Investors allegedly bilked out of $1.5 million

The Daily Inter Lake

State officials have shut down an alleged Ponzi scheme operated by a Kalispell man who allegedly bilked investors out of at least $1.5 million, including some of his own friends.

Monica Lindeen, the state's commissioner of securities and insurance, issued a temporary cease-and-desist order Thursday against Donald Chouinard and his companies, DC Wealth Management Inc. and DC Associates Inc.

Lindeen's action, which also seeks fines and restitution with interest, follows an investigation prompted by complaints from consumers who invested in what they thought was a "day-trading" program. The case has been referred to federal authorities.

Investigators allege the program became a Ponzi scheme in which investors got bogus proceeds taken from money contributed by newer investors.

"We took an administrative action to put the public on alert about our allegations," said Lynne Egan, deputy securities commissioner. "We know he's actively seeking investors to pay old investors."

The investors who lost money were from the Kalispell and northern Idaho areas, Egan said.

The order prohibits Chouinard and his companies from committing further violations of the Securities Act of Montana and the Montana Insurance Code.

"Today's enforcement action alleges that a trusted adviser defrauded long-standing clients, friends and associates for his personal financial gain," Lindeen said. "Ponzi schemes are never easy to detect because friends and family of the perpetrator generally end up being the victims."

Chouinard allegedly convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a 40 percent return in 30 days.

Instead of investing the $100,000 in the day-trading program, Chouinard used $50,000 to pay off a previous investor, deposited $25,000 into his personal joint-checking account and gave the other $25,000 to his attorney.

State regulators also allege Chouinard made unauthorized trades on customers' accounts during the five years he worked as an independent broker for LPL Financial Corp., causing customers to lose money and generating nearly $250,000 in commissions for himself. He was fired in May.

Lindeen's office also alleges Chouinard was soliciting investments to be made through his companies while he worked for LPL.

"He was also making up bogus investment opportunities and steering his clients' money into these bogus investments," Egan said.

Calls to LPL for comment were not returned Friday.

The complaints allege Chouinard also misrepresented the values of some investments - in one case by as much as 10,000 percent.

"He told people that their accounts were worth a million dollars, when there was really only a couple thousand dollars in them," Egan said. "People were basing their investment decisions and their lifestyles on monies that didn't exist."

The state is seeking to revoke Chouinard's Montana securities license, suspend or revoke Chouinard's Montana insurance producer license, and impose fines and restitution for investors, including 10 percent interest from the dates of the wrongdoing.

Penalties could amount to millions of dollars because the fine for violating the Securities Act is $5,000 per violation and the pleading outlines dozens of violations, according to Lindeen's office.

Montanans who may have been solicited by or have invested with Chouinard are asked to notify Lindeen's office by calling toll-free at 1-800-332-6148.

The Associated Press contributed to this story.