GINA CHAMPION-CAIN’S PARENTS AGREE TO PAY BACK COMPANY FUNDS
$275K loan, $79K for car given before fraud case charges
A year before federal regulators charged restaurateur Gina Champion-cain with operating a fraudulent investment scheme, she used more than $350,000 in company funds to loan her parents money and to also purchase a nearly $80,000 car for her father.
This week, a U.S. District Judge approved a settlement agreement that will return nearly all of those funds to a receivership in control of Champion-cain's former assets.
The use of company money for the benefit of Champion-cain's parents came to light in the course of an ongoing probe by a court-appointed receiver who has been combing through the San Diego businesswoman's properties and bank accounts to identify funds that could potentially be returned to investors who federal regulators say were defrauded in an alleged Ponzi scheme.
Champion-cain was accused in August by the Securities and Exchange Commission of bilking dozens of investors who
she enticed to participate in a $300 million liquor license lending scheme. Instead of using investor money to make high-interest loans to individuals seeking alcohol licenses, she directed the bulk of the money to companies she controlled, the SEC alleged.
In an agreement approved by U.S. District Judge Larry Burns, Daniel and Barbara Champion agreed to return $330,000 of the $354,337 that receiver Krista Freitag states was transferred from Champion-cain companies “without providing reasonably equivalent value in return.”
The largest share of the money transfer was a $275,000 loan made in 2018 to Champion-cain’s parents came from their daughter’s company, American National Investments. It carried no interest payments for a 10-year period. The interest rate was set at 4.25 percent, with all principal and interest due by 2028, Freitag stated in a motion in support of the settlement agreement.
In a separate transfer, Champion-cain took $80,000 from the “receivership entities” and transferred the funds to her personal account. Not long after, she wrote out a check for $79,337.86 to an Ann Arbor, Mich., BMW dealer to purchase a car for her father, Freitag details in a motion she filed with the court.
Until there is more forensic accounting, it’s unclear at this point whether the money used for the Champions included any investor funds intended for the liquor license lending scheme.
The settlement agreement does not provide for recouping the entire dollar amount that went to the Champions. The $350,000 represents 93 percent of the total sum, but Freitag argued it was not worth the cost of pursuing legal action against them to secure the full amount.
“Considering the amount at stake and the anticipated litigation costs, it is very unlikely the recovery from a judgment (net of the cost of litigation) would exceed what Daniel and Barbara Champion have agreed to pay pursuant to the Settlement Agreement,” she wrote.
In the months since undertaking her role as receiver, Freitag has identified so far about $15 million in remaining assets, based on a February quarterly report she filed with the court. Nearly all of Champion-cain’s restaurants were closed early on after the receiver took over, and efforts are ongoing to sell some of her real estate holdings and businesses.