Fraud case may widen

POLSON — The majority of possible victims affected by the Polson business Cornerstone Financial Corporation’s alleged scheme are from western Montana.

The rest of the individuals identified in a Montana State Auditor’s investigation alleging Cornerstone schemed millions of dollars from investors are dispersed throughout the state, the auditor’s communication director Jessica Rhoades said in an e-mail.

Rhoades said 32 investors are listed on the agency’s petition, but that the number may rise as the investigation continues.

The Montana State Auditor’s Office reported in late February that Cornerstone Financial, owned by partners Keith Kovick and Robert Congdon, is under investigation for a securities fraud scheme. The Auditor’s office determined Cornerstone loaned $3 million of the investor’s funds to D and D Property Management, based in Belgrade, which allegedly put up collateral in the form of four 160-acre tracts of land in Gallatin County to securitize the investor’s promissory notes.

A temporary restraining order was handed to Kovick and Congdon, restricting them from the corporation from selling assests and property by a Helena judge.

The Auditor’s Office alleges the respondents committed securities fraud by failing to disclose to investors the risks associated with the promissory notes, failing to disclose the financial condition of the companies, misrepresenting the value of the real property securitizing the promissory notes, and misrepresenting that interest payments would be held by an escrow company when they were, instead, co-mingled with Cornerstone funds.

The Auditor’s office received numerous complaints and took action because investors’ monthly interest payments have ceased, the real property securitizing the investments is now in foreclosure and none of the investors have received a return of their principal, an initial press release said.

Congdon was reportedly been hospitalized last week and was most likely not able to travel to the hearing, however, the reason for the postponed hearing was not released. Kovick said in a brief phone interview two weeks ago that he “quit” the business “awhile ago.”

The office on U.S. Highway 93 in Polson has been closed for the past two weeks. The business was started by the partners in 2000.

A scheduled hearing on the issue in Helena was postponed last Thursday. No new date for the Helena hearing was set at press time.