HOUSTON (CN) – Two men at the head of a web of insurance and financial-services companies swindled more than 100 investors out of $39 million through a phony corporate bond offering, the SEC says.
Brian Bjork and the late Joel David Salinas, who died on July 17, apparently of suicide, also took $13 million from at least 52 investors by selling securities issued by two private funds, then used $3 million of it “for undisclosed affiliated transactions,” the SEC says in its federal complaint.
The SEC sued Bjork, Salinas’ estate, and their six companies: the J. David Group of Companies, J. David Financial Group LP, Select Asset Management LLC, Select Capital Management LLC, Select Asset Fund I LLC and Select Asset Prime Index Fund LLC.
The SEC says Bjork, 42, of Missouri City, Texas, and Salinas began running their bond scheme through J. David Group in 2004, then transferred all of the investors’ accounts to Select Asset on Jan. 1, 2007.
“Bjork and Salinas promised investors safe, fixed income by investing in highly rated corporate bonds and other bonds with annual yields up to 9 percent. In reality, the J. David Group corporate bond offering was bogus,” the SEC says.
The agency claims Bjork gave investors fake account statements showing bond holdings that he and Salinas had never actually acquired, and lied when investors confronted him.
“In November 2010, an elderly investor’s grandson met with Bjork, challenging him about the market values for the bonds on his grandmother’s Select Asset account statement. The grandson, who had some finance experience, pressed Bjork that the high bond values appeared to good to be true. Bjork assured the grandson that the values were correct and that Bjork knew how the values were determined, conveying the false impression that Bjork had actually purchased the bonds,” according to the 19-page complaint – long, for the SEC.
Bjork lied to SEC investigators when they met with him in his Houston office in January this year, concealing the bond scheme by saying that account holders “only received a statement from the broker holding the advised assets and did not receive a separate statement from Select Asset,” the SEC says. “Bjork concealed the existence of the Select Asset account statements, preventing the examiners from discovering the fictitious bond holdings at J. David Financial.”
In the second scheme, Bjork “offered securities in the form of units of preferred limited liability company membership interest (‘Units’) issued by two private funds,” the SEC says. Bjork and Salinas called the funds Fund I and Fund II.
The SEC says Bjork issued private-placement memorandums (PPMs) to investors, claiming that the “funds intended to build a commercial-loan portfolio by originating short-term commercial loans, purchasing loan participations and syndications, and investing in commercial-loan funds. Each PPM also said the fund manager would seek loan opportunities with relatively short durations, focusing on asset classes that either pay in full or re-price in six to 36 months.”
From August 2007 to December 2010 the funds raised more than $13 million from 52 investors, the SEC says. The funds then loaned the proceeds to Bjork-affiliated companies without disclosing it to investors, the SEC claims.
The SEC says Bjork’s companies also commingled investor funds raised in Fund I and Fund II, did not give investors promised annual audited financial statements or quarterly unaudited balance sheets and, as mentioned previously, used more than $3 million of the Funds’ money for undisclosed transactions.
The SEC seeks disgorgement, an injunction, penalties and damages for violations of the Securities Exchange Act.
Salinas shot himself in the head, Sport Illustrated reported on its website Monday. The sports magazine said Salinas ran “an elite AAU basketball team called Houston Select,” and was “well-liked and trusted by a wide circle of friends that included Division I college basketball coaches, Texas oilmen and pro athletes.”