Ex-Hinshaw Partner Accused of Investor Fraud
A former partner at Hinshaw & Culbertson has been accused along with two executives of a real estate lending fund of defrauding investors who put $21 million into the fund after its sole borrower defaulted.
According to the civil complaint (PDF) filed by the Securities and Exchange Commission, lawyer Todd Duckson and the two executives—Michael Bozora and Timothy Redpath—failed to disclose the default of the sole borrower for several months, and when they did, they minimized its impact. At the time, Duckson was managing the hedge fund, the Capital Solutions Monthly Income Fund.
The Minneapolis Star Tribune and the St. Paul Pioneer Press have stories; a press release also has details. The Star Tribune identifies Duckson as a former partner at Hinshaw & Culbertson but does not give the dates that he worked there. A bio posted on the website of True North Finance Corp., which merged in 2009 with Capital Solutions, said Duckson was a Hinshaw partner from 2003 to 2009. The bio was later removed, but a cached version is still available.
In 2008, Duckson was the outside counsel for Capital Solutions after the borrower defaulted and the fund foreclosed on its real estate projects, the SEC says. As outside counsel, he participated in drafting an offering document that didn’t disclose the borrower’s default, the SEC alleges. Later that year, he agreed to take over management of the fund.
The SEC alleges Duckson and the two executives had claimed the fund was poised to take advantage of lending opportunities. In reality, most of the fund’s assets were used to pay existing investors and maintain the real estate acquired through foreclosure, according to the SEC.
A lawyer for Duckson and the fund, Scott Carlson, told the Pioneer Press in a statement that the SEC charges are “completely unfounded and unsupported, and we will vigorously contest them.”
Updated at 8:20 a.m. to include more information from the complaint.
