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Investors face up to $65 million in losses from funds run by a Washington, Utah, man who is accused of taking hundreds of thousands of dollars in kickbacks from dubious companies in which he placed money, including at least one which operated as a Ponzi scheme, court documents say.
A court-appointed receiver says investors in Total Wealth Management and related companies face possible additional losses of $44 million on top of $21 million already written off by the San Diego-based entities. At the end of last year, the company had about 600 investors and at least $100 million under management, it said in a regulatory filing.
Jacob Keith Cooper, the Washington man who owns Total Wealth Management, did not return messages seeking comment, and a phone number listed in his name had been disconnected. He is representing himself in the lawsuit.
A number of alleged victims in the San Diego area are members of The Church of Jesus Christ of Latter-day Saints. On a Total Wealth web page, Cooper touts his two-year Mormon mission in New England and boasts that he is an Eagle Scout.
Attorney Mia Severson, who represents a number of investors, said Cooper's actions have left many retirees without their savings and wondering monthly how they will make ends meet.
"What's worse," she wrote in an email, "Jacob Cooper used his Mormon affiliation to induce fellow Mormons in San Diego to invest. He robbed them of their money using their trust in a fellow Mormon a perverse use of the religion."
The Wealth Management receiver, Kristen A. Janulewicz, an Irvine, Calif., accountant, said in her initial report to a federal judge that Cooper had revenue-sharing arrangements and collected management and other fees from companies in which he had placed investor monies but which were insolvent, appeared to be losing money or "had unusual affiliations" with him.
Janulewicz was appointed to take control of and investigate the companies after the Securities and Exchange Commission sued Total Wealth Management, Cooper and others last month in federal court in California for allegedly misleading investors and breaching their legal duties to them.
Based on a preliminary probe, the receiver reported that a number of investments made by Total Wealth entities were in suspect companies that were or became insolvent or did not appear to have the income to make interest, commissions or fees that they paid. The report seems to suggest those payments came instead from investor monies.
Janulewicz declined comment, said receivership attorney Joshua del Castillo, noting that the findings were preliminary and the investigation was continuing.
The report points out that Total Wealth put more than $30 million into an entity called Private Placement Capital Notes II LLC, which operates a resort in South Carolina called Melrose on the Beach and owns a mining company in Utah called Good Earth Minerals LLC, which was to develop calcium sulfate mines.
The resort requires many repairs and the mining company substantial additional investment before it can start mining, while a Private Placement Capital official told the receiver it has little operating cash. Despite the cash shortage, it apparently paid 12.5 percent interest in 2013 and some of 2014, raising "a significant question" of where that money came from and suggests prospects for recovering funds "are highly uncertain," according to the report.
Private Placement paid Total Wealth about $1.3 million in fees from October 2009 to September 2104, of which about $1 million went to Pinnacle Wealth Group, Cooper's consulting company, the report said.
Cooper in a court filing lists his Washington home as worth $1.1 million with $600,000 still owed on it.
In another example of fees, the receiver says a Total Wealth company called Aegis Retail Group paid $124,242 from 2011 through 2012.
Yet, according to the report, "records reflect that the Aegis entities had substantial losses and were essentially insolvent during all relevant periods, meaning the fees paid could otherwise have mitigated investors' losses."
Another company, LJL Secured High Yield Income Fund 1 LLC, made revenue-sharing payments even after its investors had lost 20 percent to 50 percent of their investments, the report said.
Cooper's companies also placed investor monies in Life's Good Inc., which a federal court in Pennsylvania ruled was a Ponzi-like scheme. Its principal, Robert Stinson, who had a previous conviction, was sentenced to 33 years in prison, according to the receiver's report.
Cooper marketed his services on a radio program in San Diego. Investor Christopher Bryant, who is not LDS, said he put about $500,000 into Cooper's funds after hearing the program. He had asked that his money be placed in conservative investments but found himself instead in one fund that put money into coffee kiosks in San Francisco transit stations and in two New York restaurants, all of which are now insolvent, as well as in Private Placement Capital Notes.
"Let's just say three-quarters of my money ended up in those two subfunds … which were highly ill-liquid, highly speculative," Bryant said.
Janulewicz's report recommends continued investigation of the companies and Cooper's role in them.