(Photo by krisanapong detraphiphat/Getty Images)
The Iowa insurance commissioner has ordered a Johnston company and its owner to repay $2.3 million that 15 investors lost in an oil-and-gas operation that regulators have likened to a Ponzi scheme.
Regulators say one of the victims of the alleged scheme by Des Moines investment advisor Cory J. Dawkins was a teenage college student whose father died shortly after he began consulting with Dawkins on investments.
The student was struggling to find money to bury her father while his body lay in a freezer for two weeks. She allegedly decided to pursue her father’s plans of investing $188,000 with Dawkins’ help and lost all of the money.
According to state records, Dawkins formed Elite Wealth Partners in 2017 and acted as the company’s senior partner and sole owner. According to the Iowa Insurance Division, Dawkins then formed EWP Permian Basin Fund II, an investment company with no operating history on which to evaluate its operations.
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To justify his collection of sales commissions, Dawkins allegedly appointed himself to what regulators say was the “fictional position” of EWP’s fund manager. The insurance division says he then offered high-risk, unsecured investment opportunities that were not in his investors’ best interests.
In 2022, the Iowa Insurance Division formally charged Dawkins and the two companies with securities fraud; performing unregistered activity as securities agents; committing acts that constituted grounds for discipline as investment advisors; and fraud or dishonest conduct as demonstrated through incompetence, untrustworthiness and financial irresponsibility.
State: Investors were misled by ‘untrue’ statements
According to the division’s recently filed findings of fact in the case, the alleged scheme was launched sometime before May 2019 when Dawkins spoke to a Polk County couple about investing in EWP Permian Basin Fund II, whereby the couple’s money would be used to back a company that was purportedly purchasing oil wells.
According to the division’s findings of fact, EWP was not actually buying wells and had no assets to secure the notes that were issued to investors. The representations made to the Polk County couple and to other subsequent investors by Dawkins were “untrue” and amounted to securities fraud, according to the division. Investors, the division found, had been “led to believe in 2019 that EWP Permian Basin Fund II owned the oil and gas wells when, in fact, it did not.”
EWP, the division found, was set up as a vehicle through which people could invest in an entity called the Heartland Drilling Fund – but Dawkins and Elite Wealth allegedly failed to perform due diligence in investigating Heartland and its affiliates, relying instead on Heartland’s unverified marketing materials.
Dawkins failed to review Heartland’s financial statements and “exhibited significant uncertainty” as to which oil and gas interests were actually held by Heartland, the division found.
The U.S. Securities and Exchange Commission, the division noted, would later conclude that promised returns to investors “were little more than an illusion and were actually a Ponzi scheme.”
Dawkins and Elite Wealth collected thousands of dollars in fees related to their investment transactions. Dawkins, however, had a conflict of interest by acting as both an investment advisor and a self-interested promoter of EWP, the division concluded.
Dawkins was also alleged to have steered investors to a “very high risk” entity called the Carson Oil Field Development Fund II without disclosing all of the risks involved.
By 2021, the division found, Dawkins and Elite Wealth should have known they were recommending not only a series of high-risk investments but were offering investments “that had numerous characteristics of a fraudulent Ponzi scheme,” with initial investors being paid from proceeds generated by newer investors.
Investor had her dad’s ‘body in a freezer for two weeks’
One of the alleged victims in the scheme was a 19-year-old Iowa State University student whose father had recently died of cancer. The division said it found her subsequent testimony about her dealings with Dawkins to be “simply heartbreaking.”
The young woman – whose name is redacted from public filings in the case – had invested $188,000 of her father’s money with Dawkins, according to the division.
“We needed money to pay for a funeral,” the woman testified at a hearing. “We simply had my dad’s body in a freezer for two weeks. So, we were really struggling, and we owed a whole bunch of our family members money. And we just kind of proceeded because we were so desperate for funeral money to pay for his gravestone and to pay the mortgage on our home … I guess my dad already chose that investment. So we just kind of went with whatever he had … And if he trusted Cory with that market on that, then I just went ahead with it.”
Dawkins, the division found, later accepted no responsibility for steering the student toward the high-risk investment, stating that Dawkins “absurdly claimed” that although he was a fiduciary, his introduction of the EWP investment opportunity to the student was not a recommendation of any kind.
At one point during a hearing on the matter, Dawkins allegedly exclaimed, “I don’t recommend anything!”
In its findings of fact, the division said it found Dawkins’ testimony to be “wholly untrustworthy, leaving us with the unmistakable impression that Dawkins was willing to say practically anything” to avoid accountability.
The division noted that losses by the 15 investors, including interest, totaled $2,371,618.
Douglas Ommen is Iowa’s insurance commissioner. (Photo courtesy of Iowa Insurance Division)
Iowa Insurance Commissioner Douglas Ommen this week revoked the investment advisor registrations of Dawkins and Elite Wealth, revoked the insurance producer licenses of Dawkins and Elite Wealth, and permanently barred EWP from issuing or offering securities of any kind in Iowa.
Ommen also ordered EWP to pay $2.3 million in restitution, with $1.9 million of that amount payable immediately, and the remaining $400,000 payable no later than March 31, 2026. Ommen’s order also specifies that Dawkins and Elite Wealth are also held liable for the $2.3 million in restitution.
Dawkins and the two companies have also been ordered to pay the state $52,644 for the cost of its investigation of the matter.
Dawkins did not respond to calls Friday from the Iowa Capital Dispatch. SEC records indicate he, Elite Wealth and EWP denied all of the division’s allegations.
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