Former New Hampshire GOP Candidate Guilty in $50M Fraud Case
A former New Hampshire gubernatorial candidate (and state GOP bigwig) has pleaded guilty to his role in a $50 million investment scheme, including charges of securities and investment advisor fraud.
According to the Justice Department, Jay Lucas raised money from victims, falsely telling them their funds would go to investments in “early-stage” health and wellness companies. Through his private equity fund, Lucas Brand Entity, Lucas took victims’ money for personal expenses and to pay earlier investors in a Ponzi-like fashion.
According to court documents, starting in 2017, Lucas used three funds he managed to raise money from retail investors, while actually treating them as a personal “cookie jar.” Lucas wasn’t registered with federal regulators, but was acting as an investment advisor and had a fiduciary duty to clients, the DOJ argued.
In touting his bona fides to clients, Lucas claimed to have co-founded a famous private equity firm, which he did not (and led lawyers from the firm to hit him with a cease-and-desist demand).
Though he claimed investors’ money would go to “small to mid-size emerging brands” to “differentiate them and catalyze growth to a sufficient scale for exit,” Lucas repeatedly spent victims’ funds on alimony payments, rent for personal properties and political consultants.
According to reporting by the New Hampshire Journal, Lucas was elected at 19 years old and served two terms as a Republican state representative. In 1998, he spent $1 million of his own funds to win the GOP gubernatorial primary before losing to incumbent Democratic Gov. Jeanne Shaheen.
According to the NH Journal, Lucas remained a donor and activist in the party and was briefly considered as a Senate GOP candidate in 2020 (his son served in the New Hampshire House as a Republican from 2018 to 2020).
Lucas also used the funds for “vanity projects, like a local New Hampshire newspaper in his hometown.” According to last year’s reporting from New Hampshire Public Radio, Lucas purchased the Eagle Times in 2022, a potential boon to the Claremont, N.H. locality the paper covered.
However, within a few years, the purchase went awry; according to NHPR, the Times went dark after its employees quit, and staff claimed Lucas didn’t pay bills and often asked employees not to cash their paychecks.
Additionally, Lucas channeled investors’ funds to Immunocologie, a “luxury skincare business” operated by Karen Ballou, Lucas’ wife.
According to the DOJ, Lucas diverted about 40% of the investor funds that actually went to portfolio companies into Immunolocologie, even though the company had limited revenue and never turned a profit. Most of the company investment went to so-called “marketing” expenses, including parties “and trips to luxury resorts where Luca’s wife promoted ‘brand awareness.’”
However, Lucas arranged for his firm, rather than the funds themselves, to take majority ownership, “thus giving Lucas and not his clients an equity interest in the business” (and failing to disclose the conflict of interest to clients, who failed to realize that “Lucas was using their money to fund his wife’s social calendar”).
Lucas’ fraud often left the funds undercapitalized and the firm unable to pay basic expenses, including employees’ salaries. As with the Eagle Times, staff questioned the leadership, claiming that Lucas’ spending was “literally fraudulent” and “likely illegal” (though many felt afraid to speak out, worried it would cost them their jobs).
In federal court in the Southern District of New York last week, Lucas pleaded guilty to one count each of securities fraud, wire fraud, money laundering and investment advisor fraud. The first three carry maximum prison terms of 20 years, while the latter carries a five-year maximum. The sentencing date is tentatively scheduled for Nov. 12.
