|By Susan Abram, Daily News, Los Angeles
Knight Ridder/Tribune Business News
Aug. 17, 2005 - The state Department of Corporations has filed suit against a Los Angeles businessman, claiming he conned 25 investors nationwide out of $1.5 million for a bogus casino planned near Six Flags California, Valencia.
The complaint filed in Los Angeles Superior Court claims Tom Kelly, a manager of First California Diversified Fund LLC, used the names of three American Indian tribes to convince people to invest $25,000 a share for an interest in the casino.
None of the tribes Kelly mentioned had authorized the use of their name in pamphlets he distributed, according to the complaint. And investors who tried to contact the tribes to research information about the casino were directed to a telephone number operated by Kelly, according to the complaint.
"We see investment scams that occur with regularity," said Susie Wong, spokeswoman for the Department of Corporations. "The characteristics of this scam is unique in that he involved Native American tribes."
Wong said the department is still waiting to hear from Kelly, who is charged with a total of 62 violations that include selling shares using untrue statements, according to the complaint. The state is seeking more than $1.5 million in restitution for the victims, but officials said more fines are possible.
In pamphlets used to solicit investors, the casino was to be built on Oat Mountain, on land co-owned by Kelly and held in perpetuity by the Santa Monica Mountains Conservancy.
But conservancy spokeswoman Dash Stolarz said the agency doesn't own property in that area nor is it clear by Kelly's description where the property would be. She said the city and county of Los Angeles owns some property there, but there are no public roads that access the area.
"It is indeed a scam," Stolarz said. "All the claims being made in this guy's brochures are bogus."
Letters mailed to potential investors had said the San Fernando Band of Mission Indians, the Shasta Nation, and the Fort Independence Paiute Indian tribes would be involved in building the casino, but none of those tribes have federal recognition.
"The defendant (Kelly) failed to disclose that there are no Indian casinos or established reservations in Los Angeles County, therefore none of the tribes referred to in the offering circular could have entered into an agreement with (First California Diversified Fund) to have a casino operate on the land adjacent to Six Flags Magic Mountain," according to the complaint.
Also, only federally recognized tribes can be considered to open a casino, according to the complaint. California is home to more than 50 casinos operated by Indian tribes.
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