Wednesday, June 11, 2008
The SEC filed a complaint in federal district court in Orange County California charging advisory firm Lincoln Funds International, Inc. and its three principals, who raised at least $21 million from nearly 400 investors nationwide, in an alleged securities fraud scheme that involved its biotechnology investment fund companies. According to the complaint, one of the defendants, James L. DeMers, cleaned out all of the cash in the Lincoln Funds' accounts earlier this month by transferring approximately $2.9 million to his own separate company. The SEC obtained a temporary restraining order, asset freeze and other emergency relief in a civil action to halt the defendants' fraudulent activities and strip them of any ill-gotten gains. Simultaneous with the filing of the complaint, the California Department of Corporations issued an Order against two of the individuals and Lincoln Funds ordering them to desist and refrain from offering, buying or selling securities in the state by means of any false or misleading statements.
The SEC's complaint charges Lincoln Funds and its predecessor, Brookstone Capital, Inc., and their principals, Robert L. Carver, his son Robert L. Carver, II, and DeMers. The complaint also names as relief defendants Lincoln Biotech Ventures LP, Lincoln Biotech Ventures II, and LP Lincoln Biotech Ventures III LP — the three biotechnology venture funds created and controlled by the defendants. Also named is MacAuslan Capital Partners, LLC, a company controlled by DeMers. These relief defendants held cash or other assets acquired from investor proceeds. Robert Carver has been the subject of at least five state administrative orders including three by the California Department of Corporations since 1996.
The federal district court granted the SEC's application for a temporary restraining order against the defendants and issued orders freezing the defendants' and relief defendants' assets and prohibiting the destruction of documents. The Court also appointed a temporary receiver over the assets of Brookstone Capital, Lincoln Funds, and its affiliates, including the three Lincoln Biotech Venture funds.