Ponzi schemer On the Pacific
Bloomberg Businessweek|January 24, 2022
Gina Champion-Cain was a beloved friend, mentor, and pillar of the San Diego business community. But her successful image and lavish lifestyle were fueled by a $400 million fraud
Chris Pomorski

In late 2012, Kim Peterson, a San Diego real estate developer and lawyer, got a call from a friend and colleague named Gina Champion-Cain. Peterson was in his 60s; in 1982 he left behind a high-profile criminal defense practice in Chicago to build shopping centers, pharmacies, and luxury homes. With his wife, Laurie, he lived in a stylish Mediterranean villa with views of the Pacific and traveled on his own plane. In business circles, Peterson was known for probity and sound judgment. Through mutual acquaintances, he’d met Champion-Cain, roughly 15 years his junior, around 2005. They became close, playing golf at the exclusive Rancho Santa Fe country club where they were members and dining together with their spouses. Now she had an investment opportunity to tell him about.

Champion-Cain owned a real estate company, American National Investments Inc., and had recently bought her first restaurant. She was learning about liquor license regulations. When a license is transferred from one owner to another, she told Peterson, California law requires that the buyer and seller apply for approval to the California Department of Alcoholic Beverage Control. Within 30 days of applying, the parties are obliged to open an escrow account, into which the buyer must deposit the purchase price of the license. California liquor licenses can be more than $100,000. Many buyers, Champion-Cain said, are caught off guard by quickly having to come up with so much cash. She told Peterson that she’d recently met with a liquor license attorney who wished that his clients could get financing to cover their deposits while they waited for approval.

Here was the opportunity. By collecting money from investors, including wealthy acquaintances and friends, Champion-Cain had created a fund to provide short-term, high-interest loans to liquor license applicants. When, upon approval of a transfer, the buyer provided the cash for the purchase and the escrow closed, the loan principal and interest flowed back to the fund. Returns varied depending on a loan’s duration but could hit 25%. The liquor license attorney, Champion-Cain said, had a steady supply of worthy applicants, and Chicago Title, one of the largest title insurance providers in the U.S., was overseeing the escrow accounts. (Chicago Title has headquarters in Los Angeles and Jacksonville, Fla.)

To Peterson, it sounded as though his friend had identified an overlooked, potentially lucrative niche. And he’d done business with Champion-Cain before, lending her money that was repaid with interest. He made a few relatively modest investments in the fund, and after those paid off, he put in more capital. He also spread the word, first to well-heeled associates and later to banks and hedge funds. Collectively, they would invest about $140 million. In 2015, in recognition of his role as the fund’s principal rainmaker, Peterson got a small ownership interest in Champion-Cain’s company and the right to 80% of the fund’s profits.

In fall 2016, Peterson invited a promising visitor to his office in Del Mar, a beach town north of San Diego. Michael Brewer was president of Alcoholic Beverage Consulting Service, a company that offers liquor licensing assistance. Brewer was one of the foremost liquor license experts in the state, and he had name brand clients: CVS Pharmacy, Marriott International, Outback Steakhouse. Such large corporations had no need for Champion-Cain’s fund. But Peterson hoped Brewer’s smaller clients might be interested in borrowing money. Before describing his idea to Brewer, Peterson asked him to sign a nondisclosure agreement. “He thought he found the golden goose,” Brewer tells me.

Peterson explained things to Brewer much as ChampionCain had explained them to him. But Brewer was perplexed: There’s a difference between the letter of the law and how California liquor licensing really works. Yes, buyers are supposed to deposit the full purchase price of their license into escrow within 30 days of filing an application. In practice, almost no one deposits more than 10%. The agency in charge “never pressures anybody to fund within that 30-day time frame,” Brewer says. Only on the eve of approval are applicants required to have the full amount. That lets them avoid tying up significant resources in non-interest-bearing accounts during a review process that can take a year.

