A Garden Grove man who sold stakes in an ostrich-breeding business has been ordered to pay $890,000 for allegedly misusing investor money, the Securities and Exchange Commission said Thursday.
A federal judge in Santa Ana ordered David Hudson III to pay back $819,000 in allegedly ill-gotten gains plus $71,000 in interest, the SEC said.
The agency charged that principals of the Ostrich Group Inc., in which Hudson was a partner, sold contracts in the ostrich-breeding business while "transferring most of the funds to themselves and their family" instead of buying the birds.
In addition, Hudson acted as an unregistered broker-dealer when he sold shares in the business, the SEC said.
The Ostrich Group raised $800,000 from more than 80 investors, saying the ostriches would be "generating substantial cash-flow revenues in a very short while," the SEC said.
The group sold the shares from late 1995 through mid-1997, urging investors to buy trios of the African birds, which the group promised to board, feed and breed for meat.
In February, a federal judge in Los Angeles ordered two other principals, Loretta Antrim of Irvine and her son, Patrick Antrim of Dana Point, to pay $820,000. So far, "we've not collected any money from them," said Joel Kornfeld, the senior SEC trial attorney.
Hudson couldn't be reached for comment. Kornfeld said Hudson never responded to the court's hearing notices. U.S. District Judge Gary L. Taylor's order also enjoins Hudson from violating securities laws in the future.
Another Ostrich Group officer, Michael Whitney of Mission Viejo, is contesting SEC charges against him and is scheduled to have a court hearing in July.