Securities Division, 3rd Floor
Arizona Corporation Commission
1300 W. Washington St.
Phoenix, AZ 85007
Main: (602) 542-4242
Toll-Free Number in Arizona:
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The Corporation Commission ordered respondents Nathaniel S. Barnhart of Green Valley and Cornerstone Wealth Management, LLC to pay a $10,000 administrative penalty for committing investment advisory fraud. The Corporation Commission also suspended Mr. Barnhart's investment adviser representative license for five months.
The Corporation Commission found Mr. Barnhart was recruited by William Andrew (Andy) Smith and Christopher (Chris) Cox to form Cornerstone Wealth Management, LLC (Cornerstone) in order to take over servicing the investment advisory clients of their firm, Smith & Cox, LLC. During this time, Andy Smith, Chris Cox and Smith & Cox, LLC were respondents in a pending 2018 Commission enforcement action alleging securities fraud and investment advisory fraud.
The Corporation Commission found Mr. Barnhart and Cornerstone told clients misleading statements about Smith & Cox, LLC “rebranding” to Cornerstone Wealth Management, LLC while failing to disclose the Commission’s 2018 enforcement action against Smith & Cox, LLC and other negative facts.
In settling this matter, Mr. Barnhart and Cornerstone admit to the Commission’s findings, including that they committed investment advisory fraud, for purposes of this proceeding and agree to the entry of the consent order.
This consent order does not require Mr. Barnhart or Cornerstone to pay restitution because Barnhart’s former advisory firm, AE Wealth Management, LLC, has paid all restitution owed to the investors as required by Commission’s Decision #78219 dated September 1, 2021.
All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov and entering docket number S-21104A-20-0103.
August 7, 2019
Idaho Man and his Company Sold Unregistered Promissory Notes
The Corporation Commission ordered Roland B. Woolsey of Idaho and his affiliated company, Skytrace, Inc., to pay $142,500 in restitution and $10,000 in administrative penalties for offering and selling unregistered promissory notes. Woolsey and Skytrace, Inc. were seeking to raise $10 million in order to market a web-based inventory application but are not registered to offer or sell securities in Arizona.
In settling this matter, the respondents neither admit nor deny the Commission’s findings, but agree to the entry of the consent order. All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov and entering docket number S-21055A-18-0309.
July 11, 2019
Commission Finds Phoenix Man Defrauded Hispanic Christians with Promissory Notes
The Corporation Commission ordered Jaime A. Verdugo of Phoenix to pay $381,954 in restitution and a $20,000 administrative penalty for committing securities fraud. The Commission found Mr. Verdugo was not registered to offer or sell securities in Arizona when he solicited multiple promissory note investors, most of whom were from Hispanic Christian communities. The Commission found Jaime A. Verdugo told investors, on behalf of Verdugo Enterprises, LLC, that their money was going to purchase home decor products to fulfill online orders.However, the Commission found Mr. Verdugo mislead investors by stating their money was safe while knowing at least eight prior investors did not receive any investment returns. Also, the Commission found Jaime A. Verdugo failed to inform investors about the company’s unwritten policy to limit payouts to $6,000 every two weeks, which is contrary to the explicit terms of the promissory notes.
June 11, 2019
Commissioners sanction Laveen man for unlawful sale of securities
The Corporation Commission ordered Carlton Lamont Fox of Laveen, Arizona, and his affiliated company to pay $15,200 in restitution and a $5,000 administrative penalty for participating in the unlawful offer and sale of unregistered securities while not being registered as an Arizona securities salesman or dealer. The Commission found at least 17 investors were promised a return on their initial investment within 3-6 months, funding either the purchase of leads for prospective businesses that were interested in credit card reader terminals or for the purchase of the terminals that would be subsequently sold to interested businesses. The Commission found that Fox and his affiliated company, Fox First Services, LLC, participated in the unlawful sale of securities as an unregistered salesperson or dealer. Further, the Commission found that none of the investors received a full return of their original investment, and that Fox used some of the money to pay telemarketers for their work in soliciting investor funds. In settling this matter, respondents neither admitted nor denied the Commission findings, but agreed to the entry of the Commission's consent order.
June 11, 2019
Commissioners order more than $2 million in restitution to restore investors
Arizona resident Adam W. Child agreed to pay $2,014,592 in restitution and a $25,000 administrative penalty for selling promissory notes and LLC membership interests to investors. The Corporation Commission found that Child offered and sold notes and membership interests to at least 17 investors of Titan Funding Group I, LLC and Titan Capital Real Estate Fund I, LLC. The Commission found the investor funds were pooled to lend money to real estate developers who were to purchase and "flip" residential properties. However, the Commission found that Mr. Child violated the Securities Act's antifraud provisions when he failed to disclose to investors a previous judgment against him, that he had declared bankruptcy and that his prior mortgage-lending business had its license revoked.
In settling this matter, the respondent agreed to the entry of the consent order and admitted to the Commission's findings only for purposes of the administrative proceeding. All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov and entering docket number S-21054A-18-0301.
May 15, 2019
Densco Investment Corporation Investors to Receive Additional Restitution
Last week, investors of DenSco Investment Corporation were awarded a second monetary distribution for losses incurred as a result of their investment in a fraudulent company. On May 10, 2018, Maricopa County Superior Court approved the receiver’s motion to provide a second distribution in the amount of $2.5 million to DenSco Investment Corporation investors. This comes on the heels of a decision by the court in December 2017 where the receiver’s first motion was approved and $4.5 million was distributed to investors.
DenSco Investment Corporation was a real estate investment firm based in Chandler, Arizona that ceased doing business in 2016. The company was obtaining loans against hundreds of properties that were never actually purchased. As a result of this fraud, action was brought against the company by the Arizona Corporation Commission for violations of the Arizona Securities Act. Due to the death of the sole owner of the corporation, a receiver was appointed by the court in 2016. A receiver is a person appointed by the court to take possession and charge of designated assets or property and to administer them in accordance with court directives.
To date, DenSco Investment Corporation investors have been awarded roughly $7 million in distributions approved by the court. The receiver continues to recover assets and claims on behalf of the receivership and believes that more funds will be available for distribution at a later date.