Cherokee County businessman Jim Torchia, whose empire of investment companies was dismantled by the federal government over Ponzi scheme allegations, now faces criminal charges of misleading investors as his finances collapsed.
In an indictment made public on Wednesday, he was charged with conspiracy to commit mail and wire fraud, as well as seven counts of mail fraud.
Torchia's Credit Nation empire was built by betting on death — a niche industry where investors buy the rights to the life insurance policies of the elderly and terminally ill. Profits depend on the insured dying before investors have to ante up too much in policy premiums.
Torchia knew that his Credit Nation network was operating at huge losses, according to the federal indictment, filed under seal. As of late 2014, Credit Nation had roughly $9 million in assets, while investors had pledged roughly $30 million in promissory notes. Corporate income tax returns showed the company operated at a net loss of $6 million that year, the indictment says. He also knew that the U.S. Securities and Exchange Commission was poking into his operations.
Yet he continued marketing promissory notes as “100% asset-backed,” and took in investors’ checks ranging from $50,000 to $350,000, the indictment says. Money from those notes allegedly was used to cover rent and payroll and make payments to other investors. Torchia also is accused of funneling money to himself for a lavish lifestyle.
Following an FBI investigation, a federal grand jury accused him of raising over $40 million in promissory note purchases through the fraudulent scheme.
“Torchia is alleged to have stolen investors’ hard-earned money by lying to them about the security of their investments and how he would use their money,” U.S. Attorney Byung J. “BJay” Pak said in a news release. “It is important that investors thoroughly investigate who they are investing with before committing any of their hard-earned savings.”
Torchia, 61, appeared at an arraignment Tuesday before a U.S. magistrate judge, pleading not guilty. He did not return a message from The Atlanta Journal-Constitution seeking comment.
The indictment says his scheme involved “others known and unknown to the grand jury,” but only seeks to hold him accountable.
The criminal charges are the latest blow in a downfall that began four years ago, when the SEC filed suit accusing Torchia of fleecing elderly and unsophisticated investors by promising fat profits.
He drew many in through ads on the Rush Limbaugh show on AM radio, with a pitchman promising "a 9% return on your money backed by hard assets dollar for dollar."
Torchia has long maintained that none of his investors ever lost money while he controlled the companies, and that the federal government just didn’t understand the life settlement, or viaticals, business like he did. “I can tell you, I’m totally relaxed with it,” Torchia told the AJC in 2016, after the SEC filed suit against him, “because I’ve done nothing wrong.”
Pugnacious and short-tempered, for years Torchia was able to wear out opponents who accused him of breaking the law. Incessant litigation was an effective part of his business model, used to fend off state regulators, business foes and anyone else who crossed him.
In the early 2000s, when the Georgia Secretary of State’s Office began looking into allegations that he misled investors, Torchia hired away one of their enforcement attorneys, Marc Celello, in the belief that he could help keep regulators at bay and sue or counter-sue anyone who posed a threat.
A 2016 investigation by the AJC found that some other states aggressively went after Credit Nation. However, Torchia's litigiousness had kept the Georgia Insurance Commissioner's Office off his back, even though former Commissioner Ralph Hudgens had been repeatedly told that Torchia was violating state law by buying life insurance policies without a license. A former state fraud investigator, Doug Gaddis, told the AJC that his bosses steered investigators toward simpler cases because they grew weary of tangling with Torchia.
Torchia found the SEC a more formidable adversary. Siding with the agency, a federal judge in 2016 began breaking up his network of investment companies, subprime auto loan businesses and limited liability companies, appointing a receiver to try to return some $10 million to dozens of investors.
Torchia is in the process of settling that case, with the receiver still wrapping up work. Also still ongoing is the SEC's case against Celello, Torchia's former attorney, whom the federal government called an active participant in fleecing investors, preparing false documents and approving dubious advertisements.
After the SEC filed its complaint against him, Torchia sent a letter to his investors refuting the allegations, saying he had hired a forensic accountant to help the SEC understand his business operations, “to no avail.”
“However, the letter to investors failed to disclose that the forensic accountant’s report confirmed that Credit Nation could not pay back all its investors,” the indictment says. “In sending this letter, Torchia intended to lull investors into believing the previously issued promissory notes were secure.”
Gaddis, the former state fraud investigator, said he knew it would take a federal investigation to topple Torchia.
“Back when I was doing it, it was a stonewall,” he said, “and there was nothing I could do to get through that wall.”
CONTINUING COVERAGE
After the U.S. Securities and Exchange Commission accused a Woodstock businessman of running a multi-state, multi-million dollar Ponzi scheme, The Atlanta Journal-Constitution looked into Jim Torchia’s myriad business dealings to find out how such a scheme could have operated under the noses of Georgia regulators. The newspaper in 2016 detailed how Torchia spent years locked in litigation with state regulators, former business associates and anyone else he felt had slighted him. That strategy helped keep Georgia regulators at bay.
Torchia lived a rock star lifestyle, courtesy of his elderly and unsophisticated investors, the AJC found.
“I stand a chance to be in bad shape, going into my retirement,” one man who invested more than $450,000 told the AJC.
“I pray that this is not going to fall apart,” an 84-year-old widow said, “because that will hurt me terribly.”
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