Federal prosecutors have added new charges against a Paradise Valley man who allegedly defrauded investors out of over $4 million by pocketing investments meant to fund short-term loans to small businesses and consumers.
In 2019, the Progress reported that a federal grand jury indicted David Harbour on two dozen counts of wire fraud and money laundering in connection with $2.9 million in investments solicited via 11 entities incorporated in Arizona, Montana, Wyoming, Delaware and Missouri.
They included several run out of an office building at Pima Road and Thompson Peak Parkway in northern Scottsdale.
Prosecutors filed a superseding indictment on Nov. 24 that includes additional counts of wire fraud, mail fraud and tax evasion.
The new indictment also alleges that Harbour bilked investors out of nearly $4.4 million between 2010 and 2019.
The indictment alleged Harbour solicited investments that were to be used to provide high-rate payday loans to consumers and small businesses and promised returns as high as 20 percent for investors.
But, in reality, much of the money went into Harbour’s pocket to pay off credit card debt and finance a lavish lifestyle that included parties, expensive homes and luxury golf club memberships in Scottsdale, Cabo san Lucas and Palm Springs, according to the indictment.
According to court filings, Harbour allegedly came up with the loan scheme while working with an organization called KQS Management in 2010.
“Harbour solicited victims to invest by promising excessive returns in short periods of time…Although this business arrangement began around 2011 and was not successful, Harbour would continue for years to entice investors with personal guarantees, knowing that he did not have the ability to pay on the guarantees,” according to the indictment.
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 and pled guilty in 2020 to interstate transportation of stolen money, bankruptcy fraud and tax evasion related to a fake debt and bankruptcy fraud scheme, according to the Kansas City Business Journal.
Harbour then began working with Green Circle, a consumer lender operated by the Wakpamni tribe.
According to the indictment, Harbour solicited investments in Green Circle from some of the same individuals who lost money in the KSQ scheme by pinning blame for the losses on Tucker and promising “to repay them with substantial returns on investments with Green Circle.”
Harbour, Green Circle’s main fundraiser, received $25,000 for every $1 million he raised and 80 percent of the organization’s profits, according to the indictment.
According to an SEC investigation, Harbour used much of the funds he raised to pay off personal debts.
Harbour also allegedly used the money to pay for a lavish 40th birthday party for himself that included a chartered plane for guests and a performance by the 1970s rock band The Eagles.
“Again, no investor knew Harbour was keeping a large percentage of their investment funds for his own personal compensation, nor would he have been authorized to do so,” the indictment read.
Prosecutors alleged he also ran a quasi-ponzi scheme on occasion, using new investments to repay previous investors.
In one case, prosecutors alleged an unnamed investor gave Harbour $500,000, but only $55,000 went to Green Circle with the rest being used to pay off credit cards and make ponzi scheme payments to other investors.
Victims of the alleged schemes included the widow of a deceased friend, who signed over a $1 million life insurance check to Harbour in 2009 on the promise of a minimum three percent return.
According to the indictment, she received a total $73,000 back on that investment between 2010 and 2019.
Harbour is currently on trial.
He was initially held in house arrest with an ankle monitor on a $1 million unsecured bond but a judge released him from home confinement and monitoring after he posted a $500,000 bond secured by a $1.7-million home in Fountain Hills.
According to court documents, the home is owned by Timothy and Julianne Gottschalk, parents of Abby Harbour, David Harbour’s wife.
The Harbours and Gottschalks are named as co-defendants in an ongoing lawsuit in Maricopa County filed by Wyoming-based 8901 LLC that alleges the Harbours violated a lease agreement for the Paradise Valley home they lived in at the time of Harbours arrest in 2019.
That property, a 2-acre estate, was recently sold by 8901 LLC for $2.5 million, according to Maricopa County Assessor’s Office records.
The lawsuit alleged the Harbours agreed to pay monthly rent and make $1.5 million in improvements to the property but defaulted on those obligations.