchased for $3.3 million, already have been auctioned off for $1.9 million. Officials said there is no practical way to recover $1.5 million Cossey donated to the school.

The home and dogs are worth about $1 million, bringing the total available for the judgment to perhaps $3 million, said Cossey’s attorney, Dean Steward of Capistrano Beach.

“He’s giving up just about everything and starting over,” Steward said.

Cossey, 55, who admitted no wrongdoing, remains under criminal investigation by federal authorities in San Diego, Steward said.

The former TLC executive is working part time as a consultant and looking for a new place to live with his wife and two teenage children, Steward said.

Cossey agreed to the settlement last week before U.S. District Judge David Carter in Santa Ana. TLC’s chief financial officer, Gary W. Williams, also settled SEC fraud charges by agreeing to a $248,145 judgment.

Investors sank $151.6 million into TLC, the SEC said. They have been told they will recover about half of their funds after TLC’s assets are liquidated, said Lisa Gok, an SEC enforcement supervisor in Los Angeles.

Robb Evans & Associates of Sun Valley, the receiver in charge of the liquidation, recently filed seven federal lawsuits against 76 sales agents and brokers, alleging they committed fraud in marketing TLC investments.

Liquidating TLC’s holdings has been tricky because the company specialized in buying distressed properties--real estate that was rundown, had delinquent loans or other problems.

SEC fraud charges also are pending against Thomas G. Cloud of Atlanta, who is accused of marketing TLC through Christian-oriented Internet sites.