Investment firm targeted in raid

SACRAMENTO, Calif. -- The FBI raided a Southern California investment company Monday, alleging that more than 1,800 clients who invested tens of millions of dollars were victims of a long-running confidence scheme.

No charges have been filed, but the FBI is investigating Financial Advisory Consultants as a possible "Ponzi scheme," where early investors are paid with money from later investors, said FBI spokeswoman Laura Bosley.

The California Corporations Department has identified investors in Utah, Idaho, Oregon, Colorado, Georgia and California, according to an FBI affidavit. The AP has had calls from investors living as far away as Michigan.

James Lewis, who variously lists himself as the firm's president or, more recently, its funds manager, told an investor in August that his "growth fund" alone had $62 million in assets, according to the affidavit. Lewis also operated an income fund that clients said is worth tens of millions of dollars.

His firm had more than 1,800 clients across the nation, one of Lewis' assistants told the FBI.

The Associated Press disclosed earlier this month that Lewis, 57, has been investing millions of dollars for clients and claiming extraordinary financial returns for 20 years, without being licensed or regulated as required.

Moreover, the firm has never provided clients with any details on how it invests their money. Since July, Lewis has been delaying withdrawal requests with the excuse that millions of dollars in investments have been frozen by the Department of Homeland Security - - a freeze the AP reported does not exist.

Those details were confirmed in a sworn affidavit used to obtain the search warrant from a federal magistrate.

"There is probable cause to believe that FAC and Lewis, through the use of the mails, engaged in a scheme to defraud investors in FAC's Income and Growth Funds by operating a Ponzi scheme," FBI agent Brad Howard said in his affidavit. He further alleges that Lewis and the firm used the U.S. mail to sell securities without registering with the federal Securities and Exchange Commission.

Investors previously said they had been interviewed and provided financial records to investigators from both the SEC and the state Department of Corporations, although the FBI acted alone Monday.

Chuck Woolstenhulme of Temecula invested $100,000. He tried to get his money back but failed. "I'm glad it's come to this," Woolstenhulme said Monday. "It's an important step, I think, to see if there's any money left and how it gets distributed."

Lewis has not responded to multiple telephone messages left by the AP over two weeks, nor to letters sent to him by registered mail and overnight delivery.

In a letter faxed to investors Friday, Lewis said his firm has "never charged for financial advice, nor have we ever sold any securities." He said that means he doesn't need to be registered with the SEC nor the state Corporations Department.

But in its reports to investors, the Orange County firm says it charges a 5 percent "management fee" on any profits it earns for its clients.

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