Business executive Gina Champion-Cain admits she is the 'mastermind' behind the $400 million Ponzi scheme (2023)

Prominent San Diego businesswoman Gina Champion-Cain pleaded guilty Wednesday to securities fraud, conspiracy and obstruction of justice for defrauding investors of $400 million through an authorized loan financing scheme.

"Champion-Cain admitted under oath in court that she was the mastermind behind a massive $400 million Ponzi scheme involving hundreds of victims from California and across the country," US Attorney Robert Brewer said at a conference. press office at the Front Street Building in downtown San. Diego on Wednesday, adding that "this is the largest system of its kind ever examined by this office."

After pleading guilty, Champion-Cain walked out of the US District Court in San Diego with his lawyer. NBC 7 reporter Artie Ojeda asked Champion-Cain if he had any comment on his admission to running what US Attorney Robert Brewer called "the largest Ponzi scheme ever discovered in this district."

"No, but thanks for asking," she replied.

The former operator of the Patio Group restaurants misled investors into believing it had the ability to finance short-term, high-interest loans to people seeking California liquor licenses, according to the Securities and Exchange Commission.

The SEC said Champion-Cain will tell investors in American National Investment's development business that they could earn a return on each approved license. He falsified documents and allegedly used investor funds to finance or support his lifestyle.finance your other businessessuch as Patio restaurants, Saska's, coffee shops, lifestyle brands and rental properties, according to a complaint filed in August 2019.

Brewer said the program had a very real human cost that defrauded many older investors out of all their retirement funds, including one who was forced to file for bankruptcy after losing millions. He said Champion-Cain, 55, not only defrauded individual investors, but also defrauded banks and mutual funds.

"A Ponzi scheme occurs when the criminal promises investors that they will invest money in a certain way and then breaks those promises," Brewer said Wednesday. "Instead of investing the money, they use the new investor's money for three main things: first, to pay other investors who exit or benefit from their investment. Second, to pay promised interest payments on previous investments, and third, , to divert money into his own pocket.”

Hundreds of people across the country fell victim to the alleged Champion Cain scam scheme of 2012-19. In total, an estimated $400 million "flowed into the program based on [Champion-Cain's] false testimony," according to the objection agreement.

"At least one of the victims was a financial institution that invested more than $1 million in the loan program and lost," prosecutors said in the plea agreement.

Champion-Cain used some of those funds to buy homes in Rancho Mirage and Mission Beach, with about $2 million going to pay his own salary, prosecutors said. A total of $840,000 was spent on Padres and San Diego Chargers tickets, about $200,000 on jewelry, three-quarters of a million on credit cards, and hundreds of thousands more on various expenses, including the purchase of a golf cart.

Prosecutors allege that Champion-Cain and his accomplices have made multiple attempts to obstruct their efforts, after learning of the SEC investigation in May and the parallel FBI investigation in August, including the change to the Email Retention Policy. and two other employees just 24 hours ago, virtually "except for a significant volume of emails in response to the SEC subpoena, many of which the defendant knew to be incriminating." In addition, in August, Champion-Cain ordered accountants to tamper with his personal spending records and, two days later, ordered other workers to shred large amounts of paper documents related to the loan program, knowing that those documents were also incriminating.

Brewer said Wednesday that Champion-Cain also forged documents and signatures and sent fake emails to investors.

"An investor who was suspicious of Champion-Cain contacted the Securities and Exchange Commission, who launched an investigation that uncovered the fraud, filed a civil complaint and contacted our office," Brewer said.

Surprisingly, as investigators closed in, between the days Champion-Cain ordered email sanitization and shredders activated, he tried to get another $150 million in loan program funds to fund his accounts. Banks that needed a cash injection to "hide the size and scope of the Ponzi scheme."

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Alcoholic Beverage License Loan Program Scheme

The scam scheme began around 2012 when Champion-Cain first found an investor for a "loan program" to help new business owners obtain liquor licenses.

In California, an escrow account must be established to purchase a liquor license from an existing licensee. The money will be held until the license is approved or denied, a process Champion-Cain convinced investors was time-consuming and expensive for new entrepreneurs.

