Granite Bay Man Pleads Guilty in Scheme That Defrauded Investors in Green Cleaning Product Company
SACRAMENTO, CA—Brent Lee Newbold, 58, of Granite Bay, pleaded guilty today to wire fraud and agreed to submit to a restitution order of at least $2.9 million, United States Attorney Benjamin B. Wagner announced.
Newbold was employed as chief executive officer of Holy Cow, a Rocklin-based business that produced a “green” cleaning product, marketed to stores such as Wal‑Mart, ACE Hardware, and Bed, Bath & Beyond.
According to court documents, between October 2007 and January 2010, Newbold engaged in a scheme to defraud investors and lenders. He made a variety of misrepresentations to investors about the financial health of the company, including the company’s debt levels and how invested funds would be used. In fact, Holy Cow bore a significant amount of debt, and Newbold continued to assume additional debt related to Holy Cow. Newbold used investor funds for nonbusiness purposes, diverting it to himself and his wife, paying his mortgage, and paying previous investors.
Based on Newbold’s claims, a corporate investor, Spence Enterprises, invested $2 million in Holy Cow. According to the plea agreement, Newbold, without authorization, diverted over $950,000 from Holy Cow corporate accounts to himself, his wife, his mortgage company, and his previous lenders and investors. Over $550,000 of that money had been invested by Spence Enterprises. When Spence Enterprises learned of Newbold’s diversion of money, they reprimanded him and told him to repay the money.
After he was confronted by Spence Enterprises, Newbold opened a secret account at American River Bank in the name of Holy Cow Inc. Newbold was the sole signatory on the account, and the account statements were sent to Newbold’s residence. Newbold used the bank account to receive funds from undisclosed individual investors in Holy Cow.
Between July 2008 and January 2010, Newbold solicited over 10 individual investors. Newbold falsely claimed that he was authorized to act on behalf of Holy Cow; that he owned Holy Cow; he owned the majority of Holy Cow stock; Holy Cow was financially sound, stable and profitable. In some cases, Newbold provided his individual investors with false Holy Cow stock certificates, false Holy Cow purchase order reports, and corporate promissory notes.
By December 2009, Spence Enterprises put Holy Cow into bankruptcy as a result of the unauthorized and undisclosed debt Newbold was taking on in connection with Holy Cow. The gross loss amount in this case is over $2.9 million.
“The defendant raised money from investors through misrepresentations and false promises,” said Thomas McMahon, Acting Special Agent in Charge, IRS Criminal Investigation. “Then, without authorization, the defendant diverted approximately $1 million to himself, his wife, his mortgage company, and his previous lenders and investors. This chain of events led the company into bankruptcy. Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable.”
This case is the product of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation. Assistant United States Attorney Michael M. Beckwith is prosecuting the case.
Newbold is scheduled to be sentenced on December 3, 2015, by United States District Judge Morrison C. England Jr. Newbold faces a maximum sentence of 20 years in prison, a $250,000 fine, and a three-year term of supervised release. The actual sentence will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.