Brewer could think of few circumstances in which he would recommend that clients cover their escrow needs with high-interest loans. “I told Kim Peterson it made no sense,” he says. “He didn’t believe me.” By then, Peterson had been investing with Champion-Cain for about four years. Millions of dollars had flowed through the fund. Peterson had made a handsome profit, and he felt sure of his returns. He was confident that Chicago Title was protecting the loan principal for which he was responsible. Brewer says that Peterson told him, “I’ve got $8 million in loans on the street right now.” (Peterson, who denies naming a specific figure, tells me that before taking on a larger role in the fund, he consulted with multiple law firms and visited the Alcoholic Beverage Control district office in Sacramento to confirm the legality of the lending model. The office didn’t respond to a request for comment.) As far as Brewer was concerned, the problem that Champion-Cain’s fund purported to solve didn’t exist.

A mid the surfboards, flip-flops, and fish tacos, it’s easy to forget that San Diego is a Navy town, and its largest employer is the U.S. military. This helps explain the city’s relatively conservative politics and, with the twentysomethings who alight for a few years to enjoy the craft beer scene before seeking fortunes elsewhere, its transience. The motto on San Diego’s seal is Semper Vigilans (Always Vigilant), but boosters prefer a public-relations slogan dreamed up in the ’70s after San Diego was spurned by the Republican National Convention: America’s Finest City.

Until 2019, when she was revealed to be the architect of an almost $400 million Ponzi scheme—a distinction that likely makes her the most prolific female Ponzi artist in history—no one channeled the local je ne sais quoi better than ChampionCain. She arrived in 1987, tired of winters in Ann Arbor, where she had grown up and recently graduated from the University of Michigan. Seven years later, having added an MBA to her résumé, she took a job with Koll Co., a large developer. Lynda McMillen, then a regional president, hired her. “She is bright. She is articulate. She has confidence and poise,” McMillen says. “She could go anywhere she wanted to go.”

Champion-Cain inherited a passion for real estate from her father, a developer in Michigan. But she didn’t find the overwhelmingly male world welcoming. Petite, tan, and athletic, with flowing dark hair, she was once told by a senior executive that she was too good-looking to be taken seriously. Plum assignments seemed to go to men, while she was stuck with troubled projects. “I made a name for myself for being able to do complex negotiations and turn around distressed assets,” she said in a 2016 interview for a podcast hosted by psychologist Nancy O’Reilly. But it was a lonely education. “I couldn’t ask the men for help. They would have seen it as weakness.”

Among the notable projects Champion-Cain worked on at Koll were a trio of San Diego retail centers, including the massive La Jolla Village Square. If she felt intimidated by male colleagues, it didn’t show. “She played cards, she drank bourbon, she smoked cigars, she was into going to Vegas,” recalls Howard Greenberg, president of Trilogy Real Estate Management, a prominent landlord. “She could walk into a room full of guys and hold her own.”

In 1997, Champion-Cain left Koll to found American National Investments (ANI), eventually renting a small office above the Onyx Room, a nightclub in the Gaslamp Quarter, in downtown San Diego. The Gaslamp, which encompasses about 16 blocks adjacent to San Diego Bay, was once known for its brothels, gambling halls, porno palaces, massage parlors, and sailor saloons. Since becoming an historic landmark in 1978, the neighborhood had attracted developers, including Trilogy, that were converting its Victorian-era buildings to live-work lofts. The city poured in cash. In 1998 voters approved an expansion of the San Diego Convention Center, along the Gaslamp’s southwest border, and backed a deal for a new ballpark for the Padres blocks away.

The area remained scruffy, but Champion-Cain remembered her father’s perseverance through economic doldrums. In the Gaslamp’s dilapidated buildings she saw a chance to improve her own fortunes and those of her adopted hometown. In 1998, ANI bought the old Woolworth Building at the northern edge of the Gaslamp for $2.5 million. With partners, she spent several years redeveloping a chunk of the block for mixed use, with dining, retail, residential lofts, and a House of Blues.

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