(CN) - A Florida investment firm targeted senior citizens in an $800,000 investment scam, the Colorado Securities Commissioner claims in court.
Colorado sued Chadbourn Partners LLC, aka Chadbourn Partners Inc., its chairman and managing director Daniel R. Murphy and president Henry Dyer Wiggins Jr., in Denver County District Court. All except Wiggins are based in Jacksonville Fla.; Wiggins' last known address was in Middleburg, Fla.
Named as a "related individual" is Michael Mendenhall, who is cooling his heels in a Colorado prison.
Murphy and Wiggins created Chadbourn to become a full-service holding company to acquire broker-dealer entities - that's that claimed anyway, the securities commissioner says.
"Without providing even minimal disclosure, Chadbourn Partners LLC, through Daniel Murphy and Dyer Wiggins, fraudulently raised over $800,000 from mostly unsophisticated and elderly Colorado investors by selling investments in its unregistered debentures," the lawsuit states. "Beginning in September 2010, Murphy and Wiggins began using Michael Mendenhall as a sales agent for Chadbourn in Colorado. Mendenhall began contacting clients of his former employer, Bankers' Life and Casualty, and soliciting them to invest in Chadbourn. Mendenhall falsely told these largely unsophisticated and often elderly investors that Chadbourn's debentures were safe and would generate far higher returns than they were receiving on their annuities or current investments. Mendenhall also pushed investors to liquidate their annuities or other safe investments to generate the funds to invest in Chadbourn. Once that was done, Mendenhall sent the investors' money and signed debenture agreement to Murphy and Wiggins. Murphy, Wiggins and Mendenhall never told Colorado investors critical information about the debentures they purchased. Prior to taking their money, they did not tell investors such basic information as Chadbourn's business model, the risk involved in the investment, or that Chadbourn would spend a third of its money on the personal expenses and salaries of its officers and employees, or that debentures had not been registered as required by law."
Chadbourn paid Mendenhall's legal fees and bail and Mendenhall continued to work for the company even after being indicted for securities fraud, according to the lawsuit. Mendenhall is in prison for a real estate investment scheme. His arrest on charges of securities fraud for Chadbourn et al. is a separate case, according to the new complaint.
Acting Securities Commissioner Gerald Rome seeks disgorgement, restitution and penalties for offer or sale of unregistered securities, misrepresentations or omissions of material facts, and securities fraud.