One of the largest investors in an alcohol license lending scheme allegedly orchestrated by San Diego businesswoman Gina Champion-Cain has sued Chicago Title Company for fraud in hopes of recovering more than $250 million in losses and damages.
The lawsuit, filed by San Diego real estate developer Kim Peterson, is the third such suit claiming Chicago Title was complicit in a federal fraud case in which the Securities and Exchange Commission has accused Champion-Cain and her companies of swindling more than four dozen investors out of hundreds of millions of dollars that they thought was being used to purchase California liquor licenses. Peterson’s legal claim is notable for the huge amount of money he and a partner helped raise from other individuals and financial institutions who were lured with the promise of high returns.
Taking into account the money he invested and the funds he raised from others, there is no other larger investor in the alcohol license lending platform, said Peterson’s attorney, Jake Ryan.
The suit claims losses over a six-year period of more than $140 million in an escrow program Peterson says he was induced to invest in because of Chicago Title’s reputation and assurances made by its escrow officers that the lending program was legitimate. Chicago Title served as an escrow agent for Champion-Cain’s lending platform but has never been named in the SEC case.
“Throughout the life span of the escrow lending program, Plaintiffs and other lenders received from Defendants (Chicago Title) and Champion-Cain regular reports specifying which escrows they had loaned money for and confirming that the full amount of their loans were safely held in Chicago Title escrows,” the suit states. “In fact, the liquor license escrow program was a fraud, designed to use the illusion of safe Chicago Title escrows to solicit millions of dollars of loans, which would then be stolen by the Defendants and their conspirators.”
Joining Peterson in the lawsuit against Chicago Title and three of its employees are partner Joseph Cohen; Kim Funding, which Peterson created to recruit other investors; and ABC Funding Strategies, started by Peterson and Cohen in late 2014 to make additional loans for the alcohol license lending program. In addition to claims of fraud, negligence and false advertising, the Peterson suit also alleges elder financial abuse, arguing that both Peterson and Cohen, who are 71, are considered “elders” under California’s Welfare and Institutions Code.
Chicago Title attorney Steve Strauss on Monday rejected Peterson’s claims, stating that “he was a knowledgeable and sophisticated investor who made his own investment decisions.” Chicago Title, though, went even further in a recent legal filing responding to a previous suit against the company, asserting that Peterson and Kim Funding were “perpetrators” in the alleged funding scam. In that filing, which seeks to dismiss a suit filed by two financial institutions who lent money to Champion-Cain, Chicago Title claims that the two companies, Ovation Finance and Banc of California, conducted “almost no due diligence” and are going after Chicago Title simply to “recover their losses from a deep pocket.”
It added, “Liquor licenses in California are matters of public record, and basic research would have revealed to Plaintiffs that most of the licenses Cain was purporting to fund were not for sale at all … Similarly, an Internet search easily reveals that California liquor licenses are sold by highly specialized brokers, any of whom could have explained to Plaintiffs that Cain’s scheme was nonsensical.”
Ryan dismissed as false Chicago Title’s claims about his client, who he said had previously been a friend and former business associate of Champion-Cain’s. “Peterson was not at the center of the fraud; instead, Mr. Peterson was defrauded by people at Chicago Title and Gina Champion-Cain and others.” Ryan would not say how much much of Peterson’s own money was invested with Champion-Cain but he described it as significant.
Since being charged by the SEC in August with securities fraud, Champion-Cain, a once-prominent San Diego restaurateur, has been cooperating with the federal agency and has voluntarily ceded control of her companies, American National Investments and its subsidiary ANI Development, to a court-appointed receiver. A federal court order in early September froze her assets, including multiple businesses and dozens of bank accounts.
In Peterson’s suit against Chicago Title, he offers a number of examples to make his case that the company’s escrow officers sought to conceal the alleged fraud when investors or auditors would make inquiries about the liquor license loans.
In one case, a potential investor interested in making a loan wrote to one of the escrow officers asking for confirmation regarding funds that had been deposited in an escrow account for a particular liquor license.
According to the lawsuit, the request ultimately made its way to Champion-Cain, who in an email back to two Chicago Title escrow officers wrote, “I’m gonna have grouchy Kim Peterson replace Steve’s funds (the inquiring investor) as Kim, as grouchy as he is, is MUCH easier to deal with . . . love that guy! 🙂 I have always promised you I would shelter you from my crazy investors and I will continue to do so. If any one of them bug you as they are too stupid to understand the program, then they are “FIRED” as an investor!!!! I have plenty of dudes dying to give me money, honey!!! Ahahahahahahahaha.”
While Peterson himself has not been personally sued in connection with the liquor license investment scheme, he has been the target of a petition filed by some investors seeking to force him into involuntary bankruptcy as a way of potentially recouping the money they lent to Champion-Cain via Peterson. He has yet to respond to or contest the petition but is seeking an extension of his Dec. 23 deadline.
Chicago Title has opposed the request, Strauss said, “because it allows Peterson to try and use the bankruptcy action as a shield from potential legal claims against him and Kim Funding.”
Peterson also was sued, as trustee of the Peterson Family Trust, by CalPrivate Bank, which loaned the ANI License Fund $12.5 million in 2017. CalPrivate Bank states in its suit that Peterson had agreed to personally guarantee the loan should ANI ever default, which it did in September. The bank is seeking repayment of the loan, plus accruing interest.
