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September 05, 2011 at 08:00 PM
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.
