The SEC plays Whack-a-Mole

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Brent Borland raised $21 million to “fund” Belize Airport, kept $6 million for self

What’s the difference between financial scammers and the arcade game “Whack-a-Mole?”

Not much, except Whack-a-Mole operates under specific time constraints and a financial fraud can go on…forever. But, like the game, no sooner do the regulators suspend one bad actor than another one equally scheming pops up to take his or her place.

Who’s in the SEC’s sights now?

Sag Harbor, NY resident Brent Borland and two of his companies for misappropriating close to $6 million in investor funds “intended” to finance an international airport in Belize.

According to the Securities and Exchange Commission (SEC), Brent Borland sold more than $21 million of promissory notes to dozens of investors based on the premise that the funds would be used as bridge financing for the development of an international airport in Placencia, Belize. The investments, he promised, would be protected by pledges of real estate as collateral.

The notes were marketed and sold through two companies, Borland Capital Group LCC (purported to be active in “alternative investments”) and Belize Infrastructure Fund I, LCC (said to be in the business of construction finance). Using multiple holding companies and over a dozen bank accounts, nearly 44 investors in at least eight states bought $21.9 million of promissory notes.

Then, as do most of the fraudsters we write about in this blog, Borland funneled funds to himself and his family through the account of another of his entities, Relief Defendant Canyon Acquisitions, LLC, a holding company owned by Borland and his wife Alana LaTorra Borland. The money deposited was used to pay family expenses, including:

 

  • Approximately $926K in mortgage and property tax payments on the family’s 6,000 square foot, multi-million-dollar second home in Delray Beach, Fl;
  • Nearly $62K in property taxes on the Florida home:
  • More than $31K for memberships and fees at a private Florida beach club and day spa;
  • Approximately $11,000 in dues to Alana’s mother’s homeowners association;
  • A host of luxury automobile, including a Mercedes G63 SUV, and a Cadillac Escalade SUV;
  • Private school tuition for the family’s children;
  • Expensive watches, cash; and
  • $2.7 million to pay off Alana’s credit cards.

Other funds (including nearly $1.5 million) went to pay the third-party brokers who introduced investors to the Belize opportunity.

Living the high life until…

Someone complained and the SEC filed its compliant in the Southern District of New York. Up to that point, the Borlands used the cash to fund their lifestyle until the scheme ran out of gas. The maturity dates on nearly all of the notes passed without repayment, slipping into default without payment of interest or return of principal. Notes continued to be sold to new investors and the same real estate collateral repledged to give the appearance that the land parcels were worth twice the face value of the notes they secured.

Borland did not use a prospectus or an offering memorandum to secure investments in an opportunity touted to be highly remunerative. Rather, he used intermediate brokers to introduce the investment and then he and/or his employees provided a more detailed explanation of the investment by telephone, email and web presentation.

In addition to the SEC, the US Attorney’s Office for the Southern District of New York also announced criminal charges against Borland and he was arrested.

Second time fraudster

This is not Borland’s first go-round. In 2011, the Ontario (Canada) Securities Commission initiated action against Borland and his companies for unregistered securities offering that Borland and his team sold as investments in a host of real estate development projects – again primarily in Belize. To resolve the Canadian action, all defendants were required to repay investors, stop offering the investments at issue and Borland was barred from being an officer or director of any fund under the aegis of the Ontario Securities Commission.

Where was compliance?

It’s a given that Borland and his companies likely forewent compliance. But what about the brokers who represented his investments, and their affiliated companies? Who was watching those activities? And the activities of these brokers’ enthusiastic investors? That’s where Patrina can help. We’ve built a business on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.

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