Northstar CEO, Former State Treasurer Candidate Charged With Fraud By SEC
Brian Watson, founder and CEO of Denver-based development company Northstar Commercial Partners and onetime candidate for Colorado state treasurer, was charged with securities fraud following a Securities and Exchange Commission investigation in connection with 10 development projects.
Watson misrepresented his and his company’s “skin in the game” when courting additional investors for the projects, according to the SEC, which filed a civil complaint in a Denver federal district court last week.
The SEC filing lists five securities fraud charges, alleging Watson and Northstar “deceived investors in real estate projects by falsely promising that they would invest their own money alongside that of other investors.” Watson was a 2018 Republican candidate for state treasurer, but lost to Democrat Dave Young.
Watson and Northstar claimed they would put up 4%-5% of the needed equity for the projects, but “they made no equity investment at all for eight of the relevant projects, and only invested a small fraction of the amount promised for two others,” according to court documents.
Northstar raised nearly $50M from at least 350 investors for the projects through 11 securities offerings from April 2017 to August 2019, which includes the time when he was campaigning for the office of state treasurer.
The charges are the latest legal troubles for Watson and Northstar. Amazon sued him in federal court in Virginia for racketeering and fraud in 2020. Amazon alleged Northstar paid kickbacks to two Amazon employees in exchange for helping the firm land deals to develop multiple data centers in Virginia, which led the Federal Bureau of Investigation to investigate and serve a search warrant at Watson’s Cherry Hills Village mansion in April 2020.
No criminal charges have been filed in that case to date. Watson sold the 20K SF home in December 2021 for $8.5M. After Amazon sued Watson and Northstar, he filed a lawsuit against Chicago-based IPI Partners, a former joint venture partner that provided financing for the Virginia data center projects.
The suit alleges that IPI, in collaboration with Amazon, cut Northstar out of the joint venture by fraudulently citing the alleged kickback scheme. In June, a judge ruled that the courts need to separately determine whether IPI deceptively used that allegation to cut ties with Northstar.
Federal criminal prosecutors asked for a pause in civil litigation to allow their own work to take priority according to a July 15 article by The Washington Post. A court date for the civil litigation is pending unless a settlement is reached.
