Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, June 11, 2008

SEC Obtains Asset Freeze Against Lincoln Funds Int'l

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.

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I am an investor in the Lincoln Biotech Fund II. I have recently seen a lot of red flags popping up when I have attempted to contact Lincoln Funds' offices and its principals. I have read the SEC complaint and spoken to one of the attorneys who filed it. I told her I thought this was a criminal matter as well as a civil matter and she told me to contact the US Attorney's office for the Central District of CA to file a complaint. I have placed several calls to the US Attorney's Office for the Central District of California, in Santa Ana and have not gotten a response in over a week. How do I go about making a complaint to this office? Their website sucks. I also sent an email to the newly appointed fed receiver yesterday but have not heard back from him yet. It's all very frustrating!

Posted by: David | Jun 20, 2008 3:45:45 PM

I, too am an investor in the original Brookstone Capital and later Lincoln International Funds. I am interested in locating other investors who have been deceived as we were. Perhaps, as a group, we might discuss our options.

Posted by: Jonae | Jun 24, 2008 5:53:48 PM

I am also an investor in the Lincoln biotech fund II. I contacted Mr. Brown one of the attorneys from the SEC. He provided me with information about where this case was going and also gave me the Fed Reciever web site to obtain updates. It would be nice for investors to get together and also file a civil lawsuit against these criminals.

Posted by: Gerry | Jun 28, 2008 1:43:35 PM

I am also an investor and would like to be kept apprised of any class action suit against Carver and Brookstone/Lincoln Capital. I will keep folks on this blog apprised of what I learn. I received an alert from FiServ today and have contacted the Receiver's office.

Posted by: Debra | Jun 30, 2008 2:13:15 PM

I was also an investor in the original Brookstone
Capital / Lincoln Biotech Ventures, LP. I am very upset also and would like to be kept abreast of what we can do. Please keep me in the loop when you receive information.

Posted by: Wes | Jul 8, 2008 2:00:46 PM

After I posted on this site I contacted the Orange County office of the US Attorney, first leaving phone messages and then sent an email. Within a few hours of the email I was contacted by telephone by the Asst US Atty. handling the case and then received a call from an FBI agent connected to the office and was told that he was conducting a criminal investigation of the principals. I told him I felt they should include the VP's and Sales reps in the investigation. I told him that I felt they were culpable as well. I have also spoken to the Federal Receiver and was told that he is in the process of determining where the assets are, how much was actually invested and what remains for the investors. Count me in on any class action suits.

Posted by: David | Jul 9, 2008 10:49:33 AM

I invested in this company Brookstone back in November 2004, and was told that this would be an IPO with in 2 yrs. I should of checked into this more. Lots of Red Flags. No contacts when i called. Never got anything in writing but was always promised over the phone what was going on. I would like to see all of the people involved prosicuted to the fullest. I think one of the first Red Flags that I was worried about was that they wanted us to send everything back in a FED Ex envelope.i guess next time we all should think about that. Please keep me informed on how to claim any money.

Posted by: kelley | Jul 17, 2008 6:08:26 PM

Just wanted to chime in on the subject as well, I was also an investor from June of 2005, bought one share for $50,000 please include us in any civil action lawsuit.

Amal Ghishan

Posted by: Amal Ghishan | Jul 20, 2008 11:38:50 AM

I am an investor with lincoln and I would like to inform about what will happen to our investment

Posted by: Amal | Jul 21, 2008 12:26:02 PM

I am an investor with both Brookstone Biotech and Lincoln Funds International. I too have spoken to David Brown, having rececieved the same info as in the above messages. I spent my career working in the legal environment (not as a practicing attorney) and any civil action may simply get in the way of what the SEC is doing. Plus any lawyers added to the mix will slow things down, likely will want fees up front and/or will take much if not all that remains in the assets of the company as fees. Best advice is to wait for info from tha SEC before taking further steps. I suggest a determination of the applicable limitations for further actions and be patient while the wheels of justice turn. Allow them to do what they do best.

Posted by: Don | Jul 25, 2008 1:19:47 PM

I am the court-appointed Receiver in the case. If you have any questions, please feel free to visit my website at or contact me.

James H. Donell, Receiver
12121 Wilshire Boulevard
Suite 301
Los Angeles, Calfornia 90025

(310) 207-8481
(310) 207-3483 Fax

Posted by: James H. Donell | Jul 26, 2008 10:51:02 AM

My father and I invested in Xirtrix Gaming Technologies in 1998. This stock was then transferred to Intervest Ventures, which was transferred to Brookstone Capital, which was transferred to Lincoln Funds International. Please kee me updated if you receive any information, and I will do the same. I want my money back!

Posted by: John | Jul 29, 2008 6:11:42 PM

Please keep me in the loop for I was one of the
foolish one's that invested heavly.


Posted by: Michael Gomez | Aug 5, 2008 3:28:15 PM

I was offered a sales position when Brookstone opened it's Las Vegas office.

Having nearly 20 years in the security's arena, I started to see 'red flags' from week one. I asked why there was no trustee or agent to protect the limited partners? Why were there limited or no restrictions on what Mr. Carver could do with the money given the biotech partnership? Why was I being criticized for attemting to build 'long-term' relationships if a hedge fund offering was coming down the pipe?

Needless to say, I was let go after three weeks because I was asking to many questions and showed to much concern for the potential investors.

I'm not sure I have any info that could help a civil or criminal proceeding but am willing to assist in any manner possible.

