Investors in the Warr Investment Group LLC of Austin, which the State Securities Board forced into receivership earlier this year, will receive nearly one-third of their money back, with the potential for additional payments.
A State Securities Board investigation of Warr Investment Group and its CEO, James Elton Warr, revealed that they were selling investments in a fraudulent real estate program. Through YouTube videos and Internet advertising, James Warr promoted his program as a safe and lucrative alternative to the stock and bond markets. He promised investors annual returns of 8%.
Travis County state District Judge Amy Clark Meachum on Oct. 13 approved an Order allowing distribution of funds by Gregory S. Milligan, the court-appointed receiver overseeing the recovery of distribution of Warr Investment Group assets. Milligan is an executive vice president in the Austin office of Harney Management Partners LLC.
Forty-three investors in Warr Investment Group and a related company, Warr International Group LLC, will receive 31% of their money back. The distribution is expected to take place within two weeks. Additional distributions are expected as the Warr companies' assets are liquidated and the proceeds made available to investors.
"Recoveries of this scope are rare in investment fraud cases,"said Securities Commissioner Benette L. Zivley. "Typically, recoveries amount to a few cents on the dollar, if that. We're very pleased to be able to help return money to investors in this ongoing case."
The State Securities Board investigation revealed that Warr raised about $1.1 million from investors, but he used a significant portion of the funds to pay commissions to unregistered sales agents, pay for travel and dining expenses, and buy an E350 Mercedes Benz. The Mercedes was among the first items seized when the State Securities Board, together with the Office of the Texas Attorney General, shut down the company in January.
Zivley said Milligan, the receiver, and the Enforcement Division of the State Securities Board "have done an outstanding job in untangling the company's finances, locating assets, and liquidating them to the benefit of investors."
The State Securities Board issued an Emergency Cease and Desist Order against Warr and the Warr Investment Group in 2010. The Order found that Warr violated the Texas Securities Act by engaging in fraud, offering for sale unregistered securities, and making "materially misleading"statements that were likely to deceive potential investors.