Fraud that may have begun in Windsor makes its way to East Coast
(Greeley Tribune (CO) (KRT) Via Thomson Dialog NewsEdge) Feb. 16--The tangled web of apparent financial fraud thought to have originated in a Windsor investment firm in the past few years has made its way to the East Coast.
The New Hampshire Banking Department this week took over management of the Noble Trust Co. of Manchester, N.H., because it had lost $15 million and hid it from investors. It is the same loss Noble Trust's president alleges in an active lawsuit in Weld District Court, which stems from problems associated with the now defunct Blue Bear Funding in Windsor.
Former Windsor resident Darin DeVoe and others who started Blue Bear have faced continued scrutiny for their roles in investors' losses. DeVoe is wanted on a nationwide warrant for securities fraud and theft of $2.6 million from several investors through his mortgage business.
The complicated tale, as told in court documents, originated with the group that started Blue Bear, accused in 2006 of losing $20 million in investors' money. Blue Bear has since been dissolved, and investors are still trying to recoup their losses.
The president of Noble Trust, Colin Lindsey, has sued some of the original Blue Bear founders, specifically Virginia Brinkman, Russell Disberger and David Karst for the $15 million loss. Brinkman owns Sierra Factoring, one of the companies that contributed to Blue Bear's demise, and the primary company that is the subject of Lindsey's claim.
Brinkman's accountant, Thomas Anderson, who owns AgTax in Fort Collins, was formerly the chief executive officer for Noble Trust and recommended investments in Sierra, court documents state. He's also been named as a defendant in the case.
Brinkman and Anderson did not return calls for comment.
Disberger, who said he joined Blue Bear as a consultant, said Friday he shouldn't have been named as a defendant because his involvement ended before the Blue Bear bankruptcy in 2006.
"In my mind, it's somewhat laughable to hear I've been" included in that lawsuit, Disberger said. "The majority of (Noble's) losses transpired after Blue Bear filed for bankruptcy."
The lawsuit was first filed in U.S. District Court in September 2007, but it was refiled last month in Weld. It alleges several counts involving fraud, conspiracy and theft in the loss of $15 million from 150 investors "as a result of defendants' combined actions, misrepresentations and fraudulent activities," the lawsuit states.
The lawsuit discusses the inner workings of Blue Bear, stating that several factoring companies -- basically pay-day lenders for businesses -- that fed money into Blue Bear were "simply an instrument for soliciting investments in the single enterprise without becoming subject to securities regulations.
"In particular, funds invested in any one entity were commingled with funds of the other various entities, and all such funds were controlled by Brinkman, Disberger and/or Karst," the lawsuit states. "Almost from inception, Blue Bear and the (factoring companies), including Sierra, were insolvent. ... Blue Bear and the various (factoring companies) were operating as a single Ponzi-like scheme."
Noble Trust, which managed investments for nonprofits and senior citizens, came into the Blue Bear picture in 2004, the lawsuit states, when the accountant, Thomas Anderson began investing Noble Trust's and its clients' funds in Sierra and recommending that others ... do the same."
The lawsuit states the first $1 million of investments from Noble to Sierra went straight to Darin DeVoe in exchange for a $410,000 house he owned.
When officials filed bankruptcy for Blue Bear in 2006, the lawsuit alleges they transferred $15 million to Sierra, then to two other businesses under Brinkman's control, presumably in an effort to hide assets from the bankruptcy action.
On Monday, New Hampshire's banking department seized Noble Trust after a periodic review of its books.
"Generally, reviews are on an 18-month cycle, and during their exam, it all came to light," said Banking Commissioner Peter Hildreth.
In pleadings in the New Hampshire courts, Hildreth stated it was necessary to seize the company because of the high risk that money could be transferred electronically to Lindsey's Kansas offices.
Court records state that Lindsey had been "making false statements and entries into (Noble's) books for the purpose of deceiving customers, creditors and the Department" of Banking.
Court records indicate that Lindsey paid interest on some client accounts to hide the losses in the Sierra, mailed false investment statements to clients concerning the value of their holdings in Sierra and failed to report suspicious activity to the Banking Department, among other misrepresentations and omissions.
A hearing on the matter was canceled Friday and could be rescheduled at least 30 days out, Hildreth said. Hildreth filed a request with the courts to liquidate the trust. He also said he's working with the New Hampshire Attorney General's office on the matter.
"We're now going over assets to find out if anything else is going on," Hildreth said.
Blue Bear is still in court
In 2006, investors who lost roughly $20 million in the Windsor-based Blue Bear Funding sued the company for their lost investments. While the investors have settled with a couple of Blue Bear's former operators, they have yet to receive anything.
The lawsuit, which is scheduled to go to trial on March 17, now only has one set of defendants, Gerald and Peggy Makey of Severance, who are listed as original creators of Blue Bear.
Peter Houtsma, the Denver attorney representing the investors' committee that filed the lawsuit, said the investors have received a $7 million judgment, plus other settlements -- amounts that can't be disclosed.
Russell Disberger, contacted Friday, said he and others involved in Blue Bear were straw men in a host of problems stemming from bad business practices.
"Typically, in a scheme, there is one person at the helm, and they create bickering and confusion among the group to create a distraction, and it appears that has played out here," Disberger said. "There is a wonderful lesson here, and I think I'll write a book.
"There are people who take advantage, and you have to be on guard," Disberger said, adding that he was offered an equity interest in Blue Bear in exchange for his consulting work. He said he never got anything out of it, and he returned any money that did come his way because it seemed unethical.
He would not name the person he thought was responsible.
Houtsma said the lesson for anyone in the Blue Bear case is the old adage, "if it looks too good to be true, it probably is."
"This in many cases was a scheme, a Ponzi scheme whereby people kept putting money in, which allowed people at least on paper to believe they were getting every month 12 percent or more return on their money," Houtsma said of the Blue Bear operations. He said investors' bank statement would look as if they were earning that 12 percent or more, "but it was all paper."
Houtsma said while there is a $7 million judgment, the investors haven't recovered anything because they can't find any assets to seize.
"We've done everything we can in the litigation," Houtsma said. "Other than the collection action, there is no one else to sue."
The Key Players
--David Karst of Fort Collins started businesses in 2001 that eventually led to the formation of Blue Bear Funding.
--Darin DeVoe, formerly of Windsor, a former player in Blue Bear, is now wanted on a nationwide warrant for securities fraud and theft in a mortgage scheme.
--Virginia Brinkman, one of the owners of several companies involved in Blue Bear, is now the owner of DLR Factoring in Windsor.
--Thomas Anderson, a Fort Collins accountant, worked with Brinkman, leading investments her way from Noble Trust Co., in New Hampshire, according to court documents.
--Russell Disberger, a business consultant is now of New Castle. He was named as an original owner of Blue Bear and listed as a defendant in lawsuits alleging investors' losses.
--Steve Short, now a small business owner in Wasilla, Alaska, is listed as an original owner of Blue Bear, who received a judgment against DeVoe, but he is still seen as a key player in court documents.
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