Editor’s Note: An earlier version of this article included a photo of Gina Champion-Cain with a former business associate, Melissa Scott Clark. Their business relationship ended in 2016, and Clark has had no further connection with Champion-Cain. Times of San Diego regrets the use of that photograph.
A darling of San Diego business for years pleaded guilty Wednesday to conspiracy, securities fraud and obstruction of justice charges for taking hundreds of millions of dollars in investor funds intended as loans for liquor licenses and funneling the money into her companies and for personal purchases.
Gina Champion-Cain, founder and former CEO of American National Investments, was charged by the Securities and Exchange Commission last summer with taking millions from investors and telling them the money would be used to support loans for people seeking California liquor licenses.
Instead, she used the money for personal expenses, to fund her other businesses or to pay back other investors, prosecutors said.
Champion-Cain — whose case has been likened to that of notorious San Diego swindlers J. David Dominelli and Nancy Hoover of the 1980s — faces a maximum possible term of 15 years in prison. Sentencing is set for Oct. 13.
More than $400 million from more than 100 investors went into the scheme between 2012 and 2019, according to the plea agreement. Prosecutors said at least one financial institution that invested lost more than $1 million, and that the loss to all investors ranges from between $65 million to $150 million.
According to the plea agreement, Champion-Cain used at least $60 million in investor funds to meet expenses at her businesses. In addition, funds were used to pay for residences in Mission Beach and Rancho Mirage, at least $2 million to pay her own salary at American National Investments, and hundreds of thousands of dollars was spent on sporting events, automobiles, credit card bills, jewelry and more.
The plea agreement states that the lending program investors were putting funds into “was completely fictitious” and that many of the supposed liquor license applicants had not sought loans through Champion-Cain. Instead, she created fake lists with applicant names pulled from the Department of Alcohol Beverage Control website, according to the plea agreement.
“This is by far the largest Ponzi scheme discovered in this district,” said U.S. Attorney Robert Brewer. “Gina Champion-Cain constructed and maintained a house of cards that has come crashing down around her and all her victims. The scheme deprived many investors of their retirement savings, and cost at least one investor tens of millions of dollars and forced him into bankruptcy. And now it will cost the defendant her freedom.”
Since 2012, Champion-Cain drew in about $400 million from investors based on promises that she would use their money to fund those loans, the investors’ money would be safe in an escrow holding account, and the invested funds would and could only be returned to the specific investor who deposited the funds or his/her intermediary.
Champion-Cain admitted Wednesday that these promises were all false.
“She never used the funds to make liquor license loans,” prosecutor said in a news release. “Instead, she and her co-conspirators simply used investor funds to pay back other (usually earlier) investors, and embezzled funds to support Champion-Cain’s unrelated businesses and her lifestyle.”
She also spent investor funds to pay herself over $2 million in cumulative salary since 2012, and spent over $640,000 for box seats at San Diego Padres games, over $200,000 for box seats at San Diego Chargers games, at least $745,000 to pay off her credit card bills and hundreds of thousands of dollars for automobiles, jewelry and similar personal luxuries.
Prosecutors said the plea agreement also details how Champion-Cain and her co-conspirators succeeded in defrauding investors by hiding the truth.
They fabricated documents, forged signatures and told investors lies through fake email accounts so that when investors attempted to double-check on their investments with people they thought were independent third parties, the investors were often really communicating with Champion-Cain or her employees.
For example, Champion-Cain emailed an escrow company employee when investors tried to ask questions: “I told them NEVER to call and bother you ladies,” and “if they call asking about escrow agreements and alcohol licenses, blah, blah, blah … just say ‘SURE WHATEVER NOW SHOW ME THE MONEY … HAHAHAHA.’”
The cover-up continued even after Champion-Cain and her co-conspirators learned of a government investigation into her scheme — in response to which they attempted to destroy evidence they knew was incriminating, including stacks of documents, emails, video surveillance footage and accounting records.
Don Bauder of Colorado, the retired dean of San Diego business writers, sheepishly admits he never heard of Champion-Cain until her name came up last year.
“In 45 years covering San Diego, I took pride in smoking out Ponzi schemes, pump and dump capers, corporate welfare scams and the like, but I blew it on this one,” he said Wednesday via email. “When it came out, I checked the U-T and Reader archives, and could find noting I had written.”
Bauder likens her case to the one he wrote a book about — the Ponzi scheme of the late “Jerry” Dominelli and Hoover.
“The big similarity was both Dominelli/Hoover and Champion-Cain spread their money around for charitable and political purposes,” he told Times of San Diego. “The late George Mitrovich steered J. David money around cultural institutions. Much of the money went to Roger Hedgecock’s mayoral election.”
Matt Potter wrote in the Reader last year that Champion-Cain financially backed the campaign for SDSU West — taking over the Mission Valley stadium site, Bauder noted. She also gave money to Mayor Kevin Faulconer and unsuccessful mayoral candidate Carl DeMaio, among others.
“The biggest difference is embodied in the French phrase Cherchez la femme. Literally, it means ‘Look for the woman,’ although there are various nuances,” he said.
“In this case, the woman is behind the behavior of a man. Dominelli, a slight nobody, learned that Nancy Hoover, the ebullient woman about town (serving on key boards, for example) was captivated by him. So he supplied her with everything — fancy cars and clothes and lots of money that actually belonged to investors.
Dominelli spent decades in prison. Hoover was sentenced to 10 years but only served 2 1/2, Bauder said.
“The U.S. Attorney’s Office would never tell me how she got out early, although according to rumor she was to supply information on another participant in the scam who was tried and never convicted,” he said.
“With Champion-Cain, I see no such motivation. In fact, her Ponzi scheme appears to have been planned from the beginning,” Bauder said. “On the other hand, the Dominelli/Hoover Ponzi scheme evolved, propelled by Cherchez la femme.”
Updated at 10:50 a.m. July 23, 2020
— City News Service contributed to this report
