A Santa Ana insurance salesman accused of bilking investors out of tens of millions of dollars and spending it on exotic sports cars and Las Vegas real estate was indicted Wednesday on federal wire fraud, mail fraud and money-laundering charges.
The 16-count indictment against James R. Halstead comes a week after a federal judge ordered him to pay investors more than $66 million in damages in civil lawsuits.
In lawsuits and criminal proceedings, Halstead, 61, is accused of conspiring with Irvine securities lawyer Jeanne M. Rowzee to solicit millions of dollars from individual investors who ran the gamut from wealthy developers to retirees on fixed incomes.
The pair had pledged to invest the money in securities known as private investment in public equity, or PIPEs, which they said would return up to 40% in as little as three months, according to prosecutors and lawsuits.
But instead, "Halstead would use the funds to enrich himself and to further promote the scheme," according to the indictment, returned by a federal grand jury in Santa Ana.
Halstead, who was not arrested but was ordered to appear in federal court in Santa Ana on Sept. 22, has previously denied wrongdoing. He did not return calls Wednesday.
His lawyer, Michael A. Molfetta, said he had not seen the government's evidence and could not comment.
The indictment does not offer specifics on how all of the money collected from investors was used, but it alleges that Halstead spent about $353,000 of it on a Ferrari and a Porsche and about $1 million for a house in the Las Vegas area.
In granting a summary judgment last month against Halstead and his company, GamePlan Inc., U.S. District Judge David O. Carter said the plaintiffs had proved actual damages of $22 million. Carter later tacked on $44.5 million in punitive damages.
"The facts found at the time of summary judgment demonstrate that he duped investors, many of who were his insurance clients, out of tens of millions of dollars, which he used to furnish a lavish lifestyle of cars, homes, jewelry, etc.," Carter wrote in his Sept. 3 order.
Rowzee, 49, was charged in June with conspiracy and securities fraud. She struck a plea agreement, which was filed under seal, and is free on $40,000 bond, according to court records. She also has agreed to pay $66 million in damages stemming from civil suits.
The two met in the early 1990s, when Rowzee defended Halstead against charges that he and another man defrauded investors of more than $1 million in a scheme to sell crude oil and German bank shares. Records show he pleaded guilty to five felony counts and was put on probation.
Many companies legitimately use PIPE investments to raise capital for growth or acquisitions, with investors typically buying stock below market price and selling it at a profit.
In this case, investors alleged that Rowzee and Halstead promoted PIPEs as no-risk deals available to only a select few.
Some money was repaid to investors early on, but most clients later discovered their "accounts" were empty.
William L. Buus, an attorney who represents 45 investors who claim losses of about $14 million, said his clients had been "patiently waiting" for Halstead to be brought to justice.
"Now that the day has come, we feel some relief," he said. "At the same time, we know that getting the money back, or any of it, is a long shot, but my clients have vowed to move ahead and keep at it until they have either collected their money or explored their last dead end."