A San Diego businessman accused of defrauding dozens of people will no longer have control of the disputed funds, according to a bankruptcy court ruling.
NBC 7 Investigates first reported on Christopher Dougherty in March after 11 investors said he had convinced them to invest millions of dollars in a number of businesses. One of those investments included a 100-acre cattle ranch in Alpine.
But those investors said they saw little to no return on their investment.
In an earlier filing, an attorney for U.S. Bankruptcy Trustee Kristin Mihelic said 46-year-old Dougherty’s business dealings with his investors were a “Ponzi scheme.”
After Thursday’s hearing, Dougherty ran away from an NBC 7 camera crew, and would not answer any questions about the allegations. In court, an attorney representing Dougherty said the situation is “not as dire as portrayed.”
Those who invested in Dougherty’s business ventures disagree.
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“He took all of my retirement funds. He took everything,” said Robin Kavanagh. She and her husband, Jim, said they paid Dougherty more than $120,00 and that he never told them about his bankruptcy filing, nor did he reveal that he owned other investors money.
The Kavanaghs said they first talked with Dougherty at a school health symposium, where he claimed to be an investment adviser for the San Diego County Office of Education.
“He came to our house for dinner, like a good friend of the family,” Jim Kavanagh said. “He has no remorse.”
Court records reveal that Dougherty used "new investment money to pay existing investors," creating the "false impression" that those current investors were making money.
NBC 7 asked Charles Labella, a former federal prosecutor who has worked on Ponzi scheme investigations to review the court filings for Dougherty's bankruptcy case. Labella agreed with the U.S. Bankruptcy Trustee attorney, saying this is a textbook case of a Ponzi scheme.
“It's a shell game,” Labella said. “You take money from here and you put it over there and when these people need their money back, you take money from somebody else and you give it to them to keep them happy.”
On Thursday, the courtroom for Christopher Dougherty and his wife, Nereida’s bankruptcy hearing was filled with more than a dozen investors anxious to find out if they will ever recoup their investment.
Some investors have sued Dougherty for fraud and negligence. In a court filing, Dougherty denied those allegations.
While NBC 7 has only spoken to 11 investors, a trustee said Dougherty owes 35 investors at least nine-million-dollars and that there could be more people who are also owed money.
“He just started preying on us,” said George Snyder, another Dougherty investor. “He’s been doing it for years.”
Snyder said he gave Dougherty more than $250,000. He claims Dougherty threatened him and a group of other investors when they told him they would hire an attorney to try and get their money back.
Snyder said Dougherty told him, “Anyone who ‘lawyers-up’ wouldn't see a dime.”
Representatives from the San Diego County Sheriff's Department and the District Attorney's office told NBC 7 Investigates they are currently investigating Dougherty's business dealings.
Dougherty’s attorneys acknowledged that the Securities Exchange Commission is also investigating their client. An SEC representative was present at Thursday’s bankruptcy hearing by phone.
Trustee Kristin Mihelic told Judge Laura Turner that Dougherty’s estate is “grossly mismanaged” and that allowing him to file for Chapter 11 bankruptcy protection “will not benefit the [investors].”
Chapter 11 would allow Dougherty to keep running his businesses, under the supervision of the trustee.
Mihelic said trying to find where all of Dougherty’s assets are located was like “chasing a rainbow.”
Judge Turner agreed that Dougherty can’t be trusted to manage his assets, and moved his case to a Chapter 7 bankruptcy filing, which authorizes the trustee to sell all of Dougherty’s assets and distribute the proceeds to his creditors.
It’s unclear though if any of Dougherty’s investors will see any money back.
“We just trusted him and it was a mistake,” said Robin Kavanagh. “And I think that can happen when you get older, so be careful.”
