J. David Salinas, an investment manager suspected of swindling clients including college basketball coaches out of more than $50 million, may have left a note before his death in which he claimed sole responsibility for his actions, a government lawyer said.
The one-page handwritten note, purportedly from Salinas, was given to the U.S. Securities and Exchange Commission by business associates who searched Salinas’s offices about 10 days before his death on July 17, said Kathleen Galloway, an SEC attorney, in a statement filed yesterday in federal court in Houston.
In the undated note, Salinas claimed to be “fully responsible’’ for all transactions, correspondence and sales activities of his J. David Group, which the SEC sued yesterday over allegations it ran a Ponzi scheme that sold fake bonds.
“I had total authority,’’ according to the note. The firm’s employees “performed their duties with unknowing consequences,’’ Salinas purportedly wrote, according to the court filing.
Salinas, through his companies Select Asset Management and J. David Group, defrauded investors of more than $50 million beginning in 2004, the SEC said in its complaint. The agency also sued Brian A. Bjork, chief investment officer of Select Asset.
“Bjork and Salinas promised investors safe, fixed-income by investing in highly rated corporate and other bonds with annual yields up to 9 percent,” the SEC said. “In reality, the J. David Group corporate bond offering was bogus.”
The investors included college basketball coaches Lute Olson, former coach at the University of Arizona, and Scott Drew, coach at Baylor University. Salinas was a founder of an elite high school summer basketball program in Houston and a donor to college sports programs.
“I’ve invested with David and he’s been a friend for a while,” Olson said in a July 20 statement after Salinas died. “But I did not invest money until after I had retired from coaching.”
‘I, like many coaches and other individuals, did invest with Mr. Salinas with the only intent being able to provide long-term financial security for my family,” Drew said in a statement.
The SEC asked the court to freeze assets of the estate, the companies and Bjork “to ensure the eventual return of the assets to their rightful claimants.” U.S. District Judge Keith P. Ellison granted that request and set a hearing for Aug. 10.
Ellison also ordered the defendants and anyone working with them not to destroy records related to the transactions or assets.
“Our enforcement action seeks to put an end to an alleged scam that took millions of dollars from more than 100 investors,” said Robert Khuzami, director of the SEC’s enforcement division.
“Brian has been supplying information and documents to the SEC but has not himself been interviewed,” Matt Hennessy, Bjork’s attorney, said in a phone interview. “At this point, Brian plans to continue to cooperate with the investigation,” he said.
“David Salinas had established relationships with different coaches before Brian ever came into the picture,” Hennessy said. Bjork was introduced to Salinas by a mutual friend, Scott Thompson, a former basketball coach at Cornell, Rice and Wichita State universities, whom Hennessy described as a “long-time friend of David’s.”
J. Randle Henderson, an attorney for Select Asset Management, said yesterday he couldn’t immediately comment on the lawsuit because he just received the complaint.
Salinas, 60, was found dead of a gunshot wound on July 17 at his home in the Houston suburb of Friendswood, Texas. Galloway, the SEC attorney, said in court filings that a Galveston County prosecutor told her July 17 that the death was “apparently a suicide.”
The SEC claims that investors were sold corporate bonds and were issued monthly account statements to reflect their holdings.
“Neither Salinas nor Bjork, through J. David Group, J. David Financial, Select Asset, or otherwise, had ever actually acquired the bonds reflected in the account statements,” the SEC said. “The bond offering was a sham.”
“David Salinas conducted all the bond transactions for the J. David Financial Group of companies,” Hennessy, Bjork’s attorney, said. “Brian’s knowledge of what David did came from David alone. Brian had no indication that David was deceiving his investors. Brian was shocked to learn of the degree of David’s deception.”
Hennessy said Bjork’s position as senior vice president of J. David Financial Group was an unpaid position, in which he assisted with the company that sold athletic insurance to colleges and universities for their sports teams.
The SEC has been investigating the Salinas companies for several months, according to court papers filed by Galloway. This included sending requests for documents relating to any transfers, loans or investments, she said.
The SEC received multiple discs on July 8, 2011, with documents missing. None of these documents have yet been provided, she wrote.
Henderson, the Select Asset attorney, notified the SEC that “Bjork now doubted the existence of the bonds,” because Bjork and two other employees “searched the J. David office and could not find any evidence of the bonds’ existence,” Galloway said. “Further, there were signs that Salinas and J. David were struggling financially,” she wrote.
Bjork and the other employees found Salinas’s note in an envelope marked “To Whom It May Concern” during their search of the offices, according to Galloway’s statement.
The case is SEC v. Bjork, 11-cv-02830, U.S. District Court, Southern District of Texas (Houston).