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Tuesday, January 22 , 2019, 9:59 am | Fair 57º

 
 
 
 

Former Montecito Businessman Pleads Guilty to Securities Fraud, Faces 10 Years in Prison

Santa Barbara County District Attorney Joyce Dudley announced Wednesday that on Tuesday, David Prenatt pleaded guilty to seven felony counts of engaging in a fraudulent securities scheme, a violation of California Corporations Code Section 25541.

Prenatt also admitted a special allegation that the crimes were related felonies, a material element of which is fraud, that involved a pattern of conduct that involved the taking of over $500,000.

“The successful prosecution of these charges was a direct result of the thorough investigation completed by D.A. investigator Jennifer Glimp, D.D.A., Casey Nelson and Senior D.D.A. Brian Cota," Dudley said. "As a result of their excellent work, Mr. Prenatt will be sentenced to an additional 10 years state prison.”

The sentencing in this matter is scheduled to occur Sept. 25 in Santa Barbara County Superior Court.

Prenatt is currently serving a 51-month federal prison sentence after pleading guilty to providing false information on a personal financial statement to a federally insured bank. He began serving his federal sentence on Dec. 9, 2013. His 10-year sentence in this case will not begin until he finishes his federal sentence, at which time he will be transported from federal prison to the California state prison system.

From 2006 to 2009, Prenatt, who owned and operated David Prenatt Financial in Montecito, solicited friends and family to provide him large unsecured personal loans, telling them that he had a short-term lending business in which he would use their money to provide bridge loans to other individuals at a high interest rate. Prenatt promised high rates of returns and indicated to them that there was no risk in their investments because he had the personal assets to cover their investment.

In 2009, Prenatt went into bankruptcy after defaulting on the unsecured personal loans, and in 2012, after a comprehensive review of Prenatt’s financial affairs from 2004 to 2009, a Chapter 11 Trustee’s report concluded that Prenatt did not use the investors’ monies to provide short-term loans as he had represented. Instead, Prenatt used the money primarily to support an extravagant lifestyle and to pay returns to early investors. It was only by soliciting new investors that Prenatt was able to make interest and principal repayments to the early investors and continue to support his extravagant lifestyle.

At his sentencing, Prenatt will also be ordered to pay restitution to his victims in an amount to be determined at that time.

 

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