A 76-year-old man was sentenced Friday, April 11 to five years of probation for his part in a multimillion-dollar investment fraud scheme.
Charles Albert Major pleaded guilty in February to two counts of making an untrue statement or omission in connection with a purchase or sale and a count of unlawfully selling unqualified securities, all felonies. Major’s city of residence was not provided.
Orange County Superior Court Judge Craig Robison sentenced the defendant to five years of formal probation and suspended a 5-year prison sentence. He gave Major credit for 46 days behind bars.
Co-defendant Robert Andrew Lotter, 67, of Newport Beach, who also pleaded guilty in February to a misdemeanor count of illegally selling unqualified securities, is scheduled to be sentenced June 27.
In court papers filed in 2020, state Department of Insurance investigator Braelyn Velasco said Lotter “fraudulently sold securities to 20 victims by means of omission, misrepresentation, and through the use of a device, scheme or artifice, Lotter’s victims lost $4,087,811.04.”
Velasco “interviewed numerous alleged victims, mostly retired school teachers, who placed their trust in Major as their licensed insurance agent who worked for Lotter or placed their trust in other insurance agents that worked for Lotter,” prosecutors said in court papers in 2023.
The victims mainly invested in “conservative annuities,” prosecutors said.
Those investors were then “solicited and pressured to invest in risky” start-ups owned by Lotter in a “bait and switch scenario,” prosecutors said.
Two victims “liquidated their long-term-care health insurance plans to invest $50,000” in one of Lotter’s startups after “previously investing $150,000 of savings” in another start-up based on Major’s recommendation, prosecutors said. One of the startups was “worthless” as of 2023, prosecutors said.
The company “accumulated net losses (equity) of $45 million, which adversely impacted each investor, making their ownership in the company worthless,” prosecutors said.
The investors were not told of the losses and were assured everything was fine, prosecutors said.
The “bait and switch investment was ideal for Lotter who used investor money, much obtained through dog and pony shows on his yacht, at his office or hotels, to fund his extravagant lifestyle, including yachts, planes, motorcycles and other expensive vehicles, a horse ranch, spousal support to his ex-wife at $20,000 per month and more,” prosecutors said.
From May 2003 to May 2018, Lotter “sold investments in his companies’ eAgency Inc. and Mymobilewatchdog Inc. by the use of misleading marketing materials and tactics that led victims to believe Lotter’s insurance agency was affiliated with the California State Teachers’ Retirement System, a state agency that provides retirement pension benefits to California public school educators,” according to Velasco.
Lotter created My Mobile Watchdog, a Newport Beach-based company that helps parents use the app to keep track of web activity on their children’s cellphone.
“Victims responded to the misleading materials with the belief they were requesting a retirement analysis from (the state retirement system),” Velasco alleged.
Accredited investors were then solicited to invest in the defendant’s companies, Velasco said.
Lotter “inappropriately used his agency to access customers’ private financial information to determine if the customer was accredited, in order to solicit the customers’ investments” in the defendants’ companies, Velasco alleged.
Lotter also dangled “unrealistic and inflated financial projects of his companies” to potential investors, Velasco alleged.
Lotter also “failed to properly disclose to all victims” that investments in his companies were “high-risk,” Velasco alleged.
“At least 10 victims stated there were no such discussions of the risk involved, or that such discussions did not identify the investment as high-risk,” Velasco alleged. “Some victims were told there was no chance they would lose any of their investment.”
Velasco further alleged that Lotter and his “companies continued to lull victims throughout the years into believing eAgency Inc. and/or Mymobileatchdog Inc. was making significant progress and investors would see substantial returns soon. Nearly every victim stated they were told investors would see returns within one to two years. The same message was given to victims from the early 2000s until 2018.”