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25/09/2021

What Fraud? Gina Champion-Cain`s Ponzi Scheme

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Who Is Gina?
Gina Champion-Cain was born in 1964 and grew up in Ann Arbor, Michigan, before moving to San Diego in 1987 to attend law school at the University of San Diego. Switching to guaranteed business, she graduated with an MBA and moved into property development, buying and reselling distressed properties. After a spell working for the property firm. Koll struck out on her own, setting up American National Investments in 1997. Her property development efforts led her into the restaurant business, and she set up the Patio chain of restaurants in San Diego. She also launched a clothing chain, Luv Surf Boutique.

What was the scam?
By 2012, Champion-Cain’s moving various companies were losing large sums of money. Hence, she set up an investment scheme that promised to deliver largely guaranteed returns to investors, up to 22% a year, by lending money to business owners attempting to acquire California state liquor licences. She promised that the funds would be held in an escrow account to be protected. In reality, no loans were made, and she diverted the set money to prop up her failing business empire, fund her lavish lifestyle (she spent $800,000 on sports tickets alone) and repay earlier investors.

What happened next?
Champion-Cain’s reputation as a successful entrepreneur and the fact that early investors were indeed repaid meant that she had little problem attracting money. Between 2012 and 2019, it is estimated that she took in at least $372m from investors. By 2019, however, the government had started investigating her business. Despite attempts to destroy incriminating evidence, the scheme was shut down later that year. Champion-Cain later pleaded guilty to conspiracy, securities fraud and obstruction of justice. She was recently sentenced to 15 years in prison. Crispin Torres, her chief financial officer, got four years.

What are the lessons to be learned?
Net losses are estimated at $180m, around half the money invested. Some of the victims
were close friends of Champion Cain, including one woman who had known her for 30 years and attended her wedding; an important reminder that, when it comes to investment, you
should remain sceptical, even about people you would normally trust. Also, escrow accounts, where third parties hold the money and only release it under certain conditions, can reduce the risk of fraud, but they cannot eliminate it.

Kris Paterson is a writer for WhatJobs.com

Image Credits: Sandiego Union Tribune

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