SAN FRANCISCO (CN) – John Brake defrauded investors of $20 million through his Pinnacle West company, the SEC claims in Federal Court. Brake claimed the investments were secured by real estate, but “Pinnacle never owned any property” and Brake spent the money on “an expensive beachfront rental home in Carmel, private jet travel, jewelry, a chauffeur, and lavish shopping sprees,” the SEC says. The agency sued two other men in a related case.
Brake, 56, of Santa Monica, allegedly ran the scheme from 1999 through 2005. The SEC says Brake got most of his $20 million from clients of Mark Boucher, lead defendant in the second case, who advertised the scam in his newsletter.
“As early as April 2001, Brake was warned in a letter he received from Boucher, whose clients invested heavily in the Pinnacle notes, Boucher identified ‘substantial evidence of embezzlement’ by Brake and admonished him not to spend any more investor funds on personal expenses. Despite this warning, Brake continued his lavish spending and misuse of investor funds,” the complaint states.
In the second case, also in San Francisco Federal Court, the SEC sued Mark Joseph Peterson Boucher, a Portola Valley investment adviser and publisher of an investment newsletter, and Gary Paul Johnson.
The SEC says that Boucher and Johnson “solicited investors – primarily from Boucher’s advisory clients – to invest in two real estate development companies by falsely promising that the investments were secured by real property with little debt. In reality, the investments were not secured at all: one of the companies never owned any property, and the other owned a single property whose debts exceeded its potential profits. In addition to these misrepresentations, Johnson diverted over $1.5 million in investor funds for his personal use. Similarly, Boucher used investor money to make mortgage payments on his home, and failed to disclose to investors that he had been promised secret compensation for his fundraising efforts. In the end, neither company successful developed a real estate project, and thus investors lost millions of dollars,” the complaint states.