Alleged con man Christopher Dougherty currently sits in jail. Dougherty is accused of stealing millions of dollars from investors in a Ponzi scheme that stretched over years.
How much Dougherty stole is not clear but more than 50 people have come forward to the San Diego County District Attorney’s office, and the office has estimated the losses to be more than $8 million.
Victims say Dougherty used his charm to steal their money, some losing their life savings. But those investors also said they had no idea Dougherty had been convicted of embezzlement seven years prior, right here in San Diego County.
The reason the investors didn't know, NBC 7 Investigates found, is that two state agencies dropped the ball on notifying them about his “complete lack of integrity” as described by the California Department of Insurance.
Sharon and Brian Taylor invested $340,000. Jim and Robin Cavanaugh are out $334,000.
Both families tell us they wish they had known about the problems he was having.
But for them and other clients, there were no apparent or visible problems, other than a bounced check once in a while or an occasional late payment on an investment account.
“At first he was doing well for us,” said Robin Cavanaugh. “In 2012, everything changed.”
In 2012, Dougherty began convincing his incoming and existing clients to invest millions of dollars into companies he created. His companies included a marijuana growing operation in a barn on his Alpine property, a cattle ranch, a service to deliver hay, as well as at least one company which appears to have existed on paper only, according to his investors and business filings.
Dougherty’s victims have said repeatedly he was a nice guy, and they trusted him.
“He always sounded legitimate and everything was fine,” said Sharon Taylor, adding that they had total confidence in him.
What these investors didn’t know was that Dougherty was on shaky ground. Dougherty was under investigation by the San Diego County District Attorney’s office, and later the California Department of Insurance for fraud. Dougherty was charged with felony fraud for stealing $84,000 from the Tecolote Youth Baseball League out of Clairemont. Dougherty took a plea deal in the case.
Soon after Dougherty was sentenced, the Department of Insurance was after his investor’s license. That license was required for Dougherty to continue selling investments backed by insurers, like fixed and variable annuities.
“Most of the people didn't even know that he had been charged with stealing money,” said Attorney Larissa Lazarus who represents a number of Dougherty’s victims, including the Taylors and Cavanaughs.
According to the Department of Insurance records reviewed by NBC 7 Investigates, Dougherty embezzled up to $84,000 from the Tecolote Youth Baseball League. Investigators said he even lied about it after he was caught, showing a “complete lack of integrity” and a total “lack of true remorse,” according to the agency’s findings. The only way to “adequately protect the public,” investigators said, was to revoke his investor’s license.
As Robin Cavanaugh explained, with her frustration clearly evident, “We didn't know he lost his license.”
NBC 7 asked the Department of Insurance if they notified investors about Dougherty losing his license and a spokesperson said the agency only issued a news release online, but that was it.
“We work diligently to weed out those who use their license as an insurance agent/broker to prey upon consumers and violate the trust the license represents,” said Nancy Goldberg, a spokesperson for the agency.
Investor Brian Lee Taylor recalls, “like it happened and nobody told anybody especially Chris. Hell, he wasn’t going to tell us.”
The Taylors and Cavanaughs say if they had known about the 2012 charges, they would not have continued to invest with Dougherty.
“We would have left right away,” said Taylor. “Ran as quickly as possible and ask for our money out instantly.”
But it would be seven years before Dougherty’s alleged Ponzi scheme was exposed. Anyone checking his record online during this time would have found Dougherty's legal problems described on the Department of Insurance website if they knew to look.
“They weren't going online,” Attorney Lazarus said. “They're not technologically sophisticated, so they weren't researching him on the internet.”
Lazarus says many of Doughtery’s clients were older and trusted him implicitly.
However, If Dougherty’s investors had known how to research a financial planner, they would have most likely ended up on “Broker Check,” a website recommended by the Securities Exchange Commission.
But even then, investors might have remained confused about Dougherty’s expertise and history. On the website, Dougherty downplayed the embezzlement charge. Dougherty claimed he “borrowed” the money from the little league funds, but records show it was embezzled.
Dougherty also wrote he, “voluntarily disclosed the theft,” but state record show “he knew he was about to be caught.” He claimed he quickly resolved the matter with the Tecolote Little League, but that wasn’t the case, according to the department.
When the Department of Insurance asked a judge to revoke Dougherty’s license, investigators brought up his attempt to downplay the charges on Broker Check, saying it was all an attempt to minimize his legal problems.
Broker Check is maintained by the Financial Industry Regulatory Authority or FINRA. The website lists his training and the brokers he has worked with.
NBC 7 asked FINRA whether the organization had a responsibility to notify clients about Dougherty’s criminal history but the agency did not respond.
Another missed opportunity by the state to notify Dougherty’s investors of his crimes was especially troubling.
In April of 2019, the District Attorney and Securities Exchange Commission charged Dougherty with more than eighty felony counts, calling his investments a "Ponzi scheme." As part of the arrest, the SEC lawsuit filed against Dougherty revealed that even though Dougherty was convicted in 2012 of fraud, he remained “registered with California as an investment advisor representative at all relevant times.” Those relevant times refer to when Dougherty was allegedly collecting millions of dollars from his investors.
The agency responsible for Dougherty remaining registered with the state is the Department of Business Oversight or DBO. According to the DBO’s website, the department “protects consumers and oversees financial service providers and products.”
Records reviewed by NBC 7 show the DBO only suspended Dougherty’s license 22 days before his 2019 arrest in the Ponzi scheme investigation.
A spokesperson for the DBO told NBC 7 that the reason Dougherty’s license hadn’t been suspended was because Dougherty hadn’t updated his file.
The DBO would not answer NBC 7’s questions regarding their responsibility in notifying investors of Dougherty’s fraud, instead saying Dougherty should have “self-reported” his crimes to them, as required.
Dougherty's investors say it's foolish to think he would tell on himself.
“Self-reporting relies on the person who actually did something wrong to notify individuals or parties that they have a relationship,” Lazarus said. “Leaving it in his hands to me seems like it's not really the most appropriate and it's not the best way to protect these people.”
Going further, the DBO spokesperson said the agency did not know about Dougherty’s investor license revocation by the California Department of Insurance, nor “did they receive any notification” from that department.
The Department of Insurance did not comment on this claim by the DBO.
Lazarus said her clients have lost over $2 million and she wonders why those who touched this case couldn’t have written a simple letter to her clients so that other victims “could make an educated decision whether they wanted to stick with Christopher Dorsey as their financial adviser.”
Dougherty has pleaded not guilty and remains behind bars in Vista with a $5 million bail.
A preliminary hearing is scheduled for August 13, where the public will learn more about the evidence against Dougherty, and new victims that have come forward.