Colin Nathanson

Colin Nathanson, 59, formerly of Coto de Caza, pleaded guilty “to six counts of mail fraud for his role in running a $28.4 million investment fraud scheme that offered fraudulent securities in a non-existent internet company” according to US Department of Justice press release 08-141 issued October 20, 2008

Prosecutors said Nathanson was the former CEO of Giant Golf Co. and Play Big Enterprises, Inc. both of which operated out of Irvine and Rancho Santa Margarita and sold golf clubs and golf accessories. He was arrested almost three years ago.

Nathanson admitted he induced several hundred people to invest in what turned out to be a private internet company that was completely fictitious. According to the prosecutors’ press release, Nathanson told investors that they were buying an interest in a “privately-held”, “internet-based technology company” and the company was about to conduct an initial public offering. He later claimed the company had decided to enter into merger negotiations with larger public company. None of the investors’ money was ever used to purchase shares in any companies.

As stated in the press release, Nathanson “used the money to finance his unprofitable business operations of his golf companies and to pay for extravagant personal expenses, including gambling expenses and payments for three houses in Coto de Caza and Trabuco Canyon.”

Nathanson also admitted he organized the sale of unregistered securities and “falsely represented that Giant Golf and Play Big were successful and on the verge of going public” while, in fact, they never made a profit from operations according to prosecutors.

They also stated “investors were fraudulently induced to invest in various other funds, partnerships, and business, including an internet-based casino, based on false claims that the investments paid anywhere from 2 to 5 percent per month” or 24 to 60 percent annually.

Nathanson is scheduled to be sentenced on February 9, 2009 and faces a maximum statutory sentence of 120 years in federal prison.

Lesson #1: If something is too good to be true, it usually is. 24 to 60% annual return should have been a clue to at least ask more pointed questions and inspect supporting documents prepared by unrelated third parties.

Lesson #2: We don’t have any of the details about how he fooled all these people but, did he also fool all their accountants, attorneys, bankers and financial advisors, too? Did these victims run these deals by their circle of advisors?