For a second day, the developer Brian Watson emotionally detailed Wednesday how allegations that he defrauded investors have wrecked his once-successful real estate firm, accusing the U.S. Securities and Exchange Commission of “trying to hang me over a few deals.”
“I never realized a trial could be so emotional,” the 54-year-old said on the witness stand. “For six years I have been silent and this is my first trial. So, if I get emotional it is not phony.
“I always told people that on a scale of one to 10, with 10 going to prison because you did something wrong, I don’t want to come in higher than a one or two,” he said of his firm’s ethics.
Watson faces three civil counts of securities fraud in this week’s jury trial, which is scheduled to last through Friday. The SEC alleges that Watson and Northstar Capital Partners, which he founded in 2000 and 100% owns, defrauded investors in 11 real estate projects by pledging to invest 5% of equity capital in the properties, then not doing so. Watson denies that.
“They make it sound like it was all a sham, that I’m some kind of shyster. It’s offensive,” said Watson, his voice cracking and rising. “It breaks my heart to have to be here today.”
Watson’s testimony, which was part of his defense team’s presentation of its case, followed testimony from Kristi Fisher, who has worked for Northstar for two decades and is now its only employee. The company had 40 employees and $400,000 in monthly payroll in 2020.
“He took everything seriously when it came to money,” Fisher said of her boss. “He was there to protect investor money and make them money. I mean, that was the whole goal.
“His goal was to be one of the best companies and he focused on that. He wanted to be successful, for his employees and his investors. That is just who he was. Who he still is.”
Watson played a directing role in Wednesday’s testimony, advising his attorneys to ask certain questions of Fisher and Jaime Jones, a former Northstar receptionist who rose to be its manager of transactions. She testified that she thought Watson always invested in projects.
The testimony of Fisher and Jones contrasts with testimony Tuesday by former Northstar executives Brent Gray, who was chief financial officer, and Scott Gibler, chief investment officer. They told jurors that Watson was reminded to personally invest in projects from 2017 to 2019, because he had told investors he would, but Watson did not always follow through.
“How did those conversations feel?” SEC attorney Jodanna Haskins asked of the talks.
“Not good,” said the former CFO, who resigned in 2020. “I was looking out for investors and it seemed like I was constantly reminding Mr. Watson about his capital contributions.”
Fisher’s testimony was interrupted by a 30-minute legal debate outside the presence of the jury over whether Watson’s attorneys can discuss the sophistication of Northstar investors.
“Their ability to understand what they signed is relevant,” Watson lawyer Paul Vorndran said.
But Terry Miller, an SEC attorney, argued that the wealth, education and experience of investors was irrelevant and an attempt by Watson to redirect fault from himself to his investors.
“The purchasers’ sophistication is immaterial to the claims” and “not relevant to this trial,” U.S. District Judge Gordon Gallagher ruled, causing Watson to shake his head in response.
When it was time to take the witness stand himself, Watson told an abbreviated version of his life story, from his grandparents’ entrepreneurial endeavors in upstate New York to his single mother’s move to Olathe to his stepfather’s sudden death in front of him. He sniffled as he told of paying for his own tuition at the University of Colorado when his mom could not.
In college, he drove a limo for Stephen Tebo, the Boulder developer, and learned commercial real estate from Tebo, who became the first investor in Northstar, according to Watson.
“We had some of the wealthiest individuals and institutions investing with us,” he said.
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Watson maintains that he fully cooperated with the SEC’s investigation in 2019 and 2020 and, in a golf metaphor, complained that the law can seem like “a twisting fairway” at times.
“I was shocked,” he said of the SEC’s lawsuit. “I told them, ‘No, this is unconscionable.’”
In the day’s most emotional moment, Watson sniffled and wiped away tears as he recalled Don Marcotte, a former director of development at Northstar. Marcotte died in 2022 at age 66 after suffering a cardiac arrest, though Watson believes there was a secondary cause.
“Unfortunately, in another result of the SEC’s actions, Don died a few years ago,” he said.
“Objection, your honor!” Haskins responded. Gallagher told Watson’s lawyers to move on.
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