The U.S. Securities and Exchange Commission (SEC) has obtained an emergency court order in a case involving what officials say is a firm that has just been pretending to be active in the life settlement industry.
The SEC has alleged in a complaint that Daniel C.S. Powell and his company — Christian Stanley Inc., Los Angeles — have spent the past seven years creating the illusion that Christian Stanley was involved in life settlements.
Judge George King, a judge on the U.S. District Court for the Central District of California, has granted the SEC’s request for a temporary restraining order and asset freeze against Powell and his companies. The court appointed Robb Evans & Associates L.L.C., Sun Valley, Calif., to be temporary receiver over the entities.
The SEC says in a complaint filed with the court that Powell used Christian Stanley to raise about $4.5 million from at least 50 investors through an unregistered offering of debenture notes.
Powell claimed the notes were backed by assets such as a gold mine in Nevada and a coal mine in Kentucky, and he promised investors fixed-interest returns ranging between 5% and 15.5% annually for 5-year terms, the SEC says.
The SEC alleges that Powell failed to use the proceeds from the debenture offering to buy life insurance policies, generate revenue by brokering the sale of life settlements, or develop the coal mines or gold mines, and he spent most of the money raised for purposes such as financing on stays at luxury hotels, visiting nightclubs and restaurants, and buying high-end vehicles.
The SEC alleges that Powell and Christian Stanley also used investors’ money for such unrelated purposes as paying commissions to the sellers of the debentures and making what the SEC describes as being “Ponzi-like” payments to existing note holders.
The SEC alleges that some of the other expenditures included “donations totaling $91,000, including $55,000 toward a tribute to Michael Jackson and $35,000 to the rapper Usher’s New Look Foundation” and “miscellaneous luxury purchases, including $8,700 for jewelry, almost $5,000 to register for a dating service, over $5,000 for cowboy boots, and more than $1,300 for designer sunglasses.
King has scheduled a court hearing for Sept. 15 on the SEC’s motion for a preliminary injunction.
Representatives for Christian Stanley were not immediately available to comment on the case.
The SEC filed its complaint Aug. 30, and the court docket for the case does not show that Powell and his company have filed a response or registered attorneys with the court
On the Web, Christian Stanley describes itself as a “Reverse-Life Insurance” company and also as a “full-service investment bank engaged in the underwriting, syndication, distribution, and capital placement of structured financial products underpinned by investor-owned life insurance.”
Christian Stanley says it has been investing in a consumer brand by advertising in markets such as Florida and Southern California.
The firm filed a Form S-1 registration statement with the SEC in 2008 and then filed four Form S-1 amendments. In the original S-1 registration statement, the firm says Powell earned a bachelor’s degree in industrial and labor relations from Cornell University in 200, then spent two years working as a financial advisor before striking out on his own to start Christian Stanley in 2004.
In an S-1 amendment filed in October 2010, Christian Stanley reported that it had completed a transaction at the end of 2008 in which it served as a broker for the sale and purchase of a life settlement policy.
Christian Stanley was working with other companies to develop networks of life settlement buyers and sellers, but, “as a development stage company, the company has no operating history and has experienced losses since its inception,” the company said. “The company’s independent auditors have issued a report questioning the company’s ability to continue as a going concern. That is, the company needs to create a source of revenue or locate additional financing in order to continue its developmental plans. As a development stage company, management of the company has no prior experience in the purchasing and pricing of life settlement policies and has little experience in the life settlement business nor in the securitization of life settlement packages.”