More Blast From the Past Fraud Allegations in Irvine Election

This examines a fraud case from the past involving a big donor to, ironically enough, Irvine Citizens for Ethics in Government, the independent committee against Irvine's Measure R, which asks residents to give a vote of approval to the Irvine City Council's planning of the Great Park on the old El Toro Marine Corps base. This tells you about how more than half of Irvine Citizens for Ethics in Government's funding comes from contributions and loans from the various campaigns of and independent committees linked to mayoral candidate Christina Shea and Councilman Steven Choi, who is seeking reelection.

Two committees, Friends of Steven Choi '08 and Christina Shea for Mayor '08, received the individual contribution limit of $410 apiece from the Colton Co. of Irvine. Owner David Alan Colton also gave John McCain's presidential campaign $2,300 during the same election cycle.

Colton has built big office towers around Irvine and John Wayne Airport for years. But the decade of the 1990s was not kind to the Irvine-based developer. His old company, Colton Financial, forfeited its license to sell securities in 1993 after getting caught up in one of Orange County's costliest real estate scams. About 5,000 investors lost $89 million – for many, their life savings -- in the collapse of Anaheim Hills-based Hill Williams Development Corp., which Colton Financial had promoted.

As a result, Colton and his private company were named as defendants in a half dozen lawsuits tied to what government prosecutors called a Ponzi scheme. Colton admitted no wrongdoing, and Hill Williams' owner Donald Hill Williams Jr. pleaded guilty in 1998.

But that did not stop the U.S. Securities and Exchange Commission from investigating Colton. After he was ordered to pay a $34 million fraud judgment, the SEC probed Colton for possible violations of securities registration and disclosure laws. A suit filed in 1999 accused him of fraudulently shifting his assets, including $4 million in ill-gotten profits, to his wife and several real estate companies after it became clear that Hill Williams was starting to unravel.

Attorneys representing victims of the scam sought to go after some of Colton's real estate to settle up; as of the spring of '99 the company had not paid off the original fraud judgment. In March of 2000, Orange County Superior Court Judge John C. Woolley ordered Colton to sell a beachfront, million-dollar home he shared with his wife, Linda H. Colton.

One ray of sunshine came about this time from a Nevada prison cell, from where convicted swindler Williams wrote a letter exonerating Colton from knowingly taking part in the Ponzi scheme. “David Colton's accusers have always charged that he was an 'insider' at the Hill Williams Company and knew everything that was going on,” Williams wrote. “The truth, however, is he was not an insider and I purposely excluded David Colton from knowledge concerning the inner workings of the Hill Williams Company.”

David and Linda Colton settled the lawsuits in April of 2000. The amount was not disclosed, only that Colton had agreed to make “undisclosed payments” to plaintiffs “over time.”

Most of those the Coltons paid off were Orange County residents older than 70. The couple admitted no liability.

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