Orange County Man Surrenders After Being Indicted in Investment Fraud Case that Caused $2.4 Million in Losses
|U.S. Attorney’s Office December 27, 2010|
SANTA ANA, CA—An Irvine man pleaded not guilty this afternoon after surrendering this morning to special agents with the FBI in an investment scheme case that allegedly involved losses totaling $2.4 million.
Charles “Chuck” Davis, 53, was taken into custody without incident this morning and was arraigned this afternoon in United States District Court. After pleading not guilty, Davis was released on a $160,000 bond and was ordered to stand trial on February 22.
Davis was named in a 10-count indictment returned last Wednesday by a federal grand jury. The indictment alleges that Davis operated an investment scam involving the Newport Beach-based LifeRight Holdings, Inc. According to promises made by Davis, LifeRight was going to develop and use infomercials to market a product to combat child obesity.
Davis signed agreements with investors—Private Placement Memoranda (PPM)—that provided for 15 percent interest on the investment over a 13-month period. The PPMs also called for investors to receive royalties on products sold and an option to convert the investment into shares of LifeRight stock when the company began selling product.
The indictment alleges that investor funds were not used in the manner set forth in the PPMs. Instead, Davis used investor funds for personal expenses, including payments to himself, family members, and girlfriends; clothing, jewelry, and other consumer items; rent, utilities and credit card payments; and legal fees to lawyers representing Davis in lawsuits brought against him.
As a result of the scheme, the indictment alleges that Davis caused approximately 40 investors to lose more than $2.4 million.
In addition to LifeRight Holdings, Davis owned, controlled or was affiliated with LifeRight Holdings International, Inc.; LifeRight Worldwide, Inc.; American Membership Systems, Inc.; Solomon Davis Financial Group, Inc.; Forward Area, Inc.; Arcane Communications, Inc.; CJ Davis, Inc.; Arcane Communications; and Hawk Management Group.
The indictment accuses Davis of two counts of mail fraud, five counts of wire fraud and three counts of money laundering. If he is convicted of all 10 counts in the indictment, Davis would face a statutory maximum sentence of 170 years in federal prison.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court. The case against Davis was investigated by the Federal Bureau of Investigation.