SEC: 5 Men Fleeced Real Estate Investors to Pay for Strippers, Disneyland

Unregistered men misappropriated roughly 97% of the $18M raised from what they said was a Mexican beach front property development

Client money was used to fund casino outings and other trips, the SEC says. Client money was used to fund casino outings and other trips, the SEC says.

The Securities and Exchange Commission Friday charged five Arizona residents with stealing approximately $18 million from investors via radio, magazine and Internet ads to fund a fictitious beachfront property development in Mexico.

The SEC alleges that the five men also solicited investors through marketing materials, cold calls and investor presentations, and that the men used the stolen millions from investors to make car payments, buy clothes, and fund trips to strip clubs, casinos and Disneyland.

Jason Mogler, James Hinkeldey, Casimer Polanchek, Brian Buckley and James Stevens misappropriated roughly 97% of the $18 million they raised from 225 investors who were told the funds would be used to acquire and develop beachfront property in Mexico as well as to operate recycling facilities and purchase foreclosed residential properties for resale. 

The men “repeatedly lied about the purported progress of the investments to calm worried investors as time extended past when their promissory notes should have been repaid,” the SEC states. In certain instances they made Ponzi-like payments to investors who were threatening them with lawsuits by using money from new investors, which Mogler termed “robbing Peter to pay Paul.”

From at least October 2006 until October 2012, the men offered and sold promissory notes issued by Tri-Core Mexico, Tri-Core Cos. and Mar De Cortez, raising approximately $10 million from investors, according to the SEC order.

Defendants provided investors and potential investors with offering materials stating that investor funds would be used to purchase and develop waterfront investment property in San Luis Rio Colorado, Sonora, Mexico, and Polanchek in particular, the SEC states, was known to solicit potential investors at such venues as bars, cruises and self-help seminars.

The men also participated in an Arizona radio program called The Investment Roadshow during which they instructed listeners about how to use self-directed IRAs to invest in their companies, according to the SEC.

Michele Wein Layne, director of the SEC’s Los Angeles Regional Office, said that the agency alleges that while “these men were living the high life, they outright lied to investors about the uses of their funds and misled them about the safety and security of the investments and the rates and timing of their returns. Despite telling investors they were purchasing promissory notes from licensed brokers, none of these men were registered with the SEC to solicit investments.”

Mogler was described as the “Master Investor” on the Arizona Investment Center website and he orchestrated and perpetuated the fraudulent offerings. He stole almost $10 million in investor funds for strip club outings, vacations to Hawaii and Disneyland, and such personal expenses as mortgage payments and child support, the SEC states.

Polanchek stole approximately $2 million, Hinkeldey stole $900,000, Buckley stole $500,000, and Stevens stole $200,000, according to the SEC.

“Mogler candidly called investor funds ‘our treasure chest’ and his ‘personal (expletive) candy store,’” the SEC order states.  

The SEC’s complaint charges Mogler, Hinkeldey, Polanchek, Buckley and Stevens with violating federal antifraud laws and related SEC rules. The SEC said it is seeking disgorgement of ill-gotten gains plus prejudgment interest and penalties as well as permanent injunctive relief.

--- Check out 8 Oddest Enforcement Cases of 2014 on ThinkAdvisor.

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