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OURTS
Investors claim duo's fraud cost them millions
Lawsuits allege that money meant for an esoteric scheme known as PIPEs was
pocketed or spent.
By Kim Christensen, Los Angeles Times Staff Writer
March 27, 2008
He was an affable Santa Ana insurance salesman, she an Irvine securities
lawyer with an impressive resume.
Together they took in more than $40 million from scores of small investors,
who say they were promised returns of up to 40% through a sophisticated
investment strategy usually reserved for hedge funds and other Wall Street
big boys.
But of all the money that James R. Halstead and Jeanne M. Rowzee solicited
for Private Investment in Public Equities, or PIPEs, they placed exactly
zero in the esoteric transactions, investors allege.
"There were no PIPEs," said John M. Powers Sr., an Arizona commercial real
estate agent who claims losses of more than $1 million in a lawsuit in U.S.
District Court in Santa Ana.
"I'm 59 years old and ready to retire in two or three years, and I worked
pretty much my whole life for that money," he said. "Basically, it's gone."
Powers' lament echoes through more than half a dozen civil lawsuits filed in
state and federal courts accusing Halstead, 61, and Rowzee, 49, of
defrauding more than 80 people before the alleged scheme collapsed last
year.
Rowzee has denied wrongdoing but declined to comment.
Halstead, who has a 1998 felony conviction in Orange County Superior Court
for selling securities unlawfully, said he, too,was defrauded. He blamed
Rowzee, his longtime lawyer and friend, and said he has lost $20 million he
had in investment accounts with her.
"A lot of people got hurt in this deal," he said. "You want to know who's
the biggest victim? You're talking to him, buddy. . . . I lost everything."
Range of investors
That may be a tough sell to investors, who ran the gamut from wealthy
developers to retirees on fixed incomes, some of whom drained their home
equity to invest. Many were seasoned business people who said they brought
friends or relatives into the deal.
Several investors told The Times that they have detailed their allegations
to the Securities and Exchange Commission and the FBI. Halstead said he's
been in talks with the U.S. attorney's office but would not elaborate.
All three agencies declined to comment.
"I don't see how you can steal millions and millions of dollars and not be
held accountable by the authorities," said Steve Perebzak, 36, who, along
with his elderly mother, allegedly lost $450,000 they borrowed against their
homes.
Where all the money went remains a mystery.
Rowzee, a single mother of two, is accused of stashing much of it in
offshore banks, including $2 million she wired to a former client, "a
fugitive hiding in Brazil," one suit alleges.
Halstead allegedly blew millions more on a fast-lane lifestyle that included
sports cars, diamond-crusted wristwatches, frequent strip-club visits and
two houses with panoramic views of Las Vegas.
"These are people who have no consciences," said Norbert Foigelman, a
retired Newport Beach psychologist and entrepreneur who allegedly lost $1.5
million.
Life in the fast lane
As tens of millions of dollars flowed into the PIPEs scheme from 2004 to
2006, the lawsuits charge, Halstead was living it up in Vegas.
Property records show he bought two 8,000-square-foot homes near Henderson,
Nev., with sweeping views. One cost $5.9 million, records show, the other
$3.5 million.
"His house was like a mansion and looked out over the top of Vegas, the
whole Strip. It was a faraway, but beautiful view," said Foigelman, who met
Halstead as an insurance client in 1997. "He had big parties there to entice
people to invest more money."
Halstead's other Vegas house was for his girlfriend, according to Foigelman
and others, who said she was an exotic dancer.
"She was a beautiful girl," Foigelman said. "They spent money like crazy, on
jewelry and clothes."
And cars.
Sales records show the couple spent $201,000 on a Ferrari 360 Spider
convertible from a Las Vegas dealership on Christmas Eve 2005. The following
July, Halstead paid $368,000 for a 605-horsepower Porsche Carrera GT,
records show.
Others recall him getting around Vegas in a chauffeur-driven limo, with an
entourage that included a man named Sergio, whose job was to shop for the
couple's clothes.
At the Bellagio hotel, acquaintances say, Halstead cheerily flashed his
American Express Black Card to pick up the tab for himself and his friends,
sometimes in the dozens. But American Express apparently has its limits,
even if its vaunted Black Card doesn't: It sued Halstead in December for an
unpaid balance of $358,869.
'I'm not a fool'
Halstead's response to stories of his wild spending can be summed up in two
words: So what? He said he earned $750,000 a year in the insurance business
and had money to burn.
"If I want to buy five cars or 10 cars, or two houses, or go to Vegas, why
shouldn't I?" he said. "I didn't need this PIPEs deal to live my lifestyle.
.. . . I didn't need anybody else's money and I didn't steal anybody's money.
I'm not a fool."
In Orange County, Halstead tooled around in his sport cars and took business
lunches at his regular table at Il Fornaio in Irvine. He lived with his
wife, Susan, and three children in a quiet Santa Ana neighborhood and was
active in his sons' youth baseball program.
Susan Halstead, whose 2007 divorce suit is pending, is a defendant in some
of the lawsuits. She denied wrongdoing and declined to comment through
attorney David L. Casterline, who also represents her husband.
Casterline said James Halstead's legal position was that investors relied on
Rowzee for advice about PIPEs, not on his client. Halstead said as much in
an interview.
"These were attorneys, investment bankers, big-time businessmen," Halstead
said. "They knew what they were doing. They met with Jeanne, they talked
with Jeanne. I'm just an insurance guy."
Lawyer-client partners
Halstead said he met Rowzee in the early 1990s, when he hired her to defend
him in a criminal case. He and another man were charged with bilking
investors of more than $1 million in a scheme to sell crude oil and German
bank shares.
In 1998 he pleaded guilty to five felony counts and was put on probation,
case records show. His conviction was reduced to a misdemeanor when he paid
$150,000 restitution.
He and Rowzee went on to become best friends, Halstead said in an interview,
in which he also contended she repeatedly assured him that the PIPEs were on
the up and up.
Many companies legitimately use PIPEs to raise capital for growth or
acquisitions. The transactions vary, but investors typically -- and quietly
-- buy stock below market price and later sell it at a profit.
"What perpetrators of fraud tend to do is play on the investment du jour,"
said Randall R. Lee, former head of the Los Angeles regional SEC office and
now a securities lawyer in private practice.
"PIPEs actually have been kind of a hot thing, a hot way to raise money,"
said Lee, who was not familiar with the Rowzee-Halstead cases. "A few years
ago, it was real estate-related investments."
In court papers and interviews, investors say Rowzee and Halstead, through
his Game Plan Inc., promoted PIPEs as deals -- available only to a select
few -- that would protec
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