David Blaine Welliver, who started his roller coaster career as a financial adviser in the early 1990s with a $400 classified ad promoting his one-man office, retired in ignominy Wednesday in a federal courtroom in St. Paul when he pleaded guilty to a charge of securities fraud.
Welliver, 56, of Buffalo, faces up to five years in prison.
He’s the great-grandson of Val J. Rothschild, who in 1885 cofounded what’s now St. Paul’s oldest mortgage banking and real estate sales company. He established himself in the Twin Cities investment community in the early 1990s when he launched an advisory firm.
Welliver’s troubles began early in his career, however, with his promotion of Technimar Industries Inc. of Houston. The company had plans to build a $35 million plant in Cohasset, near Grand Rapids, to produce a composite building product called Stonite under license with an Italian company. The Minneapolis police and fire pension fund sank millions into the project on Welliver’s advice, not realizing that he also was working as a fundraiser for the company.
Technimar collapsed without ever producing any Stonite. The Minneapolis Police Relief Association and the Minneapolis Firefighters’ Relief Association won a $14.6 million judgment against Welliver in 2000 on allegations that he mismanaged fund assets.
Welliver never fully recovered. In 2003, he pleaded guilty to misdemeanor charges related to his failure to file IRS employee benefit plan forms. And in 2004, he consented to a $19,161 judgment to settle a U.S. Department of Labor complaint alleging he transferred funds from his company’s retirement savings plan to his personal bank account.
Welliver founded an advisory firm, Dblaine Capital, in 2005 at his home address. The Securities and Exchange Commission sued Welliver in 2011 accusing him and his firm of “flagrant and numerous” securities violations. The SEC said that Dblaine Capital had only a handful of clients with about $500,000 in assets under management and generated less than $7,000 a year in fees — its only revenue — yet Welliver paid himself a six-figure salary.
The SEC accused Welliver and Dblaine Capital of sinking client assets into a worthless investment. It also accused him of spending $500,000 on personal expenses that included a $40,000 car, vacations, liquor, meals, home improvements, jewelry, his son’s college tuition and back taxes.
In a settlement with the SEC, Welliver was prohibited from future violations of the numerous federal securities laws he allegedly violated. He also agreed to repay about $922,483 including interest, and to stay away from any securities activities.
The SEC’s charges led to Welliver’s indictment last August on 14 federal fraud and money laundering charges. It says that Welliver had agreed in 2010 to pay $100,000 to another investment adviser to buy the assets of two other mutual funds to increase his own struggling fund’s assets. But at the time, the indictment says, Welliver’s advisory company had less than $200 in liquid assets and he had less than $2,000 in his bank account. He also owed millions of dollars in civil judgments, federal income taxes and other debts.
To complete the acquisition of the mutual funds, the indictment says, Welliver borrowed $4 million. But the indictment says he used just $95,000 for that purpose and instead diverted over $500,000 for his personal use, with the remainder going to loan repayments and his business operating expenses.
Welliver cut a deal in which he agreed to plead guilty Wednesday to a single count of securities fraud in exchange for having the remaining charges dismissed.