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SEC probes stock buy

By   /   Monday, September 21st, 2009  /   Comments Off on SEC probes stock buy

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A Victorville man accused of falsely claiming he owned millions of dollars of shares in dozens in companies around the world has touched a nerve in Westlake Village.

Last year, CapitalSource Healthcare REIT, a Westlake Village firm, filed papers to raise as much as $362 million in an initial public offering. The company, a subsidiary of commercial lending giant CapitalSource, owns 186 health-care properties, most of them skilled nursing facilities, across 23 states.

But CapitalSource Healthcare put its IPO on hold as the markets tanked late last year. So it came as surprise when, in April, someone named JayCee James filed a form to say that he’d bought up all 15 million shares being offered by the Westlake Village firm, headquartered at Suite 200 of 30699 Russell Ranch Road.

In the past, James had hyped his investment prowess in music copyrights and hotel properties and claimed he attained securities licenses even though there is no record of them. Between March and May, he appeared to be quite a busy investor — he filed 83 forms with the Securities and Exchange Commission to say he owned or had purchased shares in publicly traded companies.

James, 38, now faces allegations from the Securities and Exchange Commission that he claimed stock ownership in 29 different companies but didn’t own a single share of them. The agency began cease-and-desist proceedings against James on Aug. 18.

Attempts to reach James at several phone numbers listed for him at his former businesses failed.
On April 17, James filed a Schedule 13D in which claimed to have bought up all the outstanding shares of CapitalSource Health.

“However, in late 2008, [CapitalSource Health] postponed its planned initial public offering due to adverse market conditions,” the SEC wrote in its order against James. “As a result, most of its shares remain in the hands of [its] sponsor.”

A spokesman at CapitalSource didn’t return requests for comment about the strange ownership claim. But CapitalSource Heatlhcare wasn’t the only firm that James surprised, according to the SEC’s order. In April, he claimed to own all of the outstanding shares in APT Holdings Limited, a Hong Kong telecommunications company.

“However, APT is not aware of any recent acquisitions of its stock,” the SEC wrote. “On the contrary, APT is in the process of exiting the U.S. trading market and the only recent activity is the surrender and case settlement of American depository receipts in connection with that exit.”

On May 5, enforcement officials at the SEC asked James to voluntarily provide documents to back up his buying spree. James provided nothing, the SEC said in its order, so the agency sent a probe called a Wells notice on May 8.
On May 13, James wrote back to the SEC and admitted that he hadn’t traded any shares in the 29 companies claimed ownership in.

“James also submitted a spreadsheet … in which he attempts to explain his interest in 18 of the companies by stating, for example, that they ‘dissolved,’ ‘went out of business,’ or their shares are no longer traded,” the SEC wrote in its order. “The submission did not include any stock certificates or other evidence to substantiate his stock ownership claims.”

Why James would claim ownership in dozens of obscure or inactive companies remains unclear. But in the past, James played up his investment skills in the areas of music copyrights and hotel properties.

In 2003, James announced a Los Angeles company called Serenity Entertainment, a firm that would “focus on building an active trading market for music copyrights to allow the small investor and music fan buy ownership for as low as $50 to $100.” The idea was to give artists a way to raise capital by auctioning off chunks of their copyrights.

“We are giving artists the power to take charge of their own careers while allowing their fans to directly participate in their success,” James said in a release at the time. “The truly creative potential in artists can now flourish and their fans can touch a little more of the dream.”

Serenity Entertainment’s incorporation is suspended, according to records with the Secretary of State’s office.
In 2005, James founded a limited liability corporation called Serenity Hotels & Resorts in the San Diego area. The idea was to buy up luxury hotels and turn them into condominiums, according to the company’s Web site. On the site, James claims that he started his career at Lehman Brothers in 1990. If James is 38, as the SEC says, he would have been 19 years old at the time. James also claims that in 1993 — when he would have been 22 years old — he earned his Series 7 and Series 63 securities licenses.

Those licenses are issued by the Financial Industry Regulatory Authority, which has no record of James as a financial broker.

James also claims to have worked in the mortgage industry. The California Department of Real Estate has no record of James as broker, officer or sales person.

James himself remains somewhat elusive. He did not respond to a lawsuit filed against him by Scor SE, a French reinsurer, in San Bernardino County Superior Court, and the court entered a default judgment against him.

 

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