DALLAS – Investors are saying they lost more than $50 million in a Ponzi scheme allegedly orchestrated by David Salinas, the Houston financial adviser with close ties to college basketball who committed suicide last year.
A report filed by the court-appointed receiver in the Securities and Exchange Commission’s suit against Salinas’ estate said 130 people or entities have filed 259 claims seeking $51 million for their losses, most the result of investing in what are now being described as bogus corporate bonds.
Steven Harr’s report, filed Tuesday, said the $51 million figure likely is an overstated amount because the claims haven’t been vetted for accuracy. That process could take as long as a year to complete.
The report doesn’t include names, but at least eight current and former college basketball coaches are known to have lost millions as a result of investing with Salinas, who also directed a well-known AAU program for high school players. They include Texas Tech’s Billy Gillispie, Baylor’s Scott Drew, former Arizona coach Lute Olson and former Utah coach Ray Giacoletti, now an assistant at Gonzaga.
A foundation that endows athletic scholarships at the University of Houston also has seen more than 40 percent of its listed assets wiped out because of investments with Salinas, who held a prominent role in the organization.
The SEC sued Salinas’ estate last August, two weeks after he shot himself to death at his suburban home. The suit alleges that he and an associate, Brian Bjork, bilked more than 100 investors out of $39 million by selling corporate bonds that didn’t exist. It also contends that the pair raised another $13 million for two private funds and used $3.4 million to make improper loans to affiliated parties.
Harr’s report doesn’t address the total value of Salinas’ potential assets, although it said nearly $12 million of an available $13 million in death benefits have been collected from life insurance policies. The funds have been invested in certificates of deposit, the report said.
Salinas transferred some death benefits to acquaintances just weeks before his suicide, according to the report.
The report details 20 loans valued at more than $15 million, but nearly half are unsecured and have gone largely unpaid. None of the recipients are identified because of what the receiver called “privacy concerns.”
The report said Harr has found approximately 60 bank accounts tied to Salinas and has initiated a forensic accounting. However, that process has been slow because of the large number of accounts and the policies of the financial institutions, the report said.
The attorney for Olson, who has filed a lawsuit claiming he lost more than $1 million as a result of post-retirement investments in the allegedly phony bond scheme, said the lack of details in Harr’s report is cause for concern.
Failing to disclose the identities of those who received the loans makes it more difficult for victims looking for ways to recoup their losses, said the attorney, Michael Aguirre of San Diego.
“When you are the victim of a fraud, you expect the people investigating it to err on the side of more disclosure, not less,” he said.
Aguirre said he has been asked by the receiver to drop his suit, but he hasn’t done so. That’s because he believes the proceeding can play an important role in identifying third parties who could be made liable for the alleged fraud, he said.
“This is the first case I’ve seen where people are being asked to wait in abeyance while the time runs out on the statute of limitations and they are being prohibited from exercising their constitutional rights,” Aguirre said.
Neither Harr nor his attorney, Sameer Karim, responded to requests for comment from the Associated Press.