PHOENIX (CN) – Five men who sold $18 million in promissory notes for beachfront property in the Mexican desert and other deals spent practically all of it on cars, clothes and strip clubs, the SEC claims in court.
The SEC sued Jason Mogler, 47; James Hinkeldey, 62, both of Scottsdale; Casimer Polanchek, 32, of Chandler; Brian Buckley, 56, of Gilbert; and James Stevens, 75, of Fort Mohave.
The five cronies sold $18 million in promissory notes to 225 investors from October 2006 through May 2013, ostensibly to buy and develop beachfront property in Mexico, run recycling facilities and buy foreclosed properties to resell.
But they spent 97 percent of the money on living expenses, cars, clothing, and travel and entertainment at resorts, casinos and strip clubs, the SEC says.
They “repeatedly lied about the purported progress of the investments to calm worried investors and to convince them to extend out the time at which their promissory notes were supposed to have been repaid,” according to the SEC.
Mogler bluntly called the Ponzi scheme “‘robbing Peter to pay Paul,'” according to the 20-age lawsuit.
The men created a slew of names to hide the scam, including Pangaea Investment Group, Tri-Core Business Development, Tri-Core Companies, Tri-Core Mexico, Wert-Berater, C&D Construction Services, ERC of Nevada, ERC Compactors, ERC of Chicago and Phoenix Premium Properties, according to the SEC.
Mogler transferred investors’ money into the Tri-Core bank account as his personal “treasure chest” and “personal (expletive) candy store,” the SEC says.
They promised yearly returns of 25 to 80 percent for investments in waterfront property in San Luis Rio Colorado – a desert city which is not even near water. Its average high temperature in the summer is 105. Investors in recycling facilities in Las Vegas and Chicago were promised 12 to 26 percent annual return with a 2-year maturity date, according to the lawsuit.
“Defendants further participated in an Arizona radio program called ‘The Investment Roadshow,'” the SEC says. “The radio broadcasts referenced investments available in Mexican land, recycling and lender owned or foreclosed residential properties, made representations regarding the safety and security of these investments, instructed listeners how to use a self-directed IRAs to invest in the companies,” and invited them to call Arizona Investment Center – a Pangaea dba.
“(W)hile these men were living the high life, they outright lied to investors about the uses of their funds and misled them about the safety and security of the investments and the rates and timing of their returns,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “Despite telling investors they were purchasing promissory notes from licensed brokers, none of these men were registered with the SEC to solicit investments.”
In 2013, the Arizona Corporation Commission ordered Pangaea to pay $1.9 million in restitution and Tri-Core Mexico Land Development to pay $1 million in restitution for defrauding investors.
The SEC seeks disgorgement, injunction and penalties.
Attorneys for the men were not immediately available for comment. A phone number registered to Arizona Investment Center has been disconnected.
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