MINNEAPOLIS (CN) – A Minnesota attorney and two San Francisco-area hedge fund promoters defrauded investors of more than $21 million by concealing the financial collapse of the fund’s only borrower, the SEC claims in Federal Court.
Minneapolis-based attorney Todd A. Duckson, with the help of Michael Bozora and Timothy Redpath of Marin County, Calif., raised more than $21 million from investors in the Capital Solutions Monthly Income Fund after the fund’s sole business partner, Hennessy Financial, defaulted in May 2008, the SEC claims.
As a result, the fund “had no meaningful income-producing investments as of May 2008,” the agency claims. “Consequently, the Fund began mostly paying existing investors out of proceeds raised from new investors” — a typical Ponzi scheme — “because the Fund had very little income relative to its obligations.”
Duckson, 44, allegedly drafted documents to hide the scheme from investors. Those papers “did not mention Hennessey Financial’s financial difficulties, other than to make a vague reference to ‘voluntarily surrendered collateral’ that backed Hennessey Financial’s loans,” the lawsuit states.
The SEC says Boroza and Redpath, who launched the fund in 2004 and owned its distributor and investment adviser, falsely assured investors that the fund “was enjoying success and weathering disruptions in the credit and real estate markets.”
Between the fund’s launch in 2004 and August 2009, Redpath and Bozora allegedly raised about $74 million from 450 investors across the country.
In the fall of 2008, they recruited Duckson to serve as the fund’s investment adviser, which he did through his company Transactional Finance, the SEC claims.
Meanwhile, Bozora and Redpath also ran True North, a firm the SEC has accused of accounting fraud.
Duckson is now the CEO of True North, a position once held by Redpath, who is now the vice president of finance. Bozora was formerly its president.
The SEC claims True North’s CFO, defendant Owen Mark Williams, overstated the company’s revenue by as much as 99 percent.
The agency wants the defendants to immediately halt any securities transactions, disgorge all ill-gotten gains and pay civil penalties.
It is represented by Eric Phillips in Chicago.
Defendants are Duckson, Bozora, Redpath, Williams, True North Financial Corp., Hennessey Financial Monthly Income Fund, Capital Solutions Distributors, Capital Solutions Management and Transactional Finance Fund Management.