Nearly a year after alleged wrongdoing involving a prominent Toledo investment executive first came to light, a criminal investigation is continuing and clients of the failed brokerage for which he worked have filed claims for $20 million.
Lawyers for William C. Davis, former chief executive of Continental Capital Corp., didn't return calls seeking comment.
"It's an active investigation and we're working on it constantly," said Terrence Sullivan, an investigator with the U.S. Postal Inspection Service.
Clients of Continental Capital's investment arm have filed nearly 300 claims for $20 million with the Securities Investor Protection Corp., said Thomas Zaremba, a Toledo attorney acting as trustee for the federal agency that steps in when brokerages fail. Some losses, if not the result of ordinary stock trading activity, could be paid from a fund supervised by the corporation, said Mr. Zaremba, who expects more claims before a June 5 deadline.
While attempting to identify assets and winding up affairs of Continental Capital Investments Services Inc., of Bryan, and Continental Capital Securities Inc., of Sylvania, he has amassed 1,300 file drawers of documents. Mr. Davis, 57, is former chairman of both firms.
The trustee has found little cash, however. Bank accounts contained about $5,000 and a safe held collector's coins and computer disks. He is also trying to determine how best to sell stock and other instruments paid in March, 2003 by Berthel Fisher & Co., of suburban Cedar Rapids, Iowa, for customer accounts of the Bryan and Sylvania firms.
Meanwhile, the U.S. Securities and Exchange Commission is proceeding with a separate civil fraud case brought against Mr. Davis in U.S. District Court in Toledo.
Judge James Carr has given both sides until April 20 to gather pre-trial evidence, such as sworn witness statements, said Paul Montoya, an SEC lawyer in Chicago.
No trial date has been set, although the parties have until June 1 to ask the judge to rule that the evidence is so strong either way that a trial is not needed.
Mr. Davis, responding to SEC allegations in court papers, has invoked his Fifth Amendment rights against self-incrimination.
The commission, in the civil complaint filed July 9, alleged that starting in at least May, 2001, Mr. Davis forged customer signatures on documents authorizing the sale of securities in their accounts. He then allegedly used the proceeds to buy, on their behalf but without their knowledge, at least $716,000 in promissory notes issued by firms to which he was connected as an owner or in some other capacity.
He diverted proceeds from the note sales "for his own use," the SEC said.
Problems with Continental and Mr. Davis first came to light in lawsuits filed last year by clients.
Mr. Davis, a resident of Lambertville, Mich., is well-known in Toledo social and financial circles and is a former trustee of the Medical College of Ohio.
Among investors with whom he was involved were leading Toledo physicians and business executives, including the chairman of Manor Care Inc., which is among the nation's largest operators of nursing homes.
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