Those of us raised on dozens of detectives shows on television, have a pretty good idea as to what we think a fraudster looks like. In fact, we can usually pick them out within five minutes of the start of the show. It is right after the toothpaste commercial and before the luxury SUV commercial. Whatever our image of a fraudster, Gina Champion-Cain doesn’t seem to fit the mold.
The Face of San Diego?
Fit and toned, a pet-lover, community activist, a stalwart of the business community, and an extremely successful real estate entrepreneur, Champion-Cain was the kind of person so many aspired to be. However, she was a crook running a Ponzi scheme, and is now sentenced to 15 years in jail.
It was through her real estate investments (a company called “American National Investments Inc.”) that Champion-Cain hatched her scheme.
She decided at some point to buy a restaurant, and of course, with the restaurants come a liquor license. According to writer Chris Pomorski for Bloomberg (January 21, 2022):
“When a [liquor] license is transferred from one owner to another, California law requires that the buyer and seller apply for approval to the California Department of Alcoholic Beverage Control. Within 30 days of applying, the parties are obliged to open an escrow account, into which the buyer must deposit the purchase price of the license. California liquor licenses can be more than $100,000.”
Obviously, restaurants are expensive to open and run, even established businesses, so that the licensing fees can be overwhelming. Champion-Cain saw angle in all this. How could she take advantage of others?
The Bloomberg piece summarized it thusly:
“By collecting money from investors, including wealthy acquaintances and friends, Champion-Cain had created a fund to provide short-term, high-interest loans to liquor license applicants. When, upon approval of a transfer, the buyer provided the cash for the purchase and the escrow closed, the loan principal and interest flowed back to the fund.”
As there were no end to those applying for licenses, the fund could yield huge revenues. And, on the surface, it looked like a legitimate and remarkably “ignored” opportunity. The line from the above quote is telling. Champion-Cain was collecting money from rich and powerful friends and acquaintances. In fact, the fund would collectively run itself up to $140 million. The investors, presumably would profit from the returns of Champion-Cains high interest loans, which sometimes reached 25 percent.
Indeed, the organization Champion-Cain created started to attract major players such as a California-based legitimate service called Alcoholic Beverage Consulting Service, a company that offers liquor licensing assistance. When the president of Alcoholic Beverage Consulting Service was able to analyze what Champion-Cain was doing, he became puzzled.
According to Pomorski’s piece:
“In practice, almost no one deposits more than 10%. The agency in charge ‘never pressures anybody to fund within that 30-day time frame.’”
It seemed as though Champion-Cain – at the least – was practicing usury. However, it turned out that it was much more serious. The money that was coming into her operation seemed to be disappearing.
Though she appeared to be building a San Diego real estate empire, she was characterized as an intermediary, a person who was collecting fees and investment money from soon to be duped investors, but she contributed almost nothing of her own.
Major investors in Champion-Cain’s empire began to wonder why the seemingly successful empire returned almost nothing on their investments.
Typical of what was occurring: “A 2012 complaint filed by…a pharmaceutical executive, described a $200,000 loan he made for a project in Oregon. The suit alleged that Champion-Cain used that money to pay other investors…”
Lawsuits came into Champion-Cain’s office and were quietly settled. Those who celebrated Champion-Cain’s lifestyle, image and “success” were being duped. By 2019, several investors in the real estate and liquor license conglomerate were convinced she was nothing more than a glamorous Ponzi scheme. She was living a lavish lifestyle on other people’s money. Finally, by August 2019, the U.S. SEC accused her of embezzling about $300 million. It was more than that.
“In July 2020, Champion-Cain pleaded guilty to securities fraud, obstruction of justice, and conspiracy. In all, almost $400 million flowed through her fund. All but about $11 million left in her account was used to prop up her businesses, pay off existing investors, and cover expenses including jewelry, cars, credit cards, travel, box seats for the Padres and Chargers, and a $22,000 golf cart.”
She never had the intention of paying a return to investors. Rather, to satisfy one investor by using the funds invested by a newer sucker. She was a more attractive, more celebrated version of Bernie Madoff.
Unethical Behavior Has No “Image”
The beauty shots of Gina Champion-Cain have given way to a more somber look as she faces a good portion of her life behind bars. The woman everyone wanted to be around, will find herself isolated.
She wanted money and power but she failed to be ethical. Some people rationalize their fraud by not rationalizing at all; she simply lived for the moment and enjoyed being celebrated for the moment. It’s funny in a way, because she had every tool to be highly successful. She chose to steal from people instead.
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