Three Colorado Springs residents have been arrested for allegedly running a hedge fund that bilked $7.5 million from hundreds of investors, including churchgoers and Christian groups throughout the West, state authorities said Tuesday.
“Most investors were lured by the false promise of high returns or endorsements by their friends or fellow churchgoers,” said Fred Joseph, the state’s securities commissioner.
The three men, Hamilton Alan Bird, David E. Newton and Doug las A. Scott, were arrested Monday by the Colorado Springs Police Department.
The three men were not available for comment.
A statewide grand jury last week indicted the trio, alleging they defrauded at least 350 investors, many of whom were in Colorado, California, Texas and Arizona.
The trio’s first court appearance is scheduled for May 24 in El Paso County.
Bird’s company, XL Capital Partners Inc., raised more than $23.5 million from investors between 2002 and 2004. Investors were offered limited-partnership interests in the Vision Fund, a hedge fund that promised clients handsome returns through the purchase of stocks.
Hedge funds are high-risk, private investment partnerships that often cater to the affluent.
The state alleges that at least a portion of the money raised for the Vision Fund went to pay back previous investors, a fraudulent investment structure known as a Ponzi scheme.
The trio, the state alleges, also used the cash as “a personal piggy bank,” purchasing a 12-passenger jet and a home and paying for other personal expenses, according to state Attorney General John Suthers.
Bird, the 42-year-old hedge-fund manager, has been charged with three counts of securities fraud and five counts of theft, all felonies. Because of two prior felony convictions, Bird could be considered “a habitual criminal,” making him eligible for a maximum sentence of 36 years, according to a press release.
Newton, 56, the company’s accountant, faces a possible sentence of four to 12 years, if convicted. Scott, a former evangelical pastor who allegedly roped in dozens of investors, also faces a possible sentence of four to 12 years.
In addition to the criminal charges, Colorado’s securities division in 2005 sued XL Capital, Newton and Bird to recover $12.6 million. Joseph said it’s unclear how much the company has in assets, although he said, “There are some assets that are recoverable.”
A total of $1.2 million already has been collected through settlements with other defendants.
The civil trial is set to begin Aug. 3.
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com.
