Two Montana firms accused of securities fraud

A state judge issued a temporary restraining order against two Montana firms accused of bilking dozens of seniors out of millions of dollars in a securities fraud scheme. Named in Thursday's order are Cornerstone Financial Corp. of Polson and D&D Management and Property Development Inc. of Corvallis. The order by Helena District Judge Dorothy McCarter restrains Cornerstone and owners Robert Congdon and Keith Kovick, and D&D and owners Dan Klemann and Dan Wolsky, from conducting securities business in Montana and prevents them from selling any Montana assets or property. It sets a show-cause hearing for March 5 at 10:30 a.m. in Helena. State Auditor and Securities Commissioner Monica Lindeen said the affected investors' monthly interest payments have ceased, property offered as security for the investments is in foreclosure and none of the investors have received a return of their principal. "This case highlights some of the worst abuses that can happen to investors," Lindeen said in a press release. "We cannot and will not tolerate firms taking advantage of honest Montanans." Klemann, vice president of D&D Management, said Thursday that no one from the Securities Department had communicated with him about the allegations and that he wasn't aware of them until a reporter called for comment. "We are puzzled," he told The Associated Press from his home in Bozeman. "We simply borrowed money from Cornerstone. Those investors invested with Cornerstone. We have no relationship with any of those investors, period." The auditor's office said Cornerstone had lent $3 million of the investor's funds to D&D Management, which put up collateral in the form of four 160-acre tracts of land in Gallatin County as security for the investor's promissory notes. Klemann acknowledged that the property put up for security is now in foreclosure. "We're going through the same crunch everybody else is, this land crunch. We're no different from anybody else" as far as declining property values, he said. D&D's Wolsky and Cornerstone's Congdon and Kovick did not respond to telephone messages seeking comment. The auditor's office alleges the respondents committed securities fraud by failing to disclose to investors the risks associated with promissory notes, failing to disclose the financial condition of the companies, misrepresenting the value of the real property offered as security for promissory notes and misrepresenting that interest payments would be held by an escrow company when they were, instead, co-mingled with Cornerstone funds. None of the respondents or the investments they were selling to investors was registered to be offered or sold to Montana investors, Lindeen said.