A federal judge yesterday delayed a civil fraud case against former Toledo investment executive William C. Davis until completion of a criminal investigation by the U.S. attorney's office.
Judge James Carr, acting on a request from the U.S. Securities and Exchange Commission, continued a freeze on the assets of Mr. Davis and an injunction barring him from resuming investment advisory activities.
Mr. Davis' clients have filed claims for $20 million with the quasi-governmental Securities Investor Protection Corp. against his former brokerage, which is being liquidated under supervision of a federal bankruptcy judge.
The action came during a hearing in U.S. District Court in Toledo. Judge Carr said it would be difficult for Mr. Davis to respond to the civil fraud allegations in light of the pending criminal investigation.
The judge asked for quarterly updates on the status of the case.
Mr. Davis, a former trustee of the Medical College of Ohio, was a popular investment adviser whose clients and business associates once included prominent physicians, heirs to local industrial fortunes, and a chief executive of a Fortune 1,000 company.
"My understanding is that the U.S. attorney's office intends to complete their investigation sometime this year," Paul Montoya, an SEC lawyer, told the judge.
Asked after the hearing if he had any comment, Mr. Davis told The Blade: "I'm not an attorney. I don't know what these guys are talking about half the time."
The Lambertville resident also refused to address allegations against him, saying: "I have no idea what the specifics are."
The SEC has accused him of transferring client funds - in some cases using forged signatures - from standard investments into obscure businesses in which he had an interest.
Mr. Davis, 58, is blamed for the collapse of Continental Capital Investment Services, where he was an investment adviser and chairman of parent Continental Capital Corp., of Sylvania.
The firm's court-appointed trustee alleged in a legal motion filed last week that Mr. Davis was operating a Ponzi scheme, in which money from new investors is used to pay old investors.
" William C. Davis orchestrated a scheme involving the unauthorized purchase and sale of securities through a corrupt pattern of fraud, misrepresentation, forgery, and conversion," trustee Thomas Zaremba said in the motion filed on behalf of the Securities Investor Protection Corp., which insures investors against fraud.
In a telephone interview, Mr. Zaremba said staff members continue to review claims submitted by Mr. Davis' former clients. Two claims for $10,000 each have been paid so far, and he said he expects authorization for payment of another batch this week.
He hopes to resolve remaining claims this year, Mr. Zaremba said.
David Bauer, an assistant U.S. attorney in Toledo, declined comment on the status of the criminal investigation. U.S. postal inspectors launched the probe two years ago.
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