Lake Oswego Company Called Ponzi-Like Scheme by Feds

A Lake Oswego investment company, Aequitas Capital Management, is being sued by the U.S. Securities and Exchange Commission, accused of being a "Ponzi-like" scheme that cost investors hundreds of millions of dollars.

Top officials of Aequitas, according to the complaint filed in Federal Court in Portland, "knew that redemptions and interest payments to prior investors were being paid primarily from new investor money in a Ponzi-like fashion, and that very little investor money was being used to purchase trade receivables."

According to the complaint:

• From January 2014 to January 2016, Aequitas raised money from investors by issuing promissory notes with high rates of return typically ranging from 8.5 to 10 percent.
• While Aequitas did use some investor money to acquire trade receivables in health care, education, transportation, and other consumer credit sectors, the vast majority was concentrated in student loan receivables of for-profit education provider Corinthian Colleges. Corinthian defaulted on its recourse obligations to Aequitas in mid-2014, which significantly exacerbated the firm’s already severe cash flow problems.
• The executives continued to draw their lucrative salaries, use a private jet, and attend posh dinner and golf outings, all at the expense of investors. They used the outings to raise more money from investors. Jesenik, Oliver, and Gillis took home at least $2.5 million in combined salaries during this period.
• By November 2015, Aequitas could no longer meet scheduled redemptions. Last month, the firm dismissed two-thirds of its employees and hired a chief restructuring officer.

Problems with the company were first reported by the Oregonian, which detailed how it had been hurt when its largest stream of revenue - student loans from Corinthian College - had been deemed illegal.