Topping off his collection of indictments of federal fraud and money laundering charges, former investment advisor David Welliver pleaded guilty to one charge of securities fraud last week, for which he faces five years in prison.
Welliver is accused of putting his clients’ money in fake investments, along with diverting millions from a loan to pay prior debts and fund $500,000 of personal expenses.
From the Star Tribune:
The SEC’s charges led to Welliver’s indictment last August on 14 federal fraud and money laundering charges. It says that Welliver had agreed in 2010 to pay $100,000 to another investment adviser to buy the assets of two other mutual funds to increase his own struggling fund’s assets. But at the time, the indictment says, Welliver’s advisory company had less than $200 in liquid assets and he had less than $2,000 in his bank account. He also owed millions of dollars in civil judgments, federal income taxes and other debts.
To complete the acquisition of the mutual funds, the indictment says, Welliver borrowed $4 million. But the indictment says he used just $95,000 for that purpose and instead diverted over $500,000 for his personal use, with the remainder going to loan repayments and his business operating expenses.
Welliver cut a deal in which he agreed to plead guilty Wednesday to a single count of securities fraud in exchange for having the remaining charges dismissed.
But Welliver’s legal troubles extend back years. The Star Tribune listed Welliver’s earlier mishaps with financial laws:
Welliver’s troubles began early in his career… with his promotion of Technimar Industries Inc. of Houston. The company had plans to build a $35 million plant in Cohasset, near Grand Rapids, to produce a composite building product called Stonite under license with an Italian company. The Minneapolis police and fire pension fund sank millions into the project on Welliver’s advice, not realizing that he also was working as a fundraiser for the company.
Technimar collapsed without ever producing any Stonite. The Minneapolis Police Relief Association and the Minneapolis Firefighters’ Relief Association won a $14.6 million judgment against Welliver in 2000 on allegations that he mismanaged fund assets.
Welliver founded an advisory firm, Dblaine Capital, in 2005 at his home address. The Securities and Exchange Commission sued Welliver in 2011 accusing him and his firm of “flagrant and numerous” securities violations. The SEC said that Dblaine Capital had only a handful of clients with about $500,000 in assets under management and generated less than $7,000 a year in fees — its only revenue — yet Welliver paid himself a six-figure salary.
The SEC accused Welliver and Dblaine Capital of sinking client assets into a worthless investment. It also accused him of spending $500,000 on personal expenses that included a $40,000 car, vacations, liquor, meals, home improvements, jewelry, his son’s college tuition and back taxes.
These and other charges are to be dismissed as Welliver cut a deal with the SEC with his guilty plea.
Welliver is the great-grandson of Val J. Rothschild, who cofounded St. Paul’s oldest mortgage banking and real estate sales company in 1885.
