How Triton Financial used athletes to attract clients, defraud investors
Triton Financial, a Heisman sponsor, agreed to receivership, after SEC lawsuit
Lawsuits allege that the company promised huge returns and didn't deliver
Former employees include Heisman Trophy winners Ty Detmer and Chris Weinke
Triton Financial, an Austin, Texas-based investment firm which boasts prominent ties to the sports world -- including a sponsorship deal with the Heisman Trophy Trust; a three-year contract for a PGA Champions Tour event, the Triton Financial Classic; and a roster of former Heisman Trophy winners and NFL players that were employees of the company -- has been sued in a civil action by the U.S. Securities and Exchange Commission for defrauding investors in a multimillion-dollar insurance scam, according to documents filed yesterday at Austin federal court. In connection with the complaint, Triton and its CEO, Kurt Barton, consented to an injunction to put the company into receivership.
The SEC complaint alleges that Triton and Barton had raised more than $50 million for at least 40 limited partnerships since 2004, and that the firm's insurance vehicle at the center of the complaint, Triton Insurance, had raised roughly $8.4 million from 90 people.
"Mr. Barton has consented to a receivership, which essentially means that the receiver now takes over the business," Toby Galloway, an attorney for the SEC's Fort Worth regional office, said. "Mr. Barton is out and will no longer be operating these businesses or stiff-arming investors."
Barton could not be reached for comment on his cell phone yesterday. His attorney, Joe Turner, said the following in a brief press release: "[Barton] intends to work closely with the receiver in an effort to ensure that the investors, many of whom are friends and relatives, do not lose their money."
SI.com has also learned that Triton is the target of a separate class-action lawsuit that was filed on Dec. 14 and newly amended yesterday in Travis County (Texas) District Court. The suit alleges that Barton solicited $12 million from investors, including the named plaintiff, Ryan Shapiro, for the purchase of an underperforming insurance company that it never bought, instead illegally using the money collected to pay bills or other Triton clients under the guise of "returns" on previous investments. The SEC's complaint echoes that same claim.
"What we know is that people trusted their entire financial future to this man and to this company," says Jason Nassour, an Austin-based attorney who is part of Shapiro's legal team. "Kurt Barton should be ashamed of himself on any number of levels."
According to the SEC, the government investigation began after SI first investigated Triton in a March article. SI had discovered several significant misrepresentations, among them false claims of SEC registration (Barton said he had registered in October 2008, whereas the SEC and Texas State Securities Board both attested that none existed); wild exaggerations of the value of Triton's assets under management (Barton touted the total as "over $300 million," while government forms and the firm's then-general counsel revealed that the company in actuality had less than $25 million); and an employee, former NFL quarterback Jeff Blake, who had e-mailed an advertisement -- claiming a jaw-dropping average of 32 percent annual returns on Triton investments over the past five years -- to 102 current and former NFL players without any of the disclaimers legally required by the SEC.
Once the Texas State Securities Board (TSSB) began looking into Triton -- which had been registered as an investment adviser since 2006 -- and requesting documents and information, the SEC complaint says that Barton sent the TSSB "altered and fabricated documents" in an attempt to "conceal the true number of investors and the true amounts of funds raised." The TSSB's own hearing will be held on Feb. 25, 2010.
The SEC complaint also notes that Triton "made most of its offerings through personal contacts," utilizing a sales force that employed football players -- all of whom conspicuously left the company in recent months. Galloway and the SEC's complaint both declined to specifically accuse any salesmen of wrongdoing, but Rose Romero, director of the SEC's Fort Worth office, said that "by associating with former football stars, [Triton was] able to build a facade of legitimacy and gain investor trust."
Former employees include Heisman Trophy-winning quarterback Ty Detmer, a longtime friend of Barton and the former "senior vice president of athlete services"; Blake, a former "director of athlete services"; free-agent NFL quarterback Koy Detmer, Ty's brother; former University of Texas quarterback Chance Mock, who left at the start of the year; and Heisman Trophy-winning quarterback Chris Weinke, who was promoted to Ty Detmer's position after Detmer's departure this fall but then also left in the following weeks. A series of testimonials starring Heisman-winning running back Tony Dorsett has also been removed from Triton's Web site. Triton's general counsel and chief compliance officer, David Tuckfield, also left the company in recent months.
"Ty only learned of the SEC's interest in Triton a few weeks ago, and has assisted the agency in its investigation," Ty Detmer's lawyer, Spencer Barasch, told the media. "If the allegations of the SEC's lawsuit are true, Ty, along with his peers, were greatly misled and Ty will continue to cooperate with the SEC in its investigation, if asked to do so."
Messages left with Blake, Weinke, Dorsett and Tuckfield yesterday have not been returned.
The lawsuits are the latest chapter in a saga that has been filled with deception and drama. On the afternoon of Dec. 11, a distressed Triton investor, Christine Cayton, entered the company's offices and allegedly threatened Barton with a handgun. Cayton -- a 46-year-old housewife who was dressed in her pajamas, on prescription stress medication and holding a bottle of wine -- had the weapon forcibly taken from her when she reportedly reached back into her purse for bullets. (Cayton was jailed and posted bond and now awaits trial on Jan. 4 on charges of aggravated assault with a deadly weapon.)
A week before that, on Dec. 4, Travis County court records show that Cayton had filed her own lawsuit alleging that Triton had committed statutory fraud in March by using "false representations of fact" and "false promises" to convince her to invest her family's $125,000 life savings. Cayton also claims that Triton began purposefully avoiding her questions and only arbitrarily sent her dividends.
"Hopefully, [Cayton] will receive the proper treatment and counseling necessary to prevent this from happening again," Barton would later say in a statement. "We would like to take this opportunity to assure our clients that we will continue to provide the same great level of service that they received prior to this unfortunate event."
Says one of Cayton's securities lawyers, Jim George, "All I'd like to say is that it appears that there are a lot of people whose money is at serious risk over there."