Monthly Archives: May 2016

Another Case Where Investors Should Have Googled Her Name

Posted on by
Reply

This is a story that appeared in the Salt Lake Tribune yesterday.  As I have said before, many of these fraudsters are serial offenders.  They get out of prison and quickly get back into the business of soliciting investments from innocent investors.  So please do your homework before giving anyone your hard earned money.  In this case, a quick Google search would have led you to this article in the Deseret News, and now the Utah White Collar Crime Registry contains this listing.  Google is your friend.

Utah woman sentenced gets prison for a second round of defrauding investors

By | The Salt Lake Tribune
First Published May 24 2016 10:48PM

A Logan woman will spend two to 30 years in prison after she misled investors and defrauded them of more than $1.7 million.  Lori Ann Anderson, 54, pleaded guilty to two counts of securities fraud and one count of pattern of unlawful activity, all second-degree felonies, on January 23, according to a news release from the Utah attorney general’s office. She was sentenced Tuesday.

“Anderson’s crime is especially egregious, as she has been previously convicted of fraud and she continued to prey on neighbors and friends,” said Eric Barnhart, FBI Salt Lake City special agent in charge, in the release.

Anderson spent time in prison in 1992 after defrauding insurance-policy holders of $140,000, the news release says.

Keith Woodwell, director of the Utah Division of Securities, described the case as a “grim repeat performance, deluding unsuspecting victims into handing over their trust and money in a church environment.”

He said in the news release that affinity fraud is the “most damaging white-collar crime, where fraudsters not only steal the nest eggs of Utah victims, but destroy their trusting nature as well.”

A joint investigation with the FBI, the Utah Division of Securities and the Utah attorney general’s office found that 46 people had lost more than $1.7 million as a result of Anderson’s actions, the release says.

More than 10 victims, some in tears, addressed the court at the sentencing hearing, expressing a feeling of betrayal, according to the release.

Anderson formed a trading club named S.M.T.S., which allowed her to pool the money of friends who invested with her for day trading in Apple stock, the news release says.

She misrepresented the business’ success to her investors, telling them she made returns of about 10 percent per year and never had a losing day trading, when she actually lost $300,000 trading between 2013 and 2015, according to the news release.

Despite these losses, Anderson sent investors false account statements that purported to show gains, the release says.

A search warrant for Anderson’s home was issued in July 2015, and during the search, she admitted to lying to investors, the news release says. By the time of the search warrant, Anderson claimed she only had about $40,000 of the original $1.7 million in investor funds remaining.

Anderson’s case demonstrates how easy it is for “any of us to fall victim to fraudsters with promises of high returns,” Attorney General Sean Reyes said in the release.

Reyes said he urges Utahns to check the White Collar Crime Offender Registry, call the Securities and Exchange Commission (801-524-5796) or contact the Utah Department of Commerce (801-530-6701).

A New Utah Law Permits People to Remove Their Cases From State Agency’s Websites

Posted on by
Reply

Did you enter into a settlement with or get sanctioned by the Utah Division of Securities more than five years ago? Have you paid your fine and otherwise complied with the securities laws in Utah since that time?  If so, you may be eligible to have the record of your disciplinary action and final order (if one was entered) removed from the Division of Securities’ Online Database under a new law that went into effect on May 10, 2016.

HB 118 was sponsored this session by Representative Brian Greene who represents District 57 in Pleasant Grove, Utah.  I have not spoken to Rep. Greene about the bill, but I understand that it was prompted by complaints from licensed individuals who were the subject of a disciplinary action, typically an Order to Show Cause, filed by the Division of Securities long ago.  Once these cases are filed by the Division the complaint and all subsequent filings are publicly available on the Division’s Database.  Most people don’t know where to find that database, so that wouldn’t normally be much of a problem, but the contents of database are also indexed by Google and other search engines.  Therefore, individuals and companies that have been the subject of a filing by the Division are frustrated when potential clients or investors see that old disciplinary action pop up on the first page of a Google search for their name.  If they are no longer in the securities business that may not be a problem, but for licensed stock brokers and investment advisors it can be a big problem.

But now there is a solution!  If you meet the criteria in the new law you can formally ask the Division to “remove the record of administrative disciplinary action from public access on the state-controlled website.”  In order to qualify you must meet these criteria:

  1. Five years must have passed since your final order was issued (or if no final order was issued the clock starts on the date the administrative disciplinary action was commenced);
  2. You must have successfully completed all action required by the agency, such as paying the fine or completing a suspension;
  3. You cannot have violated the same statutory provisions or administrative rules that resulted in the original action; and
  4. You have to pay an application fee ($200).

That’s basically it (you can read the complete statute here).  If you send in a request showing that you meet these criteria the administrative agency has to remove the record from its database.

WARNING: This is not the same thing as expungement.  Even if you successfully remove your records from an agency’s database the disciplinary event will still need to be disclosed on your CRD, U-5, ADV or in a PPM.  It still exists, it will just be harder to find.  Also, administrative sanctions involving FINRA-licensed registered representatives and investment advisors will still be reported on your CRD which is readily available to the public through BrokerCheck.

Also, it’s worth noting that this new statute applies to all state agencies.  So actions by the Departments of Insurance or Real Estate, or any other state agency that maintains an online database, can be eligible for removal as well.

Is this a good thing?  Certainly it is a good thing for people who are compliant with the law but have been haunted by records from their administrative cases popping up when people search for their name online.  Many people really do learn their lesson and change their behavior as a result of agency action.

