A group of Hilton Head Island investors believed its money was paying for a grass farm and timber operations, but evidence suggests it really paid for shopping trips to Victoria's Secret and Macy's, college applications to Wake Forest and Vanderbilt and other unrelated purchases, according to an order from the S.C. Attorney General's Office.
The Securities Division of the office says it has found evidence that John McIntyre of Hilton Head, manager of seven limited liability corporations, spent investors' money on personal expenses. The money was supposed to go toward a startup biofuel business called Silver Oak Energy and several timber-cutting operations in South Carolina and North Carolina.
Investors' money was used for dining, jewelry, groceries, wine, liquor, and trips to a pet hospital and kennel, according to the cease and desist order.
"He started using some of the revenue that came in -- mainly from the timber-cutting operations -- to pay his daily living expenses," said Daufuskie Island resident Richard Silver, an investor in the energy company and four of the timber operations. "We don't even know whose dog was even being treated or kenneled."
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The findings by the Attorney General's Office are not final. McIntyre has until later this month to request a hearing with the division, present evidence and refute the claims.
If he does not, the order stands, and civil penalties of as much as $10,000 must be paid for each of the 39 alleged securities violations, as well as the cost of the investigation. He can also opt to pay a flat $50,000 civil penalty.
Attempts Friday to reach McIntyre and his attorney were unsuccessful.
The Attorney General's Office attempted to subpoena documents and testimony from McIntyre, but he refused unless granted criminal immunity -- something the division cannot provide, according to the order.
Five of the investors, all with ties to the Hilton Head area, collectively paid nearly $400,000 for about 70 acres in Marlboro County to set up a farm to grow giant Miscanthus grass, a renewable source of energy.
The business plan, according to one investor who asked not to be identified, was to grow and harvest the grass, then sell pellets of it to companies in Europe for use as a coal alternative.
In addition to taking a fixed percentage of the revenue and interest in the companies for his work, McIntyre also received unauthorized consulting fees, made loans to himself and paid himself commissions that violated his agreement with investors, according to the attorney general's order.
To conceal the way he used investors' money, McIntyre juggled money among the LLCs and mislabeled expenses in the firm's accounting software, according to the order. For example, purchases of jewelry and women's shoes were labeled as purchases from a company that constructs and manages greenhouses; money paid to a kennel and animal hospital were called meal expenses, the order alleges.
"You sit and watch the Bernie Madoff scandals, and you pat yourself on the back and say, 'This won't happen to me,' " Silver said. "But you have close friends, and you can't possibly bring yourself to ask, 'Can this guy be taking our money and violating our trust?' "
Silver and four other investors also have a lawsuit pending against McIntyre over the energy company, alleging fraud and mismanagement, among other things. They want a judge to prevent McIntyre and Silver Oak Land Management from selling, transferring or disposing assets that could belong to them.
Silver said they hope the attorney general's order will strengthen their court case and that the Attorney General's Office will pursue criminal charges.
Follow reporter Gina Smith at twitter.com/GinaNSmith.