True North Finance Corporation, f/k/a CS Financing Corporation, et al.


Litigation Release No. 21657 / September 21, 2010

Accounting and Auditing and Enforcement No. 3187 / September 21, 2010

SEC v. True North Finance Corporation, f/k/a CS Financing Corporation, et al., Civil Case No. 10-3995-DWF/JJK, USDC, D. MINN.


The Securities and Exchange Commission ("Commission") announced that on September 21, 2010, it charged a Minneapolis attorney and two San Francisco-area real estate lending fund promoters with defrauding investors in a Minneapolis-based real estate lending fund by concealing the collapse of the fund's sole business partner.

The SEC's complaint, filed in federal court in Minneapolis, alleges that Todd A. Duckson, of Prior Lake, Minnesota, Michael W. Bozora, of Belvedere, California, and Timothy R. Redpath, of Mill Valley, California, raised more than $21 million from investors in the Capital Solutions Monthly Income Fund after the fund's sole business partner defaulted on its obligations to the fund. The SEC alleges that after this May 2008 default, the fund ¢€" whose sole business was to make real estate loans to a single borrower ¢€" had no meaningful income and was using new investor funds to pay existing investors.

According to the SEC's complaint, Bozora and Redpath launched the fund in 2004 and, through August 2009, raised approximately $74 million from approximately 450 investors from across the U.S. After the May 2008 default by the fund's sole borrower, the fund foreclosed on the borrower's real estate projects. The SEC alleges that in late 2008, Bozora and Redpath asked Duckson, who was acting as the fund's outside counsel, to take over managing the fund. The SEC alleges that Duckson then began managing the fund while Bozora and Redpath continued to raise money from new investors. The SEC alleges that Bozora, Redpath, and Duckson failed to disclose the default and foreclosure to investors for several months. The SEC alleges that Bozora, Redpath, and Duckson eventually made some disclosure of the default and foreclosure, but they minimized the impact of these events and misleadingly promoted the fund's ability to make new loans.

The SEC's complaint also charges True North Finance Corporation, a Minneapolis real estate lending company that merged with the fund in 2009, and True North's Chief Financial Officer, Owen Mark Williams, of Saratoga, California, with accounting fraud. The SEC alleges that in 2008 and 2009, Williams caused True North to overstate its revenues by as much as 99%. The SEC alleges that True North improperly recognized revenue on interest from borrowers which were not paying True North and which were in poor financial condition.

The SEC is seeking permanent injunctions, disgorgement, prejudgment interest and civil penalties against all of the Defendants, and officer-director bars against Bozora, Redpath, Duckson, and Williams.