Posted by: Michael A Donnelly | Sep 1, 2008 5:57:44 PM

I too am an investor...well, I gave them money, lots of money. I'm willing to wait for the SEC/Mr. Donell to do their investigations...but now, I'm having trouble with the receiver's website...that is, it's been replaced with ads from and I can't get to Mr. Donell's website to try and remain informed and patient and calm. I am with some of you. I feel the salesmen in Brookstone/Lincoln knew a lot more than they've let on and are just as guilty as the Carvers/DeMers. I'd like to find a couple of them I talked to, including Ed Vaughn and...and ring a few necks, or at least be able to slap a few cheeks.

What's so stupid? I asked and asked and questioned and questioned about Robert Carver, before sending money... Oh the promises! Carver is no longer with the company. They just forgot to say, his son is...

Posted by: Peggy Hoffer | Sep 7, 2008 1:41:39 AM

I am also an invester in this ill-fated scheme.I agree with Don in the above posting. Let's be patient and let the court-ordered receiver do their job. I contacted their office. All they need at this point is contact information from the investors. I recommend that you all provide that to them. I think getting attorneys involved, as Don says, will slow the process and they will end up getting a large chunk of what might be left of the remaining funds.

Posted by: James | Sep 7, 2008 4:09:59 AM

Just to let everyone is gone and a new receiver website is back up. Unfortunately, there's not any new news. I should state that I'm with Don/James/others who want to wait and see what happens with both civil/criminal investigations/follow-on actions, rather than give more money to a lawyer. We're going to lose enough the way it is...

Posted by: Peggy | Sep 11, 2008 9:34:37 AM

These scumbags should all go to jail.....I interviewed with DeMers 2 years ago and told him to go to hell. He was also involved in a scam foreign exchange trading firm, EFX Capital. I don't think anyone got involved with that one. All you had to do was a few minutes research calling the supposed portfolio companies and you all would've realized they owned zippo. Caveat Emptor!!!

Posted by: mike | Sep 24, 2008 2:52:43 PM

I was an investor in the Brookstone fiasco. Unfortunately when I called the Orange County Office of the US Attorney I did not receive a return call. To date I have received no information from anyone other than a 401K Trustee (for part of my investment) who sent us a notice indicating they were writing the shares down to zero. I am concerned that the receiver appointed looks like as much of a scam artist as the original company based on the web site. I wonder if anyone has been able to get any official status as to the case or if anyone has received an assessment of the assets that might have remained, like interest held in Pre-IPO companies.

Posted by: Mark Goldman | Oct 13, 2008 10:44:30 AM

If you really want to get sick checkout the most recent court ruling on releasing funds to the Carvers and look at the amounts and uses.

Posted by: Mark Goldman | Oct 13, 2008 11:51:22 AM

I am an investor in Brookstone and Lincoln Funds through my retirement account. Thieves are everywhere, apparently congress is more dangerous than the street thieves considering the recent additional damage done to my account by their attempts at social engineering through sub-prime loans.
I would be interested to know if anyone has any idea if or how much may be left of the $$ Lincoln was supposed to have invested. I suggest we wait until SEC has an opportunity to do it's job before retaining additional counsel. Any attorneys are likely to ask for fees up front, reducing any recovery realized.

Posted by: Don | Oct 17, 2008 5:59:55 AM

I started investing with Xirtrix then their asian gaming site. Rolled over to Brookstone then Lincoln. This was my 1st start-up type investing and should have waited prior to investing in other start-ups. The SEC will inprison these guys as they did with the principals of NECO energy. Hindsight is 20:20. I just wish I check out these investments with the SEC prior.

Posted by: Robert | Oct 20, 2008 5:50:34 PM

Did everyone receive e-mail(s) from the Receiver about the updates to its website concerning this case? If not, updates have been posted and the news isn't very good. They've only found a little over $3M of the $21M Brookstone/Lincoln/the Carvers/etc. stole from us, and the judge gave the Carvers living expenses for 3 months and told them to find a cheaper house. I can think of a better place for them to live on my/our taxpayer dollars, rather than my supposed "IRA investment"'s called prison.

I also noted that the Receiver's accountant hadn't received any money from or noted that any money had been invested in any biotech companies, like Oculus. I know that I checked some of the companies' websites that the Brookstone/Lincoln thieves said they had invested in and that in fact in one case, the company said one of its investors was Brookstone/Lincoln. Did anyone else look in to the companies' and find Brookstone/Lincoln noted as an investor? If so, I'm wondering if there isn't still money that isn't accounted for in "real" investments and if the Receiver's accountant knows it?

Posted by: Peggy | Oct 23, 2008 11:47:31 AM

I think the stock positions are still not accounted for in the recovered $3 mil.

I agree with Peggy, Carver & Co. should be in jail and never be allowed to cheat another innocent victim. Only in America these crooks can get living expenses from a court.

I know they may find another hole in the law to get away from this but you know they will burn in hell soon...

Posted by: Jake | Oct 28, 2008 1:36:47 PM

I have not received anything from the receiver. How do I access the website for updates. I tried to reach the receiver several times a few months ago. I have never gotten a response. What exactly is the receivor supposed to be doing????

I agree with everyone who feels Carvers belong in jail instead of receiving cost of living expenses out of what is the investors money.


Posted by: Nancy Cochener | Nov 2, 2008 11:32:50 AM

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