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Investments - Private

‘Flights of Fancy’ by Retired Police Officers

August 1, 2020

by Howard Haykin



Retired San Antonio police were among the victims of a multimillion-dollar Ponzi-scheme in which investors were promised that their funds would be used to purchase engines and other aircraft parts for leasing to major airlines. Unfortunately that never happened.



Of the $14 million that was raised by Victor Lee Farias and his company, Integrity Aviation & Leasing (“IAL”), no engines were purchased and only a small amount was spent on aircraft parts. Instead, nearly all the money was reportedly diverted for unauthorized purposes and impermissible sales commissions: (i) $6.5Mn for Ponzi-like payments to investors; (ii) $2.7Mn for a friend’s business; (iii) $2.4Mn for personal expenses; and, (iv) $1Mn for commissions to IAL sales staff for their successful recruiting of investors.



THE SALES PITCH.    From 1998 to 2013, Victor Lee Farias, 46, served as a registered broker and investment adviser – he was last associated with Capital Guardian, a broker-dealer that was expelled in 2018. Following his departure from financial services and continuing through January 2019, Farias operated the investment scheme, which sought to raise $50 million. For much of the time, Farias and IAL used a private placement memorandum, an offering brochure and a web site to falsely tout Farias’ supposed investment experience and IAL’s purported competitive advantages, such as an algorithm that supposedly identified profitable leasing opportunities.


  • The PPM or private placement memorandum was a legalistic document drafted by a lawyer to describe in depth IAL’s business and terms of the promissory notes offered to investors.
  • The Offering Brochure included glowing descriptions of the aviation asset leasing industry, accompanied by photos of airplane engines lined up in a warehouse and charts showing the percentage of industry use for each engine.
  • The Website gave false impressions of IAL’s size, success, sophistication, and experience.
  • Financial Representations were that, ... upon completion of the offering, IAL “expected to generate gross revenue in excess of $15 million per year with asset value in excess of $35 million.”


As new investor funds dried up, Farias continued to mislead investors by lying that he was taking IAL public in an initial public offering (IPO). To support that lie, he used a carefully cropped version of an SEC investigative subpoena as proof of his communication with the SEC, and blamed the SEC for the alleged delays in the IPO process.  



‘FLIGHTS OF FANCY’ BY INVESTORS.    Flight of fancy is an idea, narrative or suggestion that is extremely imaginative and which appears to be entirely unrealistic, untrue, or impractical. It is also thinking which is very speculative.


All of which seems to describe the retired San Antonio police officers and other investors in their efforts to secure extra income. They willingly pursued flights of fancy by withdrawing funds from safe and secure (if unremarkable) retirement accounts in order to purchase Promissory Notes offering annual interest of 12%. [Marginally incremental earning opportunities, at best.] And they did so without having adequate knowledge of the aviation industry or the players in the deal - namely, Farias and IAL. A big price to pay for a significant lesson in investing. 



[For further details, click on … SEC Press Release and SEC Complaint.]