State grand jury to probe Carolina Investors, parent

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He said the grand jury had its first meeting Tuesday, but he declined to say if any witnesses had testified or how long the probe will continue. The grand jury proceedings are secret, McMaster said.

"I need to emphasize we don't know what the outcome of it will be," he told The Greenville News. "We're certainly not saying anybody committed a crime at this point."

Officials at HomeGold and Carolina Investors could not be reached for comment.

McMaster said he is taking advantage of a new law that empowers the state grand jury to investigate cases of possible investment fraud. The legislation was spawned by the collapse of Pickens-based Carolina Investors, which has about 8,000 investors, most of whom are in the Upstate.

McMaster said the grand jury investigation began after he and SLED Chief Robert Stewart petitioned a circuit court judge, who authorized the official inquiry last week.

Both Carolina Investors and Columbia-based HomeGold, a mortgage lending company, have filed for bankruptcy protection. According to Carolina Investors' court filings, it owes its customers an estimated $275 million.

Carolina Investors, which has operated for 40 years, failed to open for business March 24, saying it had run out of funds to operate.

Carolina Investors sold uninsured securities — notes and debentures — to the public and turned the proceeds over to a mortgage business operated by HomeGold. Investors were supposed to get a formal written offer detailing the risk involved, but some investors said they didn't receive the plan, according to court documents.

HomeGold filed for bankruptcy protection March 31, saying it had debts in excess of $282 million. It remains in business.

Saying "there are just too many unanswered questions" surrounding recent events with Carolina Investors and HomeGold, McMaster launched "a thorough investigation" March 28.

The FBI and the Department of Justice's fraud unit also joined the probe, he said.