(TOLEDO, Ohio) — Managers of a Lucas County investment firm accused of deceiving and defrauding investors in a decade-long scheme have been reindicted on multiple felonies as part of multi-year investigation and prosecution, Ohio Attorney General Dave Yost announced today.
The indictments, filed in Common Pleas Court in Lucas and Hamilton counties, charge the seven financial managers with cheating at least 200 clients out of more than $72 million.
Northwest Capital
The case centers on Northwest Capital, a Toledo investment firm that serves as an intermediary between investors and businesses raising capital by selling accounts receivables.
Prosecutors allege that from January 2011 to December 2021 the defendants solicited clients to buy alternative investments from securities issuers without fully disclosing the managers’ conflicts of interest. The defendants also manipulated funds among interrelated entities to make the investments appear successful.
To continue raising additional capital from investors, the Northwest Capital managers and their business associates created new, affiliated entities for investment without disclosing to existing investors the poor financial condition of these companies and the monitoring fees skimmed by the defendants.
They then certified false investment values, which were shared in annual statements issued to investors. In total, more than 700 investments from at least 200 people – roughly $72 million combined – were allegedly mismanaged.
Besides Northwest Capital, other entities and investment funds associated with the indictment include Briarfield Capital, ThunderRoad Partners, TRF Fund 1, TRF Fund 2, Kings Point Leasing and Winding Creek Partners.
The reindictments split up the original case, first indicted in Lucas County in April 2023, reflecting the complex nature of the fraud schemes. Prosecutors filed a motion to dismiss the original case on May 31, noting their intent to reindict the matter to streamline the judicial proceedings.
Below is a summary of each case, its defendants and the charges faced in each indictment:
Investment Scheme (Lucas Co CR 202401975)
The indictment alleges that members of a criminal enterprise from Northwest Capital convinced investors to place money into underperforming companies without disclosing the significantly impaired status of the companies.
Those charged include: James Delverne, 36 felonies; Doug Miller, 26 felonies; Gary Rathbun, 24 felonies; Nancy Rathbun, 6 felonies.
The charges in the indictment include engaging in a pattern of corrupt activity, theft from a person in a protected class, aggravated and grand theft, and money laundering.
Bank Fraud Scheme (Lucas Co CR 202401976)
The indictment alleges that members of a criminal enterprise from Northwest Capital committed fraud against lending institutions and entities. The fraud included transferring assets between various balance sheets to make investment opportunities more attractive or to pay investors.
Those charged include: James Delverne, 21 felonies; John Walters, 20 felonies.
The charges in the indictment include engaging in a pattern of corrupt activity, tampering with records, money laundering, aggravated theft, and telecommunications fraud.
Business Scheme (Lucas Co CR 202401977)
The indictment alleges that James Delverne defrauded investors by using their investment money to pay other investors, rather than to invest the funds.
Delverne is the sole defendant and is charged with 21 felonies, including false representation in the sale of securities, aggravated theft and theft, theft from a person in a protected class, and engaging in a pattern of corrupt activity.
Securities Transaction Case (Hamilton Co 2403253)
The indictment alleges that two defendants fraudulently conducted securities transactions in Hamilton County. One of the defendants is connected with similar conduct in the Lucas County cases. The amount of money associated with the transaction is more than $250,000.
Those charged include: Bradley Konerman, 5 felonies; Adam Salon, 5 felonies.
The charges in the indictment include theft, telecommunications fraud, and securities fraud.
Investigation and Prosecution
The case is the culmination of a multi-year investigation conducted by the Ohio Department of Commerce’s Division of Securities and the Ohio Attorney General’s Bureau of Criminal Investigation.
The case is being prosecuted by the Special Prosecutions Section of the Attorney General’s Office. Indictments are merely allegations, and the defendants are presumed innocent unless proved guilty in a court of law.