In another stunning blow to a reeling California Republican Party, Red County publisher Chip Hanlon was served with a harsh and detailed order by the SEC. The order alleges fraud and misrepresentation, with repeated failures to follow other orders to disclose hundreds of thousands of dollars in negative judgments. Hanlon’s Delta Partners claimed over a billion dollars in assets under management, while the actual assets were below 25 million, and as low as nine million.
Red County grew from Matt Cunningham’s local Red County blog in Orange County to be a major communication tool for Republicans, with a national edition, regional editions, and seven local versions just in California. The blog was considered important enough that Meg Whitman paid Red County $110,000 for Hanlon’s services. Red County describes itself as among the most elite and powerful political websites in existence.
Hanlon is closely allied with existing Orange County Republicans like lobbyist and OCGOP chair Scott Baugh and lobbyist Curt Pringle. He has also been in step with rising leaders like Don Hansen in Huntington beach and Jim Righeimer in Costa Mesa.
Update:
As of this morning, still no comment at Red County, although Chip Hanlon’s bio has disappeared into the memory hole. Flash Report is still strangely quiet. Surprisingly, the best mainstream story so far is at the Orange County Register, where the story came from excellent real estate reporter, Jon Lansner, instead of the sycophantic political writers.
Below the fold, read sections of the actual SEC order.
RESPONDENTS FAILED TO MAKE REQUIRED DISCLOSURES ABOUT DELTA’S POOR FINANCIAL CONDITION AND HANLON’S DISCIPLINARY
HISTORY
13. In August 2009, Delta’s financial condition was seriously impaired because it had minimal liquid assets and several overdue bills. On November 13, 2009, Delta informed Commission examination staff by letter that it was “in the process of communicating with all clients on this matter and will have completed this process by December 9, 2009.” However, contrary to Delta’s representations, Hanlon never disclosed Delta’s financial condition to any clients.
14. On June 28, 2010, a default judgment was entered against Delta and Hanlon in a lawsuit filed by one of Delta’s clients relating to Delta’s advisory services. The lawsuit alleged breach of fiduciary duty, negligence, failure to supervise, negligent misrepresentation, and breach of contract, all relating to Hanlon and Delta’s activities as investment advisers. Among other things, the plaintiff claimed that Delta and Hanlon (i) did not follow plaintiff’s investment guidelines and objectives, and (ii) failed to disclose certain conflicts of interest. The judgment ordered Delta and Hanlon to pay $353,706 indamages. Neither Delta nor Hanlon has satisfied the judgment. In addition, Delta did not disclose the existence of this judgment to Delta’s clients or its precarious financial condition as a result of the unsatisfied judgment, even though it was required to do so.
15. In June 2010, a FINRA arbitration panel ordered Hanlon to pay compensatory damages of $272,290 and $5,500 in fees arising from a complaint against him alleging breach of contract, slander, and fraud. Hanlon failed to comply with this arbitration award and consequently on June 29, 2010 FINRA suspended Hanlon from acting in any registered capacity. Delta did not disclose this disciplinary action to its clients, even though it was required to do so.