The disgraced founder of San Diego-based The Patio Group - which once operated multiple restaurants around the city including The Patio on Lamont, The Patio on Goldfinch, and Fireside By The Patio, amongst others - pled guilty today to criminal charges of conspiracy, securities fraud and obstruction of justice. She faces up to 15 years. in prison.
In August 2019, news broke that Gina Champion-Cain was civilly charged by the United States Federal Securities and Exchange Commission (SEC) for allegedly operating a nearly $400 million "egregious fraud" against over 100 investors. The SEC ultimately obtained a consented-to asset freeze against San Diego-based ANI Development LLC and its principal Gina Champion-Cain. According to a 19-page complaint filed by the SEC this week, beginning in 2012 Champion-Cain's ANI Development raised hundreds of millions of dollars from investors by claiming to offer an opportunity to make short-term, high-interest loans to parties seeking to acquire California alcohol licenses.
In truth, the SEC alleges, the investment opportunity was a sham "a massive Ponzi scheme." Contrary to defendants’ representations, the SEC asserts, defendants did not use investor funds to make loans to alcohol license applicants. Instead, Cain forged and fabricated documents and directed significant amounts of investor funds to companies she controlled, as well as to herself and family members. American National Investments Inc. - the parent company of ANI and approximately 40 other businesses, including restaurants, rental properties, coffee shops and a surfing supply store - is also a named defendant. In April of this year, a U.S. District Judge approved a settlement agreement for the return of a small portion of misappropriated funds to several investors."This is by far the largest Ponzi scheme discovered in this district," U.S. Attorney Robert Brewer said. "Gina Champion-Cain constructed and maintained a house of cards that has come crashing down around her and all her victims. The scheme deprived many investors of their retirement savings, and cost at least one investor tens of millions of dollars and forced him into bankruptcy. And now it will cost the defendant her freedom. We will continue our aggressive efforts to root out corporate fraud and hold greedy criminals accountable."
The government alleges that Champion-Cain went as far as establishing email accounts "with slight variations on the usernames and domain names of actual email addresses" used by specific Escrow Company personnel, as well as an attorney, in order to respond to investors. There are also allegations that she and conspirators fabricated deposit receipts, deleted emails, and continuing to obstruct investigations even after charges were filed. She even attempted to solicit up to $150 million of additional investments on August 27, 2019, two days before news broke of the SEC complaint and a month after the original subpoena was served on her. It is even stated that on September 15, 2019, Champion-Cain instructed an information systems contractor to delete all content from her personal computer by means of a factory reset.
Today, Champion-Cain pleaded guilty in federal court to criminal charges of obstruction of justince in violation of 18 USC Section 1505, conspiracy in violation of 18 USC Section 371, and securities fraud in violation of 15 USC Sections 77q and 77x. Pending any delays, she will be sentenced on October 13 and the maximum sentence for the three charges could be up to 15 years in prison and a maximum fine of $250,000, forced restitution, forfeiture of property, and 3 years supervised release. She has waived all rights to appeal. According to federal prosecutors, Champion-Cain still "owns, manages, and/or controls a significant number" of San Diego businesses.
The fallout resulted in the court-appointed receiver overseeing Champion-Cain's assets closing almost all Patio Group restaurants, including Himmelberg's in San Diego's East Village, Swell Coffee locations, Bao Beach, The Patio Express branches, The Patio on Goldfinch, Fireside By The Patio, and Surf Rider Pizza branches in Ocean Beach, Mission Beach and Crown Point. San Diego's Cohn Restaurant Group was designated to operate The Patio on Goldfinch, Saska's Steakhouse and Surf Rider Pizza eateries in Ocean Beach and La Mesa. Cohn Restaurant's has taken over Surf Rider Pizza in La Mesa. OMG Hospitality bought Saska's and will revive the historic eatery. Good Time Design took over the former Fireside by the Patio space in Liberty Station and will soon open wood-fire-focused The Presley.
The entire plea agreement for the United States of America v. Gina Champion-Cain is available online.
