Fraud can come in numerous ways, but always at the heart of it is an opportunity for the unethical to commit a crime in a situation where no checks, balances or expectations in place. The San Clemente Water Park Project, a water park and miniature golf course, was the kind of investment that was easy to understand, and appealed to most everyone. Who doesn’t like to travel 
down a water slide?
The problem was that the water park never got built, and indeed there was no plan to build it. The four partners involved in the scheme collected more than a million dollars from unsuspecting investors and then they spent the money on themselves. The four pleaded not guilty, of course, and they could each face anywhere from 16 to 24 years for their fraud.
Fraud dating to 2009
As far as frauds go, this fraud had a pretty innocuous beginning. The City of San Clemente leased a portion of a sports park to the partnership group for development of miniature golf courses, water feature and restaurant, and then the partners collected a half-million dollars from investors. The partners told the investors they would get a hefty return. What the partners did not disclose was that the money would be used for their personal fun including commissions, salaries, and other payments. It should have signaled a problem from the start, but the group continued to solicit an additional $600,000 to pay themselves salaries and on restaurants, gas, hotels, utilities, air travel and at retail stores. They also used the funds as their own private bank.
It took the City of San Clemente more than five years to terminate the lease because the project failed to meet their deadlines. What this unethical case of fraud is about is much more in regard to what wasn’t done, than was done.
The obvious is that four alleged crooks took more than $1 million from investors and lavished the money on themselves with no expectation of paying it back. They had no intention of building an amusement park facility. Perhaps they had seen too many movies involving Wall Street scams, or perhaps they were raised in environments devoid of ethics, spirituality or moral responsibility. In my opinion, they deserve jail time and chances are strong they will get my wish.
Now for the not so obvious.
The City of San Clemente did not sell the parcel of property; it was leased. With a lease agreement, especially where the public is concerned, there should be at least some kind of performance expectation. The city had, I am sure, many calls for the parcel over the years – and from legitimate bidders. How did this lease arrangement come to pass without expectations of development? How was it that from 2009 to 2014 not one miniature golf hole or food venue was constructed? Where was the oversight, the regular meetings, the reporting and supervision? Did the city simply expect nothing?
What of the investors? What was the investment dynamic where a group of investors forked over money without seeing any construction or legitimate movement toward a theme park for five years? We don’t know at this point if complaints were filed with either the investment group or the city itself, but it begs the question of due-diligence. What did the investors know about the partners? Was it “blind faith,” or “greed” or naïveté?
Choices and consequences
The partnership group deluded themselves into believing that there would be no consequences for their actions. There will be. The City of San Clemente believed that as leaseholders, no further expectations were required of them once they turned over the land for an incredible 20 year period. They had responsibilities, but bureaucracies have reputations for not running very smoothly these days. This is just another example. As for the investors, they placed their trust in smoke and mirrors. They linked their finances to the belief that eventually everything would be just fine; they were wrong.
Every choice has a consequence. A lack of expectations invariably leads to embarrassment.
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