Ford F. Graham ’86 and his wife Katherine B. Graham, who once on Prospect Avenue, allegedly defrauded members of their social circle by selling unregistered securities that they presented as profitable opportunities in gas and oil investments, according to a filed against them.
On Tuesday, Jan. 29, the New Jersey Bureau of Securities a lawsuit against the couple, alleging that they raised more than $5 million between Jan. 2012 and Jan. 2014 through loans and fraudulent sales of unregistered securities to investors in at least five states, including selling at least $1,910,000 of unregistered securities in New Jersey alone.
At least three Princeton residents were among those allegedly defrauded.
The Bureau of Securities alleged that the couple committed a number of violations of the New Jersey , including “employing a device, scheme, or artifice to defraud” and “offer and sale of unregistered securities,” among other offenses.
“We strongly deny the claims made by the State of New Jersey,” Ford Graham wrote in an email to The Daily Princetonian. “When all the facts are revealed, we will prevail in court, and we look forward to that day as soon as is possible.”
The couple allegedly raised the funds by selling promissory notes, purchase agreements for certain interests, and profit participation agreements and making loans through their holding companies: Specialty Fuels Americas, LLC, Aries Energy Group Venture, LLC, CCC Holdings, LLC, and Rattler Partners, LLC. They allegedly told investors that funds would be spent on oil and gas, but they allegedly transferred the funds into their holding companies and personal accounts.
The couple also allegedly “misappropriated a significant portion of the investors’ money to fund personal expenditures including, but not limited to, luxury vacations at five star resorts, private school tuition, summer camp payments, and payments to his country club,” according to the lawsuit.
“Ford Graham and his wife allegedly used their social connections in the affluent Princeton community to lure investors into a Ponzi scheme that financed the defendants’ posh lifestyle of country clubs, private schools, and tropical vacations,” New Jersey Attorney General Gurbir Grewal, who filed the lawsuit against the Grahams on behalf of New Jersey Bureau of Securities Chief Christopher Gerold. “The Bureau’s action … seeks to hold the defendants accountable for their actions and require them to return the ill-gotten funds to defrauded investors.”
Gerold did not respond to request for comment by the time of publication.
In the court documents, the Grahams are described as having friendly relationships with some of their investors. One investor allegedly often “met in the kitchen of Graham and Katherine Graham’s Princeton home to discuss investment opportunities in the FG Entities.”
“Investors who put up money were led to believe it was being invested in legitimate projects guaranteed to return a profit, but that was a lie,” Division of Consumer Affairs Acting Director Paul R. Rodríguez. “We will not allow the defendants’ lies and deceit to go unchecked, nor will we allow New Jersey investors to be exploited in such an egregious manner.”
This is not the first time Ford Graham has found himself in trouble with investors. In 2011, a court that Graham and Vulcan Capital co-founder Kevin Davis owed two corporate officers $3,924,000 in exemplary damages in addition to $981,000 in compensatory damages for acts of fraud.
According to these court documents, the compensatory damages stemmed from a settlement agreement from a different lawsuit between the two parties in 2004.
In 2011, Levett Rockwood P.C. and Pullman & Comley, LLC also filed a against Graham and his company for allegedly failing to pay $56,279.08 in legal services, disbursements, and costs of collection owed to them.