The accountant looked over documents related to the J. David Financial Group and couldn’t shake the feeling. Something “seemed peculiar to me,” Chris Peden said.
So, Peden did what any responsible accountant would do. After going to his supervisor, asking questions and not getting any good answers, he turned the material over to the Securities and Exchange Commission.
He wasn’t the only one who didn’t like what he saw.
Over the course of the next several weeks, a widening SEC investigation into financial practices at the company run by David Salinas moved forward. What turned up were more than just potential financial improprieties, but an operation that might have cost high-level college basketball coaches millions and also raised questions about potential NCAA recruiting violations.
Salinas, 60, was found shot dead in the swimming pool of his suburban Houston home last Sunday in what has been ruled a suicide.
“In my wildest imagination, I never would have thought that what I turned over to the SEC would go in that direction,” Peden said.
Lute Olson of Arizona, Billy Gillespie of Texas Tech, Scott Drew of Baylor and Mark Few of Gonzaga have been identified as some of the big-name coaches who invested with Salinas, according to reports from CBSsports.com and SI.com. In all, more than a dozen coaches, including Gonzaga assistant and former Eastern Washington coach Ray Giacoletti, are believed to have lost more than $7.8 million, SI.com reported.
Salinas also ran a high-profile AAU basketball program in Houston, leading to questions about whether coaches were using their investments as an in to some of the top-notch high school players in that program.
“Yes, I’ve invested with David and he’s been a friend for a while, but I did not invest money until after I had retired from coaching,” Olson said in a statement.
Former coach Tom Penders told The Associated Press that shortly after he was named head coach in 2004 at the University of Houston, where Salinas was a season ticket holder and well-known donor, he received a package from Salinas with a gift for his wife – a leather jacket – and a request to meet.
Penders said Salinas showed him brochures that included information about several companies and used the material to make a pitch: Earn a return of 10 percent to 12 percent as part of a $1 million investment pool in which 10 coaches would each contribute $100,000.
At the conclusion of the pitch, Salinas mentioned that he operated an AAU basketball program and that he’d helped Houston get players in the past, including some who’d become stars, Penders said.
“He said, ‘I helped all those guys go here, and I can really help you,’ ” Penders said.
Penders, who resigned from Houston after the 2009-2010 season, said he declined to invest and also told Salinas that he tried to keep his distance from those associated with AAU programs.
“He didn’t express disappointment,” Penders said. “But he did ask me, ‘Well, from all your years at Texas, you must have some friends who are big money people. Maybe they’d like to get involved in this.’ ”
One of Salinas’ investors was Baylor football coach Art Briles, who had previously coached at Houston. Asked why so many coaches were drawn to Salinas’ firm, Briles made no mention of possible advantages in recruiting.
“I guess it’s just like everybody goes to this certain dentist,” he said. “Your friend goes, he says it’s good, then you go, and the next guy goes. It’s probably word of mouth, best I can figure.”
Drew, who is Briles’ basketball counterpart at Baylor, also invested with Salinas.
Drew said he invested with “the only intent being to provide long-term financial security for my family.”
Another who invested with Salinas was former Nebraska basketball coach Danny Nee. Nee said he considered himself a longtime friend and business associate of Salinas and never caught any hint that the financial adviser was directing players toward schools based on coaches’ willingness to invest.
NCAA spokeswoman Stacey Osburn did not return messages left by the AP seeking comment about whether the association was investigating the ties.
Houston athletic director Mack Rhoades said the school’s internal review found no NCAA issues in relation to Salinas and that the school has not been contacted by the NCAA.
According to records, Salinas was not registered to sell securities and he flunked the Texas state accreditation test three times.
Salinas did have a license to sell insurance. But according to records from the Texas Department of Insurance, he almost lost it in 1983 for failing to disclose on his application that he’d been convicted of felony forgery of a check in 1975. He was fined $500 in lieu of revocation in a ruling that noted he was 22 and having drug problems at the time of his indictment.
Peden, the accountant who contacted the SEC, is the chief financial officer at Select Asset Management LLC, a company with deep ties to Salinas and the J. David Financial Group. The CEO at Select Asset is Brian Bjork, who from 1995 to 2006 was vice president of J. David Financial Group and also serves as a director of the nonprofit organization that operates Salinas’ summer basketball program.
Although the website for J. David Financial has been shut down, a message addressed “to all clients” and posted on Select Asset’s site says the SEC recently subpoenaed information from that company, as well as from J. David Financial.
The message says many of Select Asset Management’s investors and clients also have money invested with J. David Financial Group and that many of those investors were referred to Select Asset Management by Salinas.
According to the posting, all money invested with Select Asset Management “can be accounted for.”
In his interview with the AP, Peden declined to go into details about what caught his eye when he looked at the J. David paperwork.
“What I did was, I saw something that didn’t add up to me,” he said. “I turned those documents over to the authorities to see if it added up to them. I don’t know of any other thing a reasonable person could do.”