One of the more extraordinary business crimes seen in the US was that of the entrepreneur Gina Champion-Cain which was unearthed in 2012.
Cain had been a very successful businesswoman, running American National Investments in 1997 and setting up the Patio chain of restaurants in San Diego, as well as a clothing company called Luv Surf Boutique.
However, it all went wrong, and she devised an elaborate fraud to try to stem the money her businesses were losing.
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The crimes were based around California’s liquor licenses, which can cost around $100,000.
Champion-Cain discovered businesses were having trouble coming up with such a large sum of money quickly after meeting a liquor license attorney who had voiced his concerns over his clients getting finance to cover their deposits.
We take a closer look at the crime.
What was the scam?
By 2012, Champion-Cain’s moving various companies were losing large sums of money.
To try to cover the losses, she set up an investment scheme that promised to deliver largely guaranteed returns to investors, up to 22 percent 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 admitted conspiracy, securities fraud and obstruction of justice.
She was sentenced to 15 years in prison in March 2021.
Crispin Torres, her chief financial officer, got four years.
In handing down the sentence, U.S. District Judge Larry Alan Burns told Champion-Cain her scheme demonstrated “tremendous callousness” and “extreme avarice” in committing a “monumental crime.”
Acting U.S. Attorney Randy Grossman said: “This is a fitting sentence for a defendant who caused significant harm to hundreds of victims.
“This Ponzi scheme cost investors hundreds of millions of dollars while the defendant lived in luxury. We will continue our aggressive efforts to prosecute those who swindle, deceive and bring financial devastation to victims.”
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