Colo. cannabis investment fund members owe $4M in suits in other states

Published: Aug 7, 2017, 7:41 am • Updated: Aug 7, 2017, 7:41 am

By Christopher N. Osher, The Denver Post

Members of a team that sought to raise $50 million from investors to finance the marijuana industry in Colorado and other states racked up more than $4 million in court judgments and settlements for their ties to a troubled California construction firm.

The Colorado High Yield Fund, based in Longmont, advertised itself on its website as “a capital fund that invests in financing instruments with financial entities in the medical and recreational marijuana industry as well as the related industrial hemp commodity market.”

The website stated the fund would “seek to accrue and payout no less than a net 15 percent dividend” to investors, and it made no mention of legal issues facing team members of the fund. The site was deactivated recently after inquiries by The Denver Post.

Tab Turner, an Arkansas lawyer identified on the fund’s website as a principal, is in default on a $690,000 settlement agreement after he was sued for failed construction projects in California and Arizona. Larry Kimball, identified as the fund manager, has an unpaid judgment of $2.3 million from a suit alleging bidding fraud and breach of contract, and an unpaid judgment of nearly $1 million for an action by federal prosecutors claiming unpaid payroll taxes.

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Thomas Alan Boyd, convicted in 2007 of a conspiracy, fraud and false reporting in the $200 million failure of BestBank of Boulder, is acting as an adviser to the team, he said in an interview. Some of the team members are embarking on plans to build a housing development in Windsor.

Turner, who successfully sued the Ford Motor Co. over SUV rollovers, and Boyd said the fund was not active, and that they did not believe it had raised any money from investors.

“To my knowledge, the Colorado High Yield Fund has never raised money,” Turner said in an email. “It was created by attorneys in Colorado to potentially raise money in the future, but it has never been used to date that I am aware of. It’s pretty much on the shelf pending more development.”

In promotional material offered to investors on its website, the fund advertised that it had produced $10 million in revenue after its founding in February 2016. The minimum investment the fund will accept is $100,000, according to the website.

Another fund principal listed is Chris Boyd, son of Thomas Alan Boyd. Chris Boyd did not return telephone messages seeking comment.

There is no registration of the fund at the federal Securities and Exchange Commission or the Colorado Division of Securities. Neither of the two agencies would confirm or deny whether the fund is being investigated, citing privacy provisions.

An offering for prospective investors in the fund was conducted by American Investments, a firm whose executive leadership team includes Turner, Kimball and Darren Mann, according to the fund’s website.

Turner, Kimball and Mann were sued in connection with their association with West America Corp., a San Diego-based contractor. One lawsuit alleged that Mann, who was director of West America, and Kimball, who was CEO, engaged in a “knowing, intentional fraud” related to their breached contract to build a $21 million apartment complex in a San Diego suburb. The lawsuit alleged that Kimball and Mann, through West America, had acted with “malice and oppression.” A judge ordered them to pay $2.3 million.

That 2016 lawsuit alleged that West America, through Kimball and Mann, billed the owner of the apartment complex for inflated bids from subcontractors. The lawsuit, filed by the complex owner, said Mann and Kimball pocketed money that was supposed to go to subcontractors and also engaged in fraud by entering into “secret side agreements” with subcontractors to “artificially inflate their bids” for “illicit profits.”

A lawsuit filed in U.S. District Court in California in 2015 alleged that West America did not deliver on $9.2 million in construction projects at an Indian reservation near Phoenix, a subsidized housing project in Maricopa, Ariz., and in San Diego. A firm that issued performance bonds guaranteeing the construction sued for default. Turner and Mann signed a settlement agreeing to pay $690,000 but have paid just $45,000 and are in default, according to court records. Turner said he was sued because he had guaranteed the bonds as an investor in West America.

Mann and Kimball have been sued by federal prosecutors seeking to recoup unpaid payroll taxes for West America employees. A federal judge last year ordered Kimball to pay $937,000 and Mann to pay $1.45 million owed to the Internal Revenue Service. Court documents filed in that litigation allege Mann ran West America but another individual acted as a front because Mann had past legal issues that made him unable to obtain a contractor’s license.

Mann and Kimball did not return telephone messages or emails seeking comment. In an email, Turner confirmed that West America had gone bust. The firm struggled due to two principals exiting, “leaving Mr. Mann alone with insufficient capital and resources to survive and mounds of obligations and debt,” Turner said.

Turner and some of his friends have started a new venture, Midian Homes, in northern Colorado, he said. Midian has bought nearly 50 lots for construction of homes in Windsor. Mann is the contractor building those homes, Turner said. Kimball has advertised on the internet that he also is a principal of Midian.

“Midian Homes was started quite some time after I lost my investment in West America,” Turner said. “Consequently, building homes in Colorado has nothing to do with West America or its bankrupt status.”

This story was first published on DenverPost.com

Topics: investing, investors, venture capital