A former Mission woman fraudulently raised $135 million from at least 800 investors, including more that $69 million from at least 355 B.C. investors, the B.C. Securities Commission has alleged.
In a notice of hearing Monday, BCSC enforcement staff alleged that Doris Elizabeth Nelson - who is now under house arrest in Washington state awaiting trial on criminal fraud charges - told investors their money would be used to finance her payday loan business, which operated as the Little Loan Shoppe.
She represented that the business was so profitable, she could afford to pay investors an annual interest rate of 40 to 60 per cent.
However, the commission alleged, the business consistently lost money due to a high rate of loan defaults. To pay the promised return, she used money from later investors to repay earlier investors, thereby perpetrating a Ponzi scheme.
The scheme ran from 1998 to 2009, when the business finally went bankrupt.
Although the commission alleges Nelson fraudulently sold a total of $135 million in promissory notes, the net loss to investors is much less.
According to bankruptcy officials, Nelson paid out $118 million to investors, including $2.2 million in commissions to recruiters. The remaining $17 million was used to finance operating losses and personal expenses, and other "unaccounted-for" losses.
The commission also alleges that:
¥ In July 2008, after BCSC enforcement staff notified Nelson that she was under investigation, she sent emails to investors telling them that she planned to make false statements to the commission, and coached them to hide relevant information if contacted by investigators.
¥ When investigators asked her to provide information about her investors, she tendered an affidavit that misrepresented the number of Canadian investors, and attached false evidence to claim exemptions from prospectus and registration requirements.
None of the allegations have been proven.
The BCSC action is the least of Nelson's problems.
In November 2011, FBI agents arrested her at her home in Colbert, Wash, just north of Spokane, and charged her with 71 counts of wire fraud, 22 counts of mail fraud and 17 counts of international money laundering.
She has been under house arrest ever since. Her trial is scheduled for June this year.
An early investor, Monique Olsen of Agassiz, said in an interview Monday that "Dee" Nelson was living in Mission and selling phone-book advertisements in 1997 when she started her business.
She ran short of cash and borrowed from a short-term lender.
Olsen said that, after Nelson repaid the loan, plus fees, she befriended the business owner and they became business partners in a payday loan store in Abbotsford.
When her partner bowed out, Nelson persuaded Olsen and several other friends to invest several thousand dollars each and used the money to open two more stores in Chilliwack and Maple Ridge.
In 2001, she married Dennis Nelson and the couple moved to the Spokane area, where they opened four more stores.
By 2006, they had closed all the stores and were operating exclusively through the Internet.
"She was very convincing. She could always placate any fears you might have," Olsen recalled.
According to the grand jury indictment, Nelson raised money through various corporate entities in the United States and Canada, including three B.C. numbered companies.
The indictment alleges she used investor funds to finance "an unwarranted and unearned extravagant lifestyle":
¥ From 2003 to 2009, she transferred $4.3 million to her personal accounts.
¥ Between 2007 and 2009, she and family members charged at least $374,000 in personal charges to company credit cards.
¥ In 2007 and 2008, she bought a 2008 Corvette for $61,000 and a 2008 Mercedes-Benz S550 for $112,000, and made a $50,000 down payment on a $127,000 motor home.
¥ From 2004 to 2009, she spent more than $220,000 on clothing at St. Johns Knits stores in Las Vegas, New York, Honolulu and Beverly Hills, and $217,000 on clothing from Nordstrom.
¥ From 2005 to 2008, she lost more than $400,000 gambling at various high-end casinos in Las Vegas including Bellagio, Luxor and Mirage.
¥ In November 2006, she and her husband spent $28,984 on a Royal Caribbean cruise, including $23,500 in gambling charges. She also spent $58,457 on artwork from Park West at Sea.
Nelson is also facing two other regulatory actions. In January 2010, the Washington State Department of Financial Institutions commenced civil proceedings against her, and in September 2011, the U.S. Securities and Exchange Commission filed a civil complaint against her.
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