3 Firms Closed for Alleged Fraud
Three Southern California investment firms have been shut down after the federal Securities and Exchange Commission accused them of operating a Ponzi scheme that bilked investors out of more than $33 million, officials said Friday.
The SEC said the three firms engaged in securities fraud by selling investors notes from one of the companies that reportedly paid a guaranteed return of 12% in 60 or 90 days.
In fact, the three firms were simply using some of the new investors’ funds to pay existing investors in a classic Ponzi scheme, the SEC said. Other funds were sent to overseas bank accounts, invested in a crab-fishing business and used to pay some of the defendants’ personal expenses, the commission said.
A federal judge in Riverside on Thursday froze the assets of Mx Factors LLC of Riverside, BBH Resources LLC of Palm Springs and JTL Financial Group LLC of Corona and placed the firms in receivership. Also named as defendants in the judge’s order were Richard M. Harkless, 59, of Riverside; Daniel J. Berardi Jr., 40, of Palm Springs; Thomas Hawkesworth, 49, of Rancho Mirage, and Randall W. Harding, 43, of Corona.
The notes being fraudulently sold were issued by Mx Factors, the SEC said.
None of the defendants could be reached for comment Friday night.
In September, the state Department of Corporations accused Mx Factors of raising more than $21 million in investments without a state permit. The department ordered the firm to stop accepting money from investors.
The state Better Business Bureau issued a report calling the company’s promises of a 12% return unrealistic and described some of the company’s claims of financial reliability as untrue and misleading.
Mx Factors is headed by Harkless, according to state records.
The company came to the attention of authorities through Barry Minkow, the former Reseda businessman who spent seven years in prison for defrauding investors and banks through his ZZZZ Best carpet cleaning company.
Minkow is now an employee of the Fraud Discovery Institute, a private firm in San Diego that investigates potential fraud for private clients and insurance companies.
