The Arizona Corporation Commission, this week, sanctioned Shane Krauser, a former Maricopa County criminal prosecutor, and in a separate case, Patrick Leonard Shudak, a real estate developer for defrauding investors. The Commission ordered more than $2.07 million in restitution plus $170,000 in administrative penalties.
The Commission has settled its allegations against Krauser, who admitted to committing securities fraud while he was employed as a Deputy Maricopa County Attorney.
In a separate matter, the Commission ordered Shudak, of Hawaii to pay $1,996,500 in restitution and a $150,000 administrative penalty for committing securities fraud in connection with a real estate investment. The Commission found that, while not registered to offer or sell securities in Arizona, Shudak sold unregistered promissory notes and investment contracts in the form of membership interests in Parker Skylar and Associates, LLC, a company controlled by Shudak. The investor money was to fund the acquisition and development of 1,900 acres near Bisbee, Arizona. The Commission found that Shudak violated the antifraud provisions of the Arizona Securities Act by oversubscribing the offering in his transferring more than 132 percent interest in Parker Skylar, mishandling and mismanaging investor funds, failing to advise investors of the existence of a perfected security interest in Parker Skylar’s assets and failing to disclose to investors multiple lawsuits and judgments against Shudak. For more details about this case, view the full text of the Commission’s order at S-20859A-12-0413.
The Commission found, while not registered to offer or sell securities in Arizona, Krauser, of Gilbert, raised investor funds by selling unregistered promissory notes and investment contracts, promising guaranteed returns between 20 and 36 percent. The Commission found that Krauser, who previously had been a licensed securities salesman from July 3, 1996 to December 31, 1997 represented he would invest the investors’ money in the stock, but he actually invested less than half of their funds. Krauser collected these funds from May 2007 until September 2008 from people who were close to him including his half sister, a fellow church member where Krauser was a leader and a person who trusted him because he worked as a prosecutor for Maricopa County.
The Commission found that Krauser used the majority of the investors’ funds to pay down his home equity line of credit, his credit card bills and student loans, purchase a residential lot, and to repay his brother who had previously invested with him. On August 20, 2014 Krauser and his company (KIG) made partial payments totaling $115,320 to the three investors. Earlier between 2007 and 2009 two investors were paid $30,933.
Giving Krauser credit for these previous payments the Commission ordered Krauser and his affiliated company, Krauser Investment Group, LLC, to pay the balance $79,347 in restitution and an administrative penalty of $20,000. Additionally he agrees to a consent Order to permanently Cease and Desist from violating the Securities Act and Investment Management Act.
The Commission’s final order against the named respondents will be posted online as soon as it is signed by all the Commissioners. Krauser is the host of the online radio show Liberty Storm.