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Protesters Accuse Dana Point Assembly Woman of Involvement with Securities Fraud

January 24, 2014

Posted in Business Litigation, Business Start Ups, Corporate Law, Partnership Law, Real Estate Law

Anticipatory BreachProtesters gathered outside California Assemblywoman Diane Harkey’s (R-Dana Point) holiday party earlier this month to bring public awareness to her husband, Dan Harkey, and his allegedly fraudulent business activities in connection with Point Center Financial.

Dan Harkey was sued by his investors for elder abuse, breach of fiduciary obligations, fraud, unfair business practices, violation of California Securities laws, and several other types of misrepresentations. The jury found Dan Harkey was liable for $4.5 million but more than doubled the award to $11.6 million due to egregious facts of the fraud.

The investors claimed that Dan Harkey used print ads and direct mailings to send notices of his investments to targeted audiences, which included many senior citizens. He also sent invitation only seminars to potential investors to garner their trust. The investors say that Dan Harkey’s investments were essentially a Ponzi scheme, meaning that the dividends of older investors were paid through the investments of new investors, all the while funds were allegedly mismanaged so that they never produced real returns.

Investors gave Harkey $50,000 to $3 million to invest in commercial real estate plans, which for the most part never succeeded.

Diane Harkey had also been originally tied up in the lawsuit, but a judge removed her from the case in June after Diane proved that she did not have enough involvement in the business to be held liable. Although Diane Harkey escaped legal liability, the protesters sought to create political repercussions because they believe that Diane Harkey contributed to her husband’s scheme.

Several internet sites have also been created in an attempt to warn the public of Point Center Financial and Dan Harkey.

Diane Harkey is currently a candidate for the state Board of Equalization. She claims that the protesters were actually supporters of Mark Wyland, a California State Senator in the 38th District.

California Securities and Business Fraud Law

Fraud carries the highest amount of relative liability as any business litigation. Punitive damages, typically reserved for few cases, are available for cases involving fraudulent activity. Juries have the discretion to award damages multipliers as high as 10 times actual damages.

California law provides also relatively broad liability for secondary actors in securities fraud in private lawsuits. However, federal law is much more relaxed. For example, although most of the Madoff family had benefited in some way from the activity of Bernie Madoff’s Ponzi scheme, they are insulated from liability from private shareholders due to Bernie’s fraud because none of the family had made actual misstatements of fact or omissions to investors.

In addition to civil liability for securities fraud, brokers found responsible for fraudulent activity risk the loss of their licenses. Dan Harkey’s business entities are currently under investigation by the California Department of Real Estate (DRE), which regulates corporate real estate broker licenses.

The breach of fiduciary duty due to fraud is also serious offense to the state and federal Attorney’s General. Securities fraud is also felony level offense that carries prison sentences as high as 20 years.

Business Fraud Litigation

If you have been involved in an allegedly fraudulent transaction contact the Law Offices of Tony T. Liu. Our offices have experience handling securities and business fraud claims for both investors and defending businesses. Call (714) 415-2007 to schedule a consultation today.