SAN DIEGO (CN) - Iconic basketball coach Lute Olson says he was one of more than 150 people who were burned by a man who ran two securities scams that netted him $52 million. Olson sued Brian Bjork, the estate of Joel David Salinas, and six of Bjork's investment companies, in Federal Court.
Salinas, who ran one of the top summer basketball programs in Texas, committed suicide on July 17, a few days after the SEC interviewed him in an investigation of securities fraud.
The Houston Chronicle reported on July 19 that Salinas, who exerted great influence over many young players, may have asked college basketball coaches to invest with his companies in return for steering good players to their schools.
Bjork, 42, lives in Missouri City, Texas.
Olson, in his complaint, claims that Bjork and Salinas promised investors "safe, fixed income by investing in highly rated corporate and other bonds with annual yields up to 9 percent." But he says the defendants sent investors statements about corporate bonds that did not exist or that Bjork and Salinas' companies never acquired.
In a separate scheme, Bjork and Salinas offered securities issued by two private funds that raised approximately $13 million from at least 52 investors since 2007, according to the complaint.
Olson says he invested more than $1 million in securities offered through the defendants' "fixed income" accounts and private funds.
He says, "the purchase was connected to the first part of defendants' fraud regarding the raising of money for purported investments in low-risk corporate bonds."
The complaint states: "Following plaintiff's initial purchase in or around April 2009, plaintiff received from defendants on a regular periodic basis account statements showing that his funds had been invested in low-risk, high-quality corporate bonds. Plaintiff relied on these account statements and formed the belief that his investments with defendants were safe and secure based on the fact that the corporate bonds were issued by highly-regarded national corporations. It was not until July 2011 when public reports surfaced about possible problems at [defendant] J. David Financial Group and related entities that plaintiff learned of the possibility of fraud."
Olson says Salinas offered purported "highly rated" corporate bonds to investors through J. David Group, an insurance and financial-services company he had operated since 1987. After Bjork joined the company and became its vice president, the two partners transferred investor accounts between J. David Group and various affiliates controlled mostly by Bjork and Salinas.
Olson claims that Bjork and Salinas sent monthly statements to investors, assuring them the bonds acquired by J. David Group were "an appropriate part of their investment portfolios."
But when investors and lenders raised concerns about the legitimacy of the bonds, Bjork and Salinas explained the discrepancies between bond descriptions and market value by falsely claiming they had bought the bonds in bulk and distributed them among investors to maximize returns, Olson says.
"In reality, J. David Group did not retain actual custody of the bonds," the complaint states. "Indeed, neither Salinas nor Bjork, through J. David Group, J. David Financial, Select Asset, or otherwise, had ever actually acquired the bonds reflected in the account statements. The bond offering was a sham. As of June 30, 2011, Salinas and Bjork had swindled more than 100 investors out of more than $39 million through the fraudulent bond offering."
Olson adds: "In January 2011, Bjork lied to examiners from the [Securities and Exchange] Commission's Fort Worth office, concealing the scheme's existence. Examiners met with Bjork in his Houston office during a compliance examination of Bjork's brokerage and investment-advisory activities at Select Asset. At the time, the examiners knew nothing about the bond offering and were therefore not intentionally seeking information about it. In response to the examiners' questions, Bjork told the examiners that Select Asset clients only received a statement from the broker holding the advised assets and did not receive a separate statement from Select Asset. Bjork concealed the existence of the Select Asset account statements, preventing the examiners from discovering the fictitious bond holdings at J. David Financial."
The Securities and Exchange Commission sued Bjork and the Salinas estate in August, alleging securities fraud.
Olson says that Bjork, as CEO of Select Asset Management, created two private funds that offered securities without telling investors that the funds made loans to affiliated companies controlled mostly by Bjork and Salinas.
He says Bjork commingled investors' money, transferred millions from the funds to Select Asset Management and other affiliates, and never provided investors with quarterly balance sheets or audited financial statements.
Olson seeks restitution and punitive damages for fraud and violations of federal and state securities laws.
He is represented by Maria Severson with Aguirre, Morris & Severson.
Olson, a highly respected coach for Iowa and Arizona, and a former coach of the U.S. National Team, retired from Arizona in 2007. After some uncharacteristically erratic behavior, his physician said the coach apparently had suffered an undetected "mini-stroke" that may have been responsible, and that an MRI test revealed it.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.