FBI Probes Gig Harbor Company
The FBI is investigating Harbor Funding Group Inc., a Gig Harbor-based corporation, for conspiracy to commit securities wire fraud.
HFGI allegedly offered to provide loans to land developers in exchange for a 10 percent fee, which they kept without providing the loan money, alleges the indictment brought forth by the U.S. Attorney for the Eastern District of New York. HFGI initially appeared before the U.S. courthouse in Tacoma in January.
The defendants, HFGI President William C. Lange and Black Sand Mine President Joseph Pascua allegedly stole more than $9 million from about 300 individuals, a release from the U.S. Attorney’s Office states. Many were victims of Hurricane Katrina who were attempting to rebuild their homes, the indictment claims.
“This case serves as another warning to the public to be wary of investment campaigns that represent profit opportunities that appear too good to be true,” FBI Special Agent-in-Charge Laura Laughlin said in a release. Based in Seattle, Laughlin is conducting the investigation.
Lange said he could not respond to the allegations because the investigation is ongoing.
“My attorneys have said that we can’t comment on it,” Lange said, “but we look forward to being able to tell our side of the story.”
One alleged victim was Oasis at Five Palms LLC, a San Antonio-based company that has brought a civil lawsuit against HFGI and several related individuals, including Pascua. The case will be tried in August in the district court of Guadalupe County, Texas.
Bradley Clark, OFP’s attorney, recently came to Gig Harbor to gather testimony from witnesses. He calls the case a classic Ponzi scheme, claiming that HFGI took people’s money without intending to repay it.
“It’s overwhelming the evidence against them for what they were doing,” Clark said.
OFP had intended to borrow $2 million from HFGI and had wired $200,000 to HFGI’s attorney to fulfill the 10 percent pre-payment requirement, Clark said. His reading of bank statements leads him to believe that, four days later, that money was transferred to another account. OFP also lost its $5,000 processing fee, Clark said.
“It’s just amazing that people get away with this stuff,” said Clark, who is seeking punitive damages that could reach more than $1 million and actual damages valued at $372,000.
But Patrick Hundley, the attorney who represents HFGI as of April 7, said his clients did not knowingly swindle people out of their money.
“They were trying to do the best they could to make the investments work,” said Hundley, although he conceded that he’s been their lawyer for just half of the case, and he may not continue.
On Friday, Hundley filed a motion to withdraw due to what he called a conflict of interest. It will be up to the judge what Hundley will be allowed to do, he said. Clark said if Hundley is allowed to withdraw, he would be the second lawyer for the defendants to remove themselves from the case.
Clark said HFGI used the money to fund lavish vacations, pay the mortgage on a mansion and pay children for work they did for the company. He also claims HFGI was using money from clients to fund a gold-mining venture in Alaska led by BSMI.
But Hundley said he has not found any evidence that Lange and Pascua intentionally cheated clients out of their money.
“Were they bad in business? Did they make bad business decisions? Probably so,” Hundley said. “But did they commit fraud, or were they intentionally trying to defraud any of their investors? I guess that’s what the trial is about.”
The indictment also alleges that Lange and Pascua used in-person presentations and “webinars” to persuade victims to invest thousands of dollars in BSMI. On its website, BSMI claims to own 440 acres of land in Sitkinak Island, Alaska. The website states BSMI planned to use recent advancements in mining technology to recover precious metals, such as gold.
“Now is the Right Time,” reads the header on the BSMI homepage. The website states the company’s goal is to be a part of “the 21st Century Alaskan Gold Rush.”
“Black Sand Mine, Inc. is committed to facilitating operations that will begin to harvest these precious metals,” BSMI states on its website.
The indictment alleges that BSMI made fraudulent claims in order to entice clients to invest in the company.
Hundley said HFGI has made many attempts to pay clients back.
“They were taking people’s money, just like anybody who’s looking for investments and investors for ventures,” Hundley said. “They seek investments for what they’re trying to do ... ”
But on websites like Bigger Pockets Forums, HFGI clients express outrage over their lost assets.
The civil case, originally set to begin this month, has been put off until Aug. 15 for two reasons: to give the defendants time to find a new lawyer, and to wait for the outcome of the federal case, Clark said.
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