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The Securities & Exchange Commission today charged a Minneapolis attorney and two San Francisco-area real estate lending fund promoters with misleading investors by concealing the financial collapse of the fund’s sole business partner. Attorney Todd Duckson was counsel to the Capital Solutions Monthly Income Fund, which made real estate loans to a single borrower, Hennessey Financial. The fund raised $74 million from about 450 investors from across the United States between 2005 and 2009, according to the SEC complaint, filed in U.S. District Court for the District of Minnesota. But in May 2008, Hennessey defaulted on its obligations to the fund. Shortly thereafter, the fund foreclosed on Hennessey’s real estate projects. Rather than disclosing this, the plaintiffs “told investors that the fund was poised to take advantage of attractive lending opportunities provided by the collapse in the U.S. credit and real estate markets, when in fact the fund’ s business strategy had failed,” the SEC alleged. Existing investors were paid out of proceeds raised from new investors, according to the complaint. From March 2008 through August 2009, the period of the fraud, the fund raised $21.6 million from investors. “Investors were entitled to know true facts rather than the misleading positive spin that [the plaintiffs] provided,” said Robert Burson, senior associate regional director of the SEC’s Chicago Regional Office in a statement. The SEC’s complaint charges Duckson and California promoters Michael Bozora and Timothy Redpath with violating the Securities Act of 1933 and the Securities Exchange Act of 1934. The agency also charged True North Finance Corporation, a Minneapolis real estate lending company that merged with the fund in 2009, and True North’s Chief Financial Officer Owen Mark Williams with accounting fraud. The SEC is seeking permanent injunctions, disgorgement, prejudgment interest and civil penalties against all of the defendants, and officer-director bars against Bozora, Redpath, Duckson, and Williams. According to True North’s Web site, “Duckson has been the founder of four community banks, a venture capital firm, a financial and tax firm and numerous other financial ventures. From 2003 to 2009 Mr. Duckson has practiced law as a capital partner at Hinshaw & Culbertson LLP, a national law firm. Prior thereto, he founded and managed Duckson-Carlson.” Duckson did not return a message left on his voicemail at True North.

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