Attorney General Announces Indictments And Arrests In Hedge Fund Fraud Case

DENVER – Colorado Attorney General John Suthers and Securities Commissioner Fred Joseph today announced the arrests of Hamilton Alan Bird (DOB 8/14/63), David Edward Newton (DOB 9/4/49) and Douglas Alan Scott, (DOB 11/16/59), all of Colorado Springs, following their indictment by a statewide grand jury on May 12, 2006 in a hedge fund scheme that defrauded hundreds of victims out of approximately $7.5 million.

“These individuals allegedly took the money of hundreds of victims to set up a personal piggy bank,” said Suthers. “To avoid becoming a victim of financial fraud, always remember that before you invest, discuss all investment plans with an accountant or a financial advisor you know or trust.”

According to the indictment, in the fall of 2002, Hamilton Alan Bird, director of “XL Capital Partners, Inc.” formed “Vision Fund” as a limited partnership to operate a hedge fund. Bird then offered limited partnership interests in the Vision Fund to investors. Bird distributed Private Placement Memorandums (PPMs) to his clients that outlined the offering and administration of the hedge fund. The PPM stated that XL Capital was entitled to 20 percent of the net profits during each fiscal period as a “performance fee.”

XL Capital, however, failed to identify, separate or reconcile monies earned pursuant to the agreed upon 20 percent performance fee. Over the course of 27 months, from October 2002 through December 2004, XL Capital Partners withdrew millions of dollars for improper usage including the purchase of a jet airplane, a personal residence and other personal expenses.

“Losses to investors in this case will be millions of dollars,” said Commissioner Fred Joseph. “Most investors were lured by the false promise of high returns, or endorsements by their friends or fellow churchgoers. Investors should never rely on the promises made by promoters, but thoroughly and independently check out any investment opportunity before investing.”

Bird has been charged with three counts of securities fraud and five counts theft, all class three felonies carrying a possible sentence of 4-12 years. The indictment also alleges that Bird is eligible to be sentenced as a habitual criminal, which means he is eligible to be sentenced to a term three times the maximum presumptive sentence of twelve years.

Newton has been charged with two counts of securities fraud and four counts theft, all class three felonies carrying a possible sentence of 4-12 years. Scott was charged with one count of securities fraud and one count of theft, both class three felonies carrying a possible sentence of 4-12 years.

The indictment has been filed in El Paso County District Court. Bird’s case is captioned 06CR2371, Newton’s is 06CR2383 and Scott’s is 06CR2395.

As with all persons charged with a criminal offense, Bird, Newton and Scott are presumed innocent until proven guilty in a court of law.



Find Colorado State Attorney General on TwitterFind Colorado State Attorney General on FacebookColorado State Attorney General RSS feed