SoCal Shyster Owes $158 Million, SEC Says
LOS ANGELES (CN) - A San Bernardino County man owes 485 investors $158 million from a decades-long investment fraud, the SEC claims in court.
The SEC sued Larry R. Polhill, 61, of Grand Terrace, in Federal Court.
It claims he owes "almost $160 million" from the scheme he executed through American Pacific Financial Corp., which he controlled as president.
He sold his suckers promissory notes with false promises that they were secured by specific properties or other collateral, the SEC says in the lawsuit.
Polhill promised returns of 5 percent to 17 percent per year, but the so-called collateral was "often nonexistent or otherwise impaired" and sometimes he sold it without notifying his victims, the SEC said in a statement.
He also sold interests in LPs, which he called "Funds."
Polhill ran the company since 1978, according to the lawsuit.
"While a few of APFC's investments were successful, unbeknownst to investors, the vast majority failed," the SEC says in the complaint. "As a result, the assets held by APFC - which were securing the loans held by investors - decreased in value. A 2011 forensic examination performed on behalf of APFC's committee of unsecured creditors found that more than 83% of the company's 2005 assets were eventually written off as bad debts, and that the company was insolvent at least as early as 2005, and probably for years prior to that. ...
"In September 2010, APFC filed for Chapter 11 bankruptcy, disclosing a total of approximately $103 million owed to more than 485 'unsecured' promissory note holders, and $55 million owed to the Funds. In May 2011, the bankruptcy court appointed a Chapter 11 Trustee to investigate and oversee APFC's operations, based on allegations of fraud. In February 2012, a Chapter 7 Trustee was appointed, and the Chapter 7 Trustee has filed an adversary proceeding against Polhill alleging fraud."
The SEC seeks disgorgement, penalties for securities fraud, and an injunction.