Larry R. Polhill


Litigation Release No. 22811 / September 25, 2013

Securities and Exchange Commission v. Larry R. Polhill, Civil Action No. EDCV13-1729 MRP (SPX) (C.D. Cal. September 24, 2013)

SEC Charges Former President of California-Based Investment Firm with Fraud

On September 24, 2013, the Securities and Exchange Commission charged the former president of a purported private equity real estate firm based in San Bernardino, Calif., with defrauding nearly 500 investors who purchased promissory notes under the false premise that they were secured by specific properties or other collateral.

The SEC alleges that Larry Polhill used his company American Pacific Financial Corporation (APFC) to buy and sell real estate and distressed assets, and he offered investors the opportunity to invest in the company through unregistered notes that would yield them interest payments of 5 to 17 percent per year. However, the collateral that Polhill and APFC claimed made the investments secure was often non-existent or otherwise impaired. The properties underlying the investments were sometimes even sold without notice to investors. When APFC eventually filed for bankruptcy, it named the investors as unsecured creditors who were owed nearly $160 million. None of Polhill's investment offerings were registered with the SEC.

Polhill agreed to settle the SEC's charges and be barred from acting as the officer or director of any public company. The settlement is subject to the approval of the U.S. District Court for the Central District of California, which would decide monetary sanctions at a later date.

According to the SEC's complaint, in addition to promissory notes, investors also could invest in APFC-sponsored funds that pooled investor money to make loans to APFC. The company made regularly scheduled interest payments to investors in the notes and the funds from the mid-1980s to 2007. As a result, its investor base continually grew and the company began making larger and larger investments in distressed assets by buying numerous companies out of bankruptcy. While a few of APFC's investments were successful, the vast majority failed unbeknownst to investors. Consequently, the assets held by APFC that were securing the notes and loans held by investors decreased in value. In early 2008, APFC ceased making its scheduled payments to most investors, but continued to issue newsletters, pay preferred investors, and engage in other activities designed to create a false sense of security about the investments in the company.

The SEC alleges that Polhill made several material misrepresentations to investors. Specifically, he told investors that the notes were secured by collateral when no such security interest existed. He failed to disclose that the collateral securing some investors' notes already had been pledged to other lenders. Polhill represented that he would notify investors if their collateral went into default when that was often not the case. For instance, one investor's note specifically stated it was secured by property located in Hesperia, Calif., that was owned by APFC and pledged as collateral. However, APFC sold the collateral in 2004, and neither Polhill nor APFC informed the investor that his collateral had been sold and there was no longer any asset securing the note.

The SEC's complaint charges Polhill with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act. Polhill has consented to the entry of an order that permanently enjoins him from violating these laws and permanently bars him from acting as an officer or director of any public company.

The SEC's investigation was conducted by Marc Blau, Sara Kalin, and Peter Del Greco of the Los Angeles Regional Office. The SEC's litigation will be led by Lynn Dean.

SEC Complaint


Last Reviewed or Updated: June 27, 2023