A Paradise Valley man is facing federal charges for allegedly bilking investors out of millions using a payday loan scheme he ran from his Scottsdale businesses.
David Harbour was indicted by a federal grand jury and currently faces 3 counts of wire fraud and 19 counts of money laundering in the U.S. District Court for the District of Arizona.
According to the indictment, Harbour and associates defrauded investors out of $2.9 million between 2010 and 2015 using 11 entities incorporated in Arizona, Montana, Wyoming, Delaware or Missouri, including Highpointe Capital Group LLC, Oak Tree Management LLC and DCR Hospital Investment LLC.
Most of the entities mentioned in the indictment were run out of an office building at Pima Road and Thompson Peak Parkway in northern Scottsdale.
According to the indictment, Harbour promised investors high returns over short periods of time if they invested in his operation, which was billed as a short-term loan provider for small businesses and start ups.
However, Harbour allegedly failed to live up to the terms of those deals and, in some cases, operated a quasi-ponzi scheme by using one investor’s payments to pay another.
“Harbour then used the investment funds for purposes other than what was promised to investor-victims, such as for personal living expenses to support his family’s lavish lifestyle…and in some instances used funds received from later investor-victims to make payments to earlier investor-victims,” according to the indictment.
Federal prosecutors alleged that Harbour — who lives in a $2.7-million Paradise Valley home — used investor money to pay for golf memberships, mortgage payments and private jets; and to pay off millions of dollars in credit card debt.
According to court filings, Harbour allegedly came up with the payday loan scheme while working with an organization called KQS Management in 2010.
KSQ was eventually investigated by the FBI, IRS and Federal Trade Commission.
KSQ owner Joel Tucker was indicted by a federal grand jury in 2018 on 15 counts, including bankruptcy fraud and interstate transportation of stolen money.
Following the demise of KSQ, Harbour began working with Green Circle, a consumer lender that was operated by the Wakpamni tribe.
Harbour allegedly was to be the exclusive provider of capital to the outfit and was paid to bring in investors.
“Harbour was to be paid $25,000 for every $1 Million invested, in addition to 80 percent of revenue,” according to a report from an IRS special agent.
However, according to an SEC investigation into Harbour and Green Circle, he used much of the funds he raised to pay off debts and cover personal expenses, including purchasing homes in Idaho and Mexico.
Harbour also allegedly used the money to pay for a lavish 40th birthday party for himself, which included a chartered plane for guests and a performance by the 1970s rock band The Eagles.
According to the IRS investigation, Harbour raised money for his ventures from friends and business acquaintances, including the widow of a deceased friend.
The widow invested a $1 million from her husband’s life insurance policy with Harbour, who allegedly sent $600,000 to Green Circle and used the rest for personal expenses, including to pay off over $200,000 in credit card debt.
According to court filings, one of Green Circle’s largest investors called its promissory note when it learned of the SEC investigation and the tribe ultimately turned Green Circle over to the investor.
That development revealed a number of irregularities in Green Circle’s books, including that the entity was worth $2 million less than Harbour presented and that he had diverted funds for personal use, including paying a fine levied by the FTC.
This is hardly Harbour’s first brush with law enforcement and financial regulatory agencies.
The SEC investigation resulted in a $1.6-million judgment and sanctions against Harbour by the agency in 2018.
Prior to that, Washington’s Department of Financial Institutions fined Harbour and one of his LLCs $5,000 and prohibited them from making loans to Washington residents.
The current Arizona case is ongoing.
On Aug. 8, Harbour was released on $1 million bail.
Prosecutors asked a judge to deny Harbour bail or impose stiff restrictions on him if he is released, because they consider Harbour a flight risk and a risk to society.
Harbour owns a home in Mexico and had made statements in the past suggesting he had deposited some funds in off-shore accounts, according to the indictment.
Court filings also suggested that Harbour may be using others to hide his money.
Harbour and his wife are allegedly subaccount holders on a credit card account with $6 million in charges. The real account holder is an individual identified as J.L.S., according to the IRS agent’s report.
J.L.S. is also the legal owner of Harbour’s Paradise Valley home.
Harbour told investigators that a friend owns the house and allows him to live in it rent free and that he is only responsible for utilities.
However, mortgage and escrow documents obtained by the IRS showed that entities run by Harbour paid some escrow and closing costs for the house and that his wife Abby Harbour also participated in the transaction.
Harbour also told investigators that he currently works as a salesman for Savior Hospice & Palliative Care, which is also owned by J.L.S., according to the IRS investigation.
According to Arizona Corporation Commission filings, Savior is owned by Jeffrey L. Smith.
However, according to the IRS agent’s investigation, Harbour has told associates he was pursuing a health-care-related venture and that he owns the company.
The court documents also alleged that hundreds of thousands of dollars were sent to accounts owned by Harbour’s mother.
As a condition of his bail, Harbour had to give up his passport and is prohibited from leaving Maricopa County without court permission.
Harbor is also prohibited from soliciting investment and may not open new financial accounts and is prohibited from making transactions over $1,000.