The federal fraud case against Charlotte investment adviser Richard W. Davis Jr. involves multiple charges, 17 different corporate entities and more than 1.5 million pages of documents.
Because of this extreme complexity – even for normally complicated white-collar cases – the federal trial has been pushed back until early next year, according to recent filings in federal court in Charlotte.
That means around 100 investors who were allegedly defrauded of as much as $19 million will have to wait until the February term or longer for a trial.
In the meantime, a court-appointed receiver in a companion case brought by the U.S. Securities and Exchange Commission is working to sell off assets – mostly real estate investments – in order to raise money for investors. But that effort has also been complicated, court documents show.
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The receiver in the case, Charlotte attorney Cotten Wright, and Davis have exchanged a number of dueling motions as Wright has worked to sell off property. In one example, Davis sought a finder’s fee for helping identify a buyer for a property, a request that Wright resisted.
“There should be no strings attached to your conveying any leads,” Wright wrote in an email to Davis last month, according to court documents.
A federal grand jury returned a criminal indictment in December charging Davis, 40, with one count of wire fraud, two counts of securities fraud and three counts of tax evasion. He is accused of taking money from investors in and around Charlotte and using it to repay other investors and to spend on personal items, including vacation homes, nannies, a personal chef and a groundskeeper.
To attract investors, he spoke at events for “preppers” and survivalists, thereby targeting victim-investors who feared the stock market and the banking system, prosecutors said. His clients included professional athletes and people recruited at his church, the indictment says.
Davis has pleaded not guilty and is free on bond.
In a sign of the case’s complexity, Davis initially hired his own attorney, but she withdrew two weeks after his arraignment in December 2016, citing the heavy load of documents to examine, according to court documents. He is now represented by court-appointed federal defenders, J.P. Davis and Peter Adolf. J.P. Davis declined to comment.
According to a joint filing last month by Davis’ lawyers and U.S. Attorney Jill Westmoreland Rose, the case is comparable in complexity to two other high-profile Charlotte-area prosecutions: the case against Paul Burks in the Zeeks Rewards Ponzi scheme fraud and the accounting fraud case against former Beazer Homes executive Michael Rand. From its inception, for example, the Burks case took nearly two years to go to trial, according to the filing.
The fact that the Davis case involves a large number of potential witnesses, multiple commercial real estate transactions and the valuation of properties and natural resources makes it “particularly complicated, even among securities fraud cases,” the filing says.
Dueling motions in SEC case
The criminal charges followed a civil action in June 2016 by the U.S. Securities and Exchange Commission in which the agency charged Davis with defrauding investors by secretly moving portions of real estate investments into transactions with companies he owned or operated himself. That case accuses Davis defrauding at least 85 people who invested a total of approximately $11.5 million.
The SEC and Davis reached an agreement that requires him to cooperate with a court-appointed receiver, who is charged with liquidating Davis’ investments to raise cash for investors. Court filings show that Wright, the receiver, has jostled with Davis during the process.
After Wright listed a property for sale in Virginia, she received an email from Davis in May saying he had a prospective buyer and requested a finder’s fee.
Wright responded in an email to Davis that she thought the “request was inconsistent with (Davis’) obligation to cooperate with the receivership.” Davis replied that he disagreed and that he has been told by authorities that he is allowed to work.
A court filing also says that Wright had concerns that Davis was using the email address for Davis Capital Group – one of the entities involved in the case – to communicate with third parties about assets in receivership. U.S. District Judge Graham Mullen later issued an order directing him to stop using emails associated with the companies that are defendants in the case.
In another instance, Davis has objected to Wright’s effort to sell a piece of property to the town of Huntersville. Wright also filed suit against two individuals who say Davis has a stake in mining equipment in Nevada.
In an interview, Wright said she can’t make a prediction on how much she money she will be able to reclaim for investors.
“I don’t expect to be able to make investors whole, that is just outside the realm of possibility,” she said. “But I am mandated to do the best I can, to collect as much as possible.”