School Employees Among Investors in Alleged Multi-Million-Dollar Fraud

Sep 11

Christopher Anthony Zaal of McKinney was arrested Sept. 8 after having been indicted in Collin County on charges of securities fraud and money laundering for obtaining at least $2.27 million in fraudulent investment schemes.

Zaal allegedly committed fraud when he sold promissory notes and other securities without disclosing to investors that he has never been registered to sell securities and that he was in proceedings with the Texas Department of Insurance, which had filed to revoke his license. The insurance department revoked Zaal’s license, a decision later upheld by the Third Court of Appeals in Austin.

The license revocation case and subsequent Third Court opinion revealed that Zaal’s alleged victims were mainly teachers, administrators, and other school district employees, as well as retirees. In some instances, school employees allegedly took sizeable lump-sum withdrawals from their Teacher Retirement System pension account and sank the money into investments Zaal promised them would be safe and secure sources of retirement income.

According to the indictment, Zaal forged the signatures of two individuals on annuity applications he submitted to Annuity Investors Life Insurance Co. The applications and supporting documents were submitted without the individuals’ permission. Court documents in Zaal’s insurance revocation case indicate the two individuals were school district employees at the time.

The indictment also alleges that Zaal committed fraud in the sale of investment contracts issued by Jerrald Green and Wealth Systems International, Ltd., and Delgreene Financial Services, L.L.C. Zaal failed to disclose to prospective Delgreene investors that he had been sued in 2008 for fraud and breach of contract in Denton County state district court over his sale of Delgreene investments.

Delgreene was eventually shut down by the state of Colorado. The Colorado Securities Commissioner, in a 2010 state court filing, accused Green and his companies of fraudulently selling securities that were marketed as investments in real estate notes and mortgages and consumer and commercial loans.

Zaal, who did business as Southwest Financial Group in McKinney, was named as a  defendant in the civil complaint. Colorado securities regulators said Delgreene “took investor money, paid substantial commissions to referring brokers,” and operated as a Ponzi scheme in which new investor funds were used to pay earlier investors.

Investors eventually recouped only 30% of their original funds.

Besides misrepresenting the safety of the Delgreene investments, Zaal allegedly failed to tell prospective investors in Delgreene about his prior involvement in what the U.S. Attorney’s Office in Chicago described as a $500 million Ponzi scheme. The fraud centered on a “universal lease” investment program operated by Yucatan Resorts, also known as Resort Holdings International Inc.

Zaal failed to disclose that the universal lease investments he had sold, far from providing investors the promised high fixed-rate of return, caused them to incur “significant losses,” according to the Collin County indictment.

The universal lease program was structured to give the owners of the lease the choice of using the property, renting it, or employing a third-party management company to rent and manage their unit.

Michael E. Kelly, the president and sole shareholder of the Yucatan and Resort Holdings, was sentenced to five years in federal prison in 2012 and died the next year with other criminal charges pending.

The Collin County District Attorney’s Office is prosecuting Zaal. Texas State Securities Board enforcement division attorneys Dale Barron, Angela Cole, and Melanie Good are serving as special prosecutors.