Champion-Cain provided interested lenders with a list of businesses "seeking credit for their liquor license." In fact, the list was bogus and full of companies he found on the Alcoholic Beverage Control (ABC) website with expired or canceled licenses.

These entrepreneurs are willing to pay high interest rates for short-term loans to obtain their license, Champion-Cain told investors. The mogul would handle the "negotiations" for the investors and put the notional loan on escrow to be returned to the business owners once the liquor license process was complete.

The first lender he unknowingly convinced to participate invested tens of millions of dollars in the program. According to prosecutors, a "significant number of individuals and organizations" have invested tens of millions in the system.

The scam involved other anonymous ANI employees, led by Champion-Cain, forging signatures using a stamp imprinted with the signatures of an escrow company's employees. On at least one occasion, Champion-Cain persuaded a royal trustee to sign more than 20 fake trust deeds to convince investors of the scheme's validity, prosecutors said.

To cover up its plan, Champion-Cain would prevent the trust company from interacting with investors. In an email to the trust company, Champion-Cain wrote: "I always promised you that I would protect you from my crazy investors..." as an investor. I have a lot of people who are dying to give me money, honey. !!Ahahahahahahahaha.:-I love you guys!

The lenders agreed to participate in the securities guarantee program. They were told their funds would be held on escrow, meaning their earnings depended on the success of the program.

To give investors an idea of ​​its success, around $200 million was paid out to investors.

Whats Next

The former tycoon, who once dedicated himself to a day in the city of San Diego, faces up to 15 years in prison.

The prosecution's recommendation actually consists of three consecutive five-year prison sentences, for securities fraud, obstruction of justice and conspiracy, and a three-year supervised prison sentence. Under federal guidelines, his sentence ranges from 188 to 235 months in prison, Brewer said. She is also threatened with the confiscation of money and property and an order to compensate the victims.

While prosecutors said in the plea agreement that Champion-Cain "expressed a desire to provide significant assistance to the government in investigating and prosecuting others," they also said they had not yet assessed the value of this offer of cooperation. However, if they find the information about the co-conspirators valuable to them, "it could warrant a deviation from the sentencing guidelines."

Champion-Cain did not operate the massive fraud alone, prosecutors said. One of his co-conspirators, Crispin Torres Jr., pleaded guilty in connection with the case. Torres, who was an accountant and then chief financial officer at American National Investments, used his position to determine when Champion-Cain's companies needed the most cash from investor funds.

"The plea agreement contains the word 'co-conspirator' at least 10 times..." Assistant District Attorney Aaron P. Arnzen said Wednesday. "That leaves other co-conspirators out there."

Both Champion-Cain and Torres are scheduled to appear for sentencing on October 13.

What happened to the Grupo Pátio restaurants?

In light of the scandal, Cohn Restaurant Group (CRG) took over operations of some of the Patio Group's stores, including The Patio on Lamont in Pacific Beach, Surf Rider Pizza in La Mesa and Ocean Beach, and Saska's in Mission. Beach.

The Patio at Goldfinch in Mission Hills and Fireside by the Patio at Liberty Station were closed. The Mission Hills site was recently acquired by the operators of La Puerta in San Diego's Gaslamp District, who are expected to open a satellite site between October and February.

Champion-Cain has long been a respected member of the San Diego business community and has received numerous awards for his work.

These other San Diego-based ANI companies were also shut down as part of the Champion-Cain case:

• Bao-Strand, Missions-Strand
• Himmelbergs, East Village
• Compañía de surf de Mission Beach, Mission Beach
• Patio Express, Mission Beach
• Patio-Express-Mission Hills
• Swell Coffee Co., Del March
• Swell Coffee Co., Mission Beach
• The Farmers Market, La Jolla
• The Farmer's Market, UTC
• A life to surf, Mission Beach

A San Diego real estate investor is accused of defrauding dozens of victims out of $300 million through an alcoholic beverage license loan financing scheme. Reports Jackie Crea of ​​NBC 7.

This is a developing story and will be updated as details are released.