In January 2015, Loren Holzhueter, an insurance agent from Watertown charged
with securities fraud, had his funds frozen during a lawsuit filed by
the U.S. Securities and Exchange Commission (SEC). U.S. District Judge
James Peterson issued the order after the SEC had sought it in response
to claims that his company was running a $10 million dollar investment scam.
The SEC brought the
suit against Holzhueter because it alleges that Holzhueter had been running a Ponzi scheme. However,
this isn’t the first time Holzhueter has been in the headlines.
In a separate and earlier action, the IRS has sent criminal investigators
after Holzhueter, even raiding his office in 2013.
Holzhueter, the owner of ISC Inc., an insurance agency comprised of a dozen
offices, flatly denies having done anything wrong.
The terms of the temporary restraining order (TRO) issued by Judge Peterson
dictate that Holzhueter may only access up to $4,000 of his funds, but
only to cover his necessary and ordinary living expenses. Also, the TRO
does not apply to funds Holzhueter receives from Medicare or Social Security.
According to the complaint filed by the SEC, after receiving millions of
dollars since January 2008, Holzhueter lied to investors, thus violating
their trust. The complaint goes on to allege that Holzhueter assured investors
that their money was deposited in an individual, separate investment account
at ISC. Holzhueter further assured investors that their funds would be
available for withdrawal at any time. He informed them that their money
would be properly invested, placed into investment vehicles like Individual
Retirement Accounts or mutual funds.
However, the SEC says that Holzhueter failed to make the investments he
claimed he had made, instead allowing funding from investors to intermingle
with other ISC money. In fact, significant amounts of investor capital
were put into maintaining the Ponzi scheme, or even used to help cover
regular business expenses, such as payroll. Some investor money even went
towards paying down ISC’s preexisting debt. The SEC alleged that
members of the Holzhueter family collected more than half a million dollars
from accounts that held the investor funds.
According to Holzhueter, all transactions were made using only money legally
obtained from clients. Holzhueter insists that many of his customers were
personal friends. Holzhueter’s attorney, Stephen Kravit, stated
that the individuals who gave Holzhueter the money in question were not
investors, but merely lenders and that he was working to pay them back.
Kravit iterated that the continued operation of ISC would be “in
the best interest of all parties,” and that its continued operation
was legal under the terms of the TRO.
If you would like more information on this topic or would like to set
up a free consultation, please
contact Kevin Kim, Esq.
or call our main office at (949) 298-8050.