February 24, 2010 in Business

State outlines Ponzi charges

Colbert woman denies the state’s allegations
By The Spokesman-Review
 
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The operator of an alleged Ponzi scheme has requested a hearing to respond to state charges she misled investors and sold securities without a license.

The Washington Department of Financial Institutions is seeking a $150,000 fine from Colbert resident Doris Nelson, manager of Little Loan Shoppe and several related entities. The department also wants to impose a $30,000 fine on Paul Cooper, “believed to reside in Puerto Vallarta, Mexico.”

In a statement of charges filed last month, the department alleges Nelson told investors they could earn as much as 60 percent on money Little Loan Shoppe or affiliates used to make payday loans. More than 300 investors bought notes worth $29 million in U.S. currency and another $26 million Canadian.

Washington residents – at least 35 of them – invested more than $6 million.

Most investors learned of Little Loan Shoppe from friends or family members, according to the statement, which noted many were Jehovah’s Witnesses.

Nelson told investors the high returns were possible because short-term, high-fee payday loans allowed Little Loan Shoppe to turn their money over several times before it was returned to them. But no payments were made after March 2009.

The company filed bankruptcy in July under the name LLS America LLC. In documents filed in the U.S. Bankruptcy Court, investors claim Nelson operated the companies as a Ponzi scheme that paid early investors with money from newcomers.

Cooper allegedly helped raise money for the company.

Conrad Lysiak, Nelson’s attorney, said Nelson does not have a securities license, but may not have needed one to issue promissory notes. Some untrue statements may have been made, he added, but not by Nelson.

She does not admit to anything in the department’s statement, Lysiak said.

Nelson manages Team Spirit America, which has taken over the affairs of the Little Loan Shoppe companies.

In addition to the fines, the state is seeking $60,000 in costs, and a cease-and-desist order to stop the sale of promissory notes by Nelson, Cooper or Little Loan Shoppe and related entities.

John Munding, an attorney for LLS America LLC, said the bankruptcy court will appoint an examiner to review the company’s accounts and determine whether money was misappropriated, and if the company should remain in business.


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