Wayzata Fund Mgr. Allegedly Ran Major Fraud Scheme
Eight trusts have sued a Wayzata fund manager, accusing him of operating a multimillion-dollar fraud scheme.
Through his company, R Capital Advisors, Gary Vibbard allegedly sold unregistered securities based on exaggerated claims.
The suit was filed in St. Louis, and the trusts are seeking to get back $3 million they invested in Vibbard's company-along with unspecified damages.
In addition to Vibbard and R Capital Advisors, the suit lists 15 other defendants. Fourteen are individuals, three of whom live in Minnesota, and one is a Connecticut company that the suit says is a “successor in interest” to R Capital Advisors.
Interest on the debt of the securities that investors bought was to begin being paid in early 2010, according to the complaint. But around the time when the interest payments were due, the defendants allegedly told the investors that “substantially all of their investment was stolen by one or more officers of the company and that no funds were available to repay their investments in accordance with the terms of the agreement.”
According to a July 2009 private placement memorandum given to prospective investors, which is included in court documents relating to the case, R Capital Advisors had secured $5 billion in “signed engagements” from 30 clients on four continents-which represented $50 million in future revenue.
Even in a worst-case scenario, a $1 warrant would double in six years and grow 2,500 percent in 25 years, the document indicates.
In the lawsuit, the investors argued that R Capital Advisors' private placement memorandum should have been registered with the U.S. Securities and Exchange Commission. The suit alleges that the document contains inaccurate, misleading, or vague statements and that the company's income statements and balance sheets were false.
According to Bloomberg Businessweek, R Capital Advisors entered the marketplace in 2007. Prior to his involvement in the company, Vibbard was involved in more than $1.4 billion in transactions, plus other “value-creating events” encompassing an additional $1.6 billion plus.
Vibbard's Businessweek profile also indicates that he developed a “systematic, three-stage capital-raising process” in 1984 and first used it to raise $100 million from Harvard's Endowment Fund for an unnamed energy client. Following early successes, Vibbard reportedly realized that his capital-raising process would work in most market conditions and investment sectors and began to use it to support alternative asset fund managers.
One of the projects in which he participated was the purchase and restructuring of Spectrum 7 Energy, President George W. Bush's oil company in Midland, Texas.
The Star Tribune reported that Vibbard filed for Chapter 7 bankruptcy in Minnesota in 2000 as surety for Strategic Capital Holding Corporation and Strategic Capital Partners. He also reportedly founded Capital Resource Group, which got into trouble when a private equity transaction firm accused it, Vibbard, and more than a dozen others of engaging in securities fraud. Vibbard and his firm didn't respond to the lawsuit, and a $757,500 judgment was brought against them in 2004, according to the Star Tribune.