Travis County state District Judge Stephen Yelenosky today approved a Temporary Restraining Order against an Austin-based firm that allegedly continued to sell illegal, high-yielding investments in violation of a Cease and Desist Order issued by the State Securities Board.
The Court also granted the State of Texas' request for a receiver to take control of the companies, Warr Investment Group LLC and Warr International Group LLC. The receiver, Gregory S. Milligan, executive vice president of Harney Management Partners LLC, today froze bank accounts and other assets of the Warr companies.
In its initial petition, the State of Texas alleges that CEO James Elton Warr and other officials with the Warr entities "are defrauding the public through their illegal and deceptive sales of securities in real estate investment programs."The defendants claim that investors will receive a guaranteed 8% annual return and that the real estate investments are a safe, secure and lucrative alternative to more traditional investments such as certificates of deposit and stocks.
The lawsuit was filed by the Office of the Attorney General at the request of Texas Securities Commissioner Denise Voigt Crawford.
The petition alleges that to date, the Warr entities have raised at least $972,000 from investors, although the actual total won't be known until the court-appointed receiver seizes all the companies' assets and determines exactly how investors' money was spent. The petition states that Warr Investment and James Warr have misused investors' money.
Warr and the Warr companies "have used the majority of these funds to pay commissions to unregistered sales agents, pay for dining and restaurant expenses, purchase a 2008 E350 Mercedes Benz, and cover costs wholly unrelated"to the purchase of income-generated real-estate assets.
Warr used $40,595 of investors' money to buy the Mercedes, according to the petition. Company officials spent $18,905 at restaurants and on air travel and paid $121,428 to pay commissions to sales agents.
The Cease and Desist Order against Warr and the Warr companies, entered in September, found that Warr violated the Texas Securities Act by engaging in fraud, offering for sale unregistered securities, and making "materially misleading"statements that are likely to deceive potential investors. Warr marketed his investment system through YouTube videos and on various websites.