A year before federal regulators accused restaurateur Gina Champion-Cain of setting up a fraudulent investment program, she used more than $ 350,000 in company funds to lend money to his parents and also buy a car for nearly $ 80,000 for his father.
This week, a U.S. District Judge approved a settlement agreement that will return substantially all of those funds to a receivership controlling the former assets of Champion-Cain.
The use of the company’s money for the benefit of Champion-Cain’s parents was revealed during an ongoing investigation by a court-appointed receiver who combed through properties and bank accounts from the San Diego businesswoman to identify funds that could potentially be returned. to investors who federal regulators say have been defrauded in an alleged Ponzi scheme.
Champion-Cain was accused last August by the Securities and Exchange Commission of defrauding dozens of investors it tricked into participating in a $ 300 million liquor license loan program. Instead of using investor money to grant high-interest loans to people seeking alcohol licenses, she directed most of the money to businesses she controlled, alleged the SEC.
In an agreement approved by U.S. District Judge Larry Burns, Daniel and Barbara Champion agreed to return $ 330,000 of the $ 354,337 that receiver Krista Freitag says was transferred from the Champion-Cain companies “without providing any value in return. reasonably equivalent ”.
Most of the money transfer was a 2018 loan of $ 275,000 to Champion-Cain’s parents and came from their daughter’s business, American National Investments. He made no interest payments for a period of 10 years. The interest rate has been set at 4.25%, with principal and interest due by 2028, Freitag said in a motion in support of the settlement agreement.
In a separate transfer, Champion-Cain took $ 80,000 from the “escrow entities” and transferred the funds to his personal account. Shortly after, she issued a check for $ 79,337.86 to a BMW dealership in Ann Arbor, Michigan, to purchase a car for her father, Freitag details in a petition she filed in court.
Until there is more forensic accounting, it is not clear at this point whether the money used for the Champions included investor funds for the liquor license loan program.
The settlement agreement does not provide for the recovery of the full dollar amount that went to the champions. The $ 350,000 is 93% of the total amount, but Freitag argued that it was not worth the cost of taking legal action against them to get the full amount.
“Considering the amount at stake and the anticipated litigation costs, it is very unlikely that the recovery of a judgment (net of litigation costs) will exceed what Daniel and Barbara Champion have agreed to pay under the regulation, ”she wrote.
In the months following its role as receiver, Freitag has so far identified approximately $ 15 million of remaining assets, based on a February quarterly report that she filed with the court. Almost all of Champion-Cain’s restaurants were closed soon after the receiver took control, and efforts are underway to sell some of its real estate and businesses.