Family Business Called a $40 Million Ponzi

EUGENE, Ore. (CN) - A family-owned insurance financing business took money from investors though they knew the firm was insolvent, costing more than 400 people $40 million, federal prosecutors say.

A federal grand jury returned a 26-count indictment against brothers Michael and Gary Holcomb on Nov. 19. It also charged Michael's two daughters, Kristen Van Breemen and Jennifer Chalmers.

The charges include conspiracy, nine counts of mail fraud, seven counts of wire fraud, six counts of money laundering, bank fraud, and four forfeiture allegations.

Prosecutors say the crimes occurred from 2008 through 2012 in the Holcombs' businesses, Berjac of Oregon and Berjac of Portland. The businesses are not named as defendants.

The brothers ran the Berjac companies, providing insurance premium financing to small businesses. Michael Holcomb's daughters worked for the companies as office managers.

The firms began investing in real estate and as a result faced a number of financial and legal troubles.

In 1996, the Oregon Division of Finance and Corporate Securities sanctioned the Holcombs "for securities fraud," the indictment states, "because they failed to disclose material facts to investors in Berjac of Oregon, including the fact that Berjac of Oregon was purchasing real estate for purposes of resale."

In 2012, the Division of Finance and Corporate Securities charged the Holcombs with selling unregistered securities in the form of "Berjac notes." The state said the Holcombs had been selling the unregistered securities for more than 15 years. The firms filed for bankruptcy.

During the bankruptcy proceedings, some of the firm's creditors said they did not know about the real estate investments.

Just before filing for bankruptcy in 2012, the Holcombs "caused Century Bank to advance them $300,000," according to the indictment.

"Defendants failed to disclose to investors the ever-widening gap between the amounts they owed investors and the value of the insurance premium financing portfolio, that the insurance premium financing businesses had been declining, and that the insurance premium businesses' financial condition was poor," the indictment states.

The Berjac firms "acted as a Ponzi scheme," prosecutors said.

In fact, according to the indictment, "In or about 1994, Peter R. Snook, the managing partner of Berjac of Washington, was convicted of operating Berjac of Washington as a Ponzi scheme from at least 1987 through 1991."

Snook is not named as a defendant in this case.

According to the indictment: "In 2012, the insurance premium financing businesses' portfolio totaled approximately 3 percent of the amount owed to investors - that is, defendants' portfolio was approximately $1.3 million, yet they owed investors more than $40 million."

The forfeiture allegations seek money and property, if it can be found.

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