The Securities and Exchange Commission accuses the owner of a bankrupt Spokane-based payday loan business with conducting a massive Ponzi scheme.
The civil complaint alleges that Doris “Dee” Nelson stole investor money to pay for an upscale lifestyle that included expensive cars and gambling jaunts to Las Vegas.
Nelson lives with her family in Colbert. The SEC alleges she defrauded investors in her company, Little Loan Shoppe, by misrepresenting the profitability and safety of their investments and giving them the false impression that their money was being used to grow her business.
“Nelson conducted a classic Ponzi scheme where Little Loan Shoppe paid back early investors by lying to new investors,” said Marc J. Fagel, director of the SEC’s San Francisco Regional Office, in a news release. “By offering outsized returns and guarantees of repayment, Nelson created the enticing mirage of a successful business.”
Millions of dollars also were misappropriated for her personal use, the agency alleges.
According to the SEC’s complaint filed in federal district court in Spokane, Nelson raised about $135 million between 1999 and 2008 from at least 650 investors in the U.S., Canada and Mexico. She misled investors by telling them that Little Loan Shoppe was financially sound, the SEC said.
Most investors learned of Little Loan Shoppe from friends or family members, and many were Jehovah’s Witnesses, according to the Washington Department of Financial Institutions, which sued Little Loan Shoppe in March 2010.
Nelson denies the allegations, said her attorney, Carl Oreskovich.
“We’re not going to comment yet on these allegations, except to say that Dee hasn’t had a chance to tell her side of the story,” he said.
Nelson has not been charged with any criminal wrongdoing.
The civil complaint alleges that Nelson sold promissory notes assuring investors of annual returns of 40 to 60 percent that she claimed would be paid through Little Loan Shoppe’s profits. She also told investors that their money was safe because she had insurance or a separate account to pay back investors. However, Little Loan Shoppe was not profitable, investor money was not safe and Nelson misappropriated the money to run her Ponzi scheme, the agency stated.
As the scheme neared collapse in mid-2008, the complaint alleges, Nelson made a last-ditch effort to attract new investments by announcing a “window to invest” and falsely telling investors that Little Loan Shoppe had “defied financial gravity” in the deteriorating economy.
Investors responded by pouring millions more into Little Loan Shoppe. The business soon buckled, payments were cut and missed and investors dragged the company into bankruptcy in 2009.
The SEC charged Nelson with violating the antifraud and registration provisions of the federal securities laws.
Little Loan Shoppe’s bankruptcy is ongoing and now includes dozens of companies owned and run by Nelson.
In seeking bankruptcy protection, the company claimed it owed more than $100 million to more than 1,300 creditors.