More than a week after J.V. Huffman Jr. was arrested on securities fraud charges, many of the investors he is accused of scamming $25 million from are questioning how the state could have allowed him to create a legitimate corporation that was operating illegally.
"Corporations are set up, and we're limited, by state statute, as to what information we can ask about them," said Liz Proctor, with the public information office of the Secretary of State's office. "We can ask the name, the number of shares they're authorized to issue and their address. They also have to give an annual report each year."
If any of Huffman's clients had contacted the Secretary of State's office for information on Huffman's company, Biltmore Financial Group Inc., the Secretary of State's office would only be able to tell the clients how long the company had been incorporated and if it is in good standing, according to information on the Secretary of State's Web site.
And while people may have lost money investing with Huffman during the Secretary of State's investigation of him this year, Proctor said the department can't alert people involved in any investigation when they first start it. They have to determine there's something worth investigating.
"Investigators have to go through the investigation to have any probable cause," she said. "I can't speak about this case specifically, but they can't alert people when we start an investigation."
She said it was unfortunate that it took several months, but said financial investigations are complex.
"Following the money trail takes time," Proctor said. "That's why it's so important for people to make sure that someone is registered with the state before they get involved with them."
In Huffman's instance, although Biltmore Financial Group was registered with the state, Huffman was not registered with the securities division, Proctor said.
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