U.S. Securities and Exchange Commission
Litigation Release No. 18861 / August 31, 2004
SECURITIES AND EXCHANGE COMMISSION v. COLIN NATHANSON, INDIVIDUALLY AND DOING BUSINESS AS NATHANSON INVESTMENT TRUST, GIANT GOLF COMPANY, PLAY BIG ENTERPRISES, INC., STARQUEST MANAGEMENT, INC., WHITEHAWK CONSULTING GROUP, INC., LEAFHEAD CONSULTANTS, INC., NETTEL CONSULTING CORP., YRMAC CONSULTING SERVICES, INC., AND MILLENNIUM TECHNICAL GROUP, INC., Civil Action No. SA CV 04-0351 GLT (RZX) (C.D. Cal.)
DEFENDANTS IN $29.5 MILLION SECURITIES FRAUD IN ORANGE COUNTY, CALIFORNIA AGREE TO SETTLE SEC ACTION
The Securities and Exchange Commission today announced that on August 26, 2004, the Honorable Gary L. Taylor, United States District Judge for the Central District of California, entered final judgments against defendants Colin Nathanson and eight of the business entities Nathanson founded pursuant to their consents. The Commission's complaint alleged that the defendants, based in Orange County, perpetrated a $29.5 million securities fraud. As part of the settlement, Nathanson and the defendant entities, controlled by a court-appointed receiver, consented to permanent injunctions, without admitting or denying the allegations in the Commission's complaint. Additionally, the defendant entities agreed to disgorge all of their funds and assets pursuant to one or more plans of distribution approved by the court, less any court-approved receivership fees and expenses. Nathanson consented to disgorge $4.7 million. In satisfaction of this debt, Nathanson agreed to disgorge to the receiver all of his real property, including three parcels of land he owns in Orange County, as well as certain personal property that he owns. Payment of the remainder of the $4.7 million is waived, based upon Nathanson's demonstrated inability to pay.
The Commission's complaint, filed on March 25, 2004, in federal court in Orange County, alleged that since 2001, Nathanson and his companies raised $29.5 million from over 1800 investors nationwide through four fraudulent investment schemes. At the time the Commission filed its complaint, Nathanson was continuing to raise funds from investors in at least two of his schemes. The first of Nathanson's schemes involved selling securities in a golf equipment company he controlled, Giant Golf Co., which purportedly was preparing to conduct an IPO. The second scheme was a Ponzi scheme involving several entities that would purportedly purchase air time to air Giant Golf's infomercials. In the third scheme, Nathanson sold investment interests through the Nathanson Investment Trust in a purported unnamed software company that he claimed would soon be bought-out by a larger, unnamed, company. Finally, the complaint alleged that Nathanson sold securities in a company known as Millennium Technical Group that Nathanson said would exploit certain FCC licenses purchased in 1994. The Commission alleged that in these four schemes, the defendants lied to investors regarding how they would use the investor funds. The complaint alleged that without the investors' knowledge or consent, Nathanson commingled the investors' monies, and used the commingled funds to operate both the unprofitable defendant businesses and his other various unprofitable businesses.
Additionally, the Commission's complaint alleged that since February 2001, Nathanson used at least $1 million of investor funds to support his extravagant lifestyle, including three homes and payment of $346,500 in gambling-related debts. Finally, the Commission alleged that, in Ponzi-like fashion, Nathanson caused over $5 million of the $29.5 million raised to be paid to certain investors either as purported "returns" on their investments when, in fact, their investments were not profitable, or as purported returns of their principal.
The Commission previously obtained a temporary restraining order against all defendants. (See Litigation Release No. 18642). The Commission subsequently obtained a preliminary injunction against all defendants. (See Litigation Release No. 18663).