Last updated 4/19/2021 at 1:39pm
Long-time San Diego business owner Gina Champion-Cain, who pled guilty in federal court in July 2020 to securities fraud, conspiracy and obstruction of justice for defrauding investors out of $400 million through a liquor-license loan funding program, was sentenced to 15 years in prison – the maximum sentence – by U.S. District Judge Larry Alan Burns on March 31. Champion-Cain was immediately taken into custody.
"During the hearing, several victims spoke to the judge," said Assistant United States Attorney Andrew Galvin outside court on March 31.
"Nearly 500 victims poured over $350 million into Champion-Cain's sham investment scheme. Champion-Cain did not use the money to finance liquor-license transactions, as she told investors. Rather, she used tens of millions of dollars to line her own pockets and to support her failing Patio restaurants and other retail businesses."
Champion-Cain, 55, spearheaded an operation that biked hundreds of investors. Instead of using investor money to fund short-term high-interest loans to individuals seeking alcohol licenses, she directed the money to companies she controlled between 2012 and 2019, according to the Securities and Exchange Commission.
While under oath in court, Champion-Cain, 55, admitted that she was the "mastermind" of the scheme, which is said to be the largest scheme of its kind discovered in this district.
She added that she lied and forged documents to hide the scheme, on top of shredding evidence in the course of an investigation by the SEC, conspiring with employees of her own company and the local branch of a national title company to both commit the fraud and cover it up. The fraud was committed through her companies American National Investments, Inc., and ANI Development, LLC.
The SEC said Champion-Cain would tell investors of American National Investment's development business they could make a return on each license that was approved. She fabricated documents and then allegedly used the money from investors to support her lifestyle or to fund her other businesses like The Patio chain restaurants, Saska's, coffee shops, lifestyle brands and rental properties, according to a complaint filed in August 2019.
Champion-Cain was the founder and principle controller of San Diego based company, The Patio Group, the former management company of La Casa Del Zorro Desert Resort and Spa. The Patio Group took over as a managing partner back in November of 2018, and she had invested $1 million into LCDZ. At the time of the fraud, LCDZ was completely unaware and were "shocked." It did not affect their operations at the time.
The judge in the case handed down a sentence that was "more harsh" than that recommended by prosecutors, Assistant United States Attorney Aaron Arnzen told the media at the news conference after the sentencing.
"We recommended 130 months," Arnzen said. "The judge handed down a 180-month sentence. The judge did a great job of collecting information not just from the prosecution, but also from the defense and from the victims. When we investigate a crime, we try to gather as much information as we can, but in this case, the judge actually had more information than we did."
Prosecutors said the case may not be over yet, noting that if she gives more information that could lead to more charges or indictments of others, a motion could be brought back, and could possibly reduce her sentence.
The fraud scheme began in about 2012, when Champion-Cain first found an investor for a "lending program" to help new business owners obtain liquor licenses.
Hundreds of people nationwide were victims of Champion-Cain's alleged fraud scheme from 2012 – 19. In all, about $400 million "flowed into the scheme based on [Champion-Cain's] false statements," the plea agreement said.
Champion-Cain used some of those funds to purchase homes in Rancho Mirage and in Mission Beach and about $2 million went to pay her own salary, prosecutors said. A combined $840,000 was spent on San Diego Padres and Chargers box seat tickets, about $200,000 was spent on jewelry, at least $745,000 to pay off credit card bills and hundreds of thousands more went to miscellaneous expenses, including the purchase of a golf cart, according to the plea document. In order to give her scheme a sense of legitimacy, she did make payments of interest and principal to investors of more than $200 million, according to the plea document.
Champion-Cain and her co-conspirators made multiple attempts to obstruct their efforts – after learning in May 2020 about the SEC's probe, and in August, the FBI's parallel investigation – including changing American National Investments e-mail retention policy for herself and two other employees to just 24 hours, in effect "deleting a significant volume of emails that were responsive to the SEC's subpoena, many of which the defendant knew to be incriminating."
In addition, Champion-Cain ordered accountants in August to alter records of her personal expenditures, and instructed other workers to shred large amounts of hard copies related to the lending program, knowing those documents were also incriminating.
Champion-Cain provided interested lenders a list of businesses "seeking loans for their liquor license." In actuality, the list was fake and filled with businesses she found listed on the Alcoholic Beverage Control (ABC) website with expired or canceled licenses.
The fraud involved other unnamed employees of ANI – at the direction of Champion-Cain – who would forge signatures using a stamp imprinted with the signatures of employees of an escrow company. At least once, Champion-Cain convinced an actual escrow employee to sign more than 20 fake escrow agreements in order to convince investors of the scheme's validity, prosecutors said.
Champion-Cain's sentencing recommendation by prosecutors is actually made up of three consecutive five-year sentences – for securities fraud, obstruction of justice and conspiracy – and a three-year period of supervised release. Her sentencing range from federal guidelines is from 188 to 235 months in prison, Brewer said back in June.
While prosecutors said in the plea agreement that Champion-Cain "has expressed a desire to provide substantial assistance to the government in the investigation and prosecution of others," they also said they have not yet assessed the value of that offer of cooperation. However, if they do determine any information about co-conspirators is valuable to them, she may "merit a downward departure from the sentencing guidelines."
Champion-Cain did not operate the massive fraud alone. One of her co-conspirators, Crispin Torres Jr., pled guilty in connection to the case. Torres, who was an accountant and, later, the Chief Financial Officer of American National Investments, used his position to determine when Champion-Cain's businesses needed more money from investor funds.
On March 23, Torres was sentenced to four years in prison for, in the words of the U.S. Attorney's office, "using funds received from investors to prop up Champion-Cain's other businesses."