FAttorneys general have added new charges against a Paradise Valley man who allegedly defrauded investors of more than $ 4 million by pocketing investments to fund short-term loans to small businesses and consumers.
In 2019, Progress reported that a federal grand jury indicted David Harbor with two dozen counts of wire fraud and money laundering in connection with $ 2.9 million in investments solicited through 11 entities. incorporated in Arizona, Montana, Wyoming, Delaware and Missouri.
They included several exits from an office building at Pima Road and Thompson Peak Parkway in north Scottsdale.
Prosecutors filed a substitute indictment on November 24 that includes additional counts of wire fraud, mail fraud and tax evasion.
The new indictment also alleges that Harbor defrauded investors of nearly $ 4.4 million between 2010 and 2019.
The indictment alleged that Harbor solicited investments that were to be used to provide high-rate payday loans to consumers and small businesses and promised returns of up to 20 percent for investors.
But, in reality, much of the money went into Harbor’s pocket to pay off credit card debt and fund a lavish lifestyle that included parties, expensive homes, and golf club memberships. luxury in Scottsdale, Cabo san Lucas and Palm Springs, according to the indictment.
According to court documents, Harbor offered the loan program while working with an organization called KQS Management in 2010.
“Harbor asked victims to invest by promising them excessive returns for short periods… Although this trade deal began around 2011 and was unsuccessful, Harbor continued for years to attract investors with personal guarantees. , knowing that he did not have the capacity to pay. on guarantees ”, according to the indictment.
KSQ was ultimately investigated by the FBI, IRS, and the Federal Trade Commission.
KSQ owner Joel Tucker was indicted by a federal grand jury in 2018 and pleaded guilty in 2020 to interstate transportation of stolen money, bankruptcy fraud and tax evasion related to a bogus plan to debt fraud and bankruptcy, according to the Kansas City Business Journal.
Harbor then began working with Green Circle, a consumer lender operated by the Wakpamni tribe.
According to the indictment, Harbor solicited investments in Green Circle from some of the same people who lost money under the KSQ program by blaming the losses on Tucker and promising “to pay them back. with substantial returns on investment with Green Circle ”.
Harbor, Green Circle’s top fundraiser, received $ 25,000 for every million dollars it raised and 80 percent of the organization’s profits, according to the indictment.
According to an SEC investigation, Harbor used much of the funds it raised to pay off personal debts.
Harbor also reportedly used the money to pay for a lavish 40th birthday party that included a chartered plane for guests and a performance by 1970s rock band The Eagles.
“Again, no investor knew that Harbor was keeping a significant percentage of its investment funds for his own personal compensation, and he would not have been allowed to do so,” the indictment says.
Prosecutors alleged that he also occasionally led a quasi-ponzi scheme, using new investments to pay off previous investors.
In one case, prosecutors alleged that an anonymous investor gave Harbor $ 500,000, but only $ 55,000 went to Green Circle, with the rest being used to pay off credit cards and make Ponzi scheme payments. to other investors.
Victims of the alleged schemes included the widow of a deceased friend, who signed a million dollar life insurance check in Harbor in 2009 on the promise of a return of at least three percent.
According to the indictment, she received a total of $ 73,000 on this investment between 2010 and 2019.
Harbor is currently on trial.
He was initially placed under house arrest with an ankle monitor on an unsecured $ 1 million bond, but a judge released him from solitary confinement and home surveillance after posting a $ 500 bond. $ 000 secured by a $ 1.7 million home in Fountain Hills.
According to court documents, the house is owned by Timothy and Julianne Gottschalk, parents of Abby Harbor, wife of David Harbor.
The Harbors and Gottschalks are named co-defendants in an ongoing Maricopa County lawsuit filed by Wyoming-based 8901 LLC, which alleges the Ports violated a rental agreement for the Paradise Valley home they lived in. time of Harbors’ arrest in 2019.
This property, a 2-acre estate, was recently sold by 8901 LLC for $ 2.5 million, according to records from the Maricopa County Appraiser’s Office.
The lawsuit alleged that the ports had agreed to pay monthly rent and make $ 1.5 million in improvements to the property, but had defaulted on those obligations.