More than two years after Gina Champion-Cain was charged with securities fraud in San Diego’s biggest Ponzi schemes, a federal judge paved the way for her hundreds of victims to begin claiming losses that are approaching so far. ‘now $ 200 million.
The court-appointed receiver overseeing Champion-Cain’s financial portfolio, including former real estate and restaurant assets, will soon be sending out âproof of claimâ forms that investors will need to complete to be eligible for potential payments. Former employees, vendors and other creditors will also be eligible.
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Whatever funds are ultimately available, they will be disbursed in accordance with a distribution plan which has not yet been approved.
âYou have been identified as a potential applicant,â says receiver Krista Freitag in her template letter to investors. âWith respect to investor claimants, I have worked to calculate the amount of net loss, which reflects the net amount of actual payments you made and received from receivership entities or others in connection with the program. ”
Freitag notes that if investors believe his calculations conflict with their own records, they will have the right to challenge his findings, provided they provide proof. For creditors seeking repayment, Freitag will not know their potential losses until they submit their claim forms.
The claim forms are currently being finalized and Freitag plans to start distributing them shortly, said David Oates, spokesperson for the receiver.
In the two years since his appointment to the receiver, Freitag combed through a tangle of bank accounts, real estate investments, restoration operations and hundreds of transactions related to a long-running license loan transaction. alcohol orchestrated by Champion-Cain.
According to Freitag’s most recent status report, completed in August, the receivership had just over $ 23 million in the bank, still a fraction of the estimated $ 183 million in net losses suffered by more than 300 people and entities who thought they would invest in high interest loans to liquor license applicants.
Instead, the money Champion-Cain collected from unwitting investors was redirected to companies it controlled. She in turn used the money from the new investors to repay the people who had invested earlier. Champion-Cain pleaded guilty to federal criminal charges of securities fraud, obstruction of justice and conspiracy, and earlier this year he was sentenced to 15 years in prison.
The current bank balance in the receivership includes between $ 15 million and $ 16 million in net proceeds from the sale of Champion-Cain’s assets, most of which have been sold. Also included is $ 11.3 million that was previously held in a Chicago securities escrow account when a federal court in 2019 froze all accounts related to Champion-Cain and its companies – American National Investments and its subsidiary ANI Development.
Chicago Title is the company that Champion-Cain used to hold investor money that it raised for so-called liquor license loans. Many victims have filed complaints against the company, claiming that it was partly guilty of the fraud. To date, 200 victims have reached settlements, recovering approximately $ 65 million of their claimed losses of $ 90 million.
“I would say this process is extremely important because ultimately that is the goal of any receivership proceeding – to maximize asset value and maximize distribution to creditors, although we do not yet know what is. this expected allocation, âsaid attorney Benjamin Galdston, who represents a number of investors who have filed a lawsuit against Chicago Title but have not yet settled.
âBut investors are very frustrated with what they think is a frosty process, not only on the part of the receiver but also the courts. You have an accused who has pleaded guilty, there was a tremendous amount of evidence against him. other evildoers, and the US attorney’s office said there would be more indictments, but there was very little real progress in the entire universe of this case.
Freitag notes in her August report to U.S. District Court Judge Larry Burns that she made 28 real estate sales and three leasehold sales, in addition to liquor license and personal property sales. associated with six Champion-Cain restaurants now closed. There have also been three foreclosures of previous Champion-Cain properties, including the Patio on Lamont and the Himmelberg Restaurant and Bar in downtown San Diego. As a result, no money was paid into receivership, Freitag reported.
However, she was able to recover $ 1.3 million from Champion-Cain’s husband, Steven Cain, following the refinancing of the couple’s family home in Old Town. The receiver had claimed in a court document that $ 1.4 million of funds from Champion-Cain’s former company, ANI, were used to help finance the purchase of the home in 2015. In a petition Freitag filed last November, she noted that the repayment plan the parties had settled on would allow Cain to take sole possession of the house.
Freitag notes that due to heavy indebtedness from a number of Champion-Cain holdings, sales proceeds were relatively small “relative to past or currently estimated market values ââof the assets.”
She is, however, hoping that she will be able to recover even more funds as she files what are known as recovery requests aimed at recouping profits from investors who have in fact received a net gain from their investments with Champion. -Cain. It has so far filed 11 claims worth nearly $ 16 million, although none have been finalized.
Attorney William Caldarelli, whose investor clients were able to recoup 65% of their nearly $ 23 million loss last year through a Chicago Title settlement, said those victims would still be entitled to a share of the assets under escrow, but on one condition. Other unpaid investors would first have to recoup 65% of their receivership losses before Caldarelli’s clients can begin to split the remaining holdings from the receivership.
Freitag is asking the court for permission to also sue Chicago’s title in the hopes of getting more money for the victims, but has yet to receive court approval for this.
âNothing that I’ve seen has yet provided a percentage of what the receivership thinks it can give back to people,â Caldarelli said. âSo you don’t know at the end of the day how much a comeback will come in, and that’s because they can’t predict how they’re going to do on their big clawblack claims or what will happen with the Chicago title. “One of the reasons we have structured our settlement the way we have done is to remain eligible to participate in future distributions, as we are always hopeful that there will be money coming back to them.”