I just hope it doesn’t result in more victims of fraud by serial offenders who might qualify for the removal simply because they haven’t been caught in the last 5 years.  Serial fraudsters are definitely out there — just ask the victims of Scott Clark who convinced investors to give him $1.84 million while he was on supervised release for a 2012 guilty plea for conspiracy to commit bank fraud, money laundering and obstruction of justice.

It will be interesting to see whether the legislature will tweak this statute next year to give state agencies some discretion on whether to grant the request, but for now it is available to anyone who meets the criteria.

Copyright © 2016 by Mark W. Pugsley.  All rights reserved.

Why Do Utahns Take Such Extreme Risks in Investments?

Posted on by
Reply

The editorial board of the Salt Lake Tribune recently wrote an editorial titled “Gambling-avemaxresdefaultrse Utahns take wild investment bets” (reproduced below) which asks why Utahns, who are always talking about the evils of gambling, so often fall prey to the pitches of con-men who promise outrageously high returns with significant risk.  Isn’t an investment that promises returns of 600% per year (or more) basically gambling too?

I wish I knew the answer to that question, but I think a hint lies in a comment I recently received on one of my posts about a convicted con-man named Alan Oviatt, who is currently serving time in prison for felony theft.  The commenter wrote:

“My family and I have known Alan Oviatt for more than 35 years, and I can assure everyone that he is a great man with a wonderful family, his outstanding life style based on wonderful principles has inspired me to be much better.”

I think, for whatever reason, many here in Utah focus more on the person than the nature of the investment.  They think so-and-so is a great person or such a good member of the church, so the investment he is pitching must be great too.  If only that were true.

I have previously written about how to spot a scam; these steps should be followed regardless of whether or not the person offering the investment is a “great man with a wonderful family.”  Investing in a private deal with no paperwork is extremely risky.  In fact, you might be better off driving down to Las Vegas and putting your retirement on the blackjack table — the risks there are much lower.

What do you think makes Utah people take such wild investment risks with their money?  Add your thoughts in the comments below.

Tribune Editorial: Gambling-averse Utahns take wild investment bets

Another day, another Utah fraud conviction. Logan businessman John Scott Clark pleaded guilty this week in federal court to defrauding investors of $1.84 million. That’s a lot of money, but not anywhere close to the major fraud cases that have floated through this state.

What makes Clark’s case a little different is that he started the fraud scheme while he was on supervised release for a 2012 guilty plea in a New York federal court to conspiracy to commit bank fraud, money laundering and obstruction of justice.

And that came after Clark had been sued in Salt Lake City by the federal Securities and Exchange Commission for allegedly operating a $47 million Ponzi scheme through his payday loan operations. In that case he was ordered not to violate federal securities laws and he was required to pay more than $5.6 million.

In other words, this guy is not someone to trust with your money, and yet there were 46 people willing to give him the $1.84 million.

At least some of the victims came through church associations, and that has an all too familiar ring. Utah is thought to have the highest rate of affinity fraud, in which scammers use religious and other associations to gain trust from victims.

Aware of the reputation, Utah Attorney General Sean Reyes has championed a state white-collar crime registry, and the registry’s website recently launched with 106 people listed (with photos). That may be helpful, but this case also shows the limitations of such lists. Clark, for all his history, is not among the listed, at least not yet.

The greed of these perpetrators is obvious, but what is less acknowledged is the greed of the victims. Consider what Clark was selling. He promised returns of 15 percent to 15,000 percent on foreign oil contracts by telling investors he and his business partner “were members of a top secret U.S. military and government program and held special security clearances which enabled them to invest in the purchase and sale of Iraqi dinar and oil contracts.”

Who in his right mind would buy that line?

That brings us to another state effort to counter our fraud-capital rep. Utah is one of only a few states to require high school students to take a course in financial literacy. The standards for that class say students are required to “understand that investments put principal at risk.” On the sliding scale of risks vs. rewards, there is a point at which investing is more like gambling, and 15,000 percent returns are definitely past that point.

And that is where gambling-averse Utahns may be easy prey. Along with counseling our children on benefits of wise money management, maybe we should be teaching them how to play poker. Then they won’t be surprised when someone in real life tries to bluff.

http://www.sltrib.com/opinion/3730586-155/editorial-gambling-averse-utahns-take-wild-investment

Copyright © 2016 by Mark W. Pugsley.  All rights reserved.

Chad Deucher of Marquis Properties Has Been Indicted.

Posted on by
1

DOJI previously wrote about the SEC’s lawsuit against Chad Deucher of Orem, Utah.  As is often the case, the criminal authorities have now brought separate criminal charges against him in connection with the alleged $28 million Ponzi scheme that defrauded more than 250 investors throughout the United States.  Yesterday the U.S. Attorney’s Office for the District of Utah announced that it has obtained a criminal indictment against him charging 18 counts of wire fraud and one count of fraud in connection with the purchase and sale of securities.

Prosecutors alleged that Deucher used direct solicitations, radio advertisements, a website, and real estate and retirement seminars, among other things, to find investors for three types of investments offered through his company.  The investment options included turnkey cash flow real estate investments, promissory notes secured by real properties, and joint ventures.

The indictment alleges that Deucher made oral and written misrepresentations about the investments in communications with potential investors. He represented that Marquis located, purchased, renovated and sold single family and small, multi-family homes in lucrative areas of the country.  Deucher told investors that Marquis retained renovation crews, property managers and realtors on the ground to assist with all stages of the projects, eliminating the need for direct involvement.  According to the indictment, Deucher represented that investors could earn a significant return on their investments.  Some investors were promised approximately 8 percent per year for three years, while others were promised 16 percent to 22 percent over an investment period of about one year when rental income was considered. Later in the scheme, according to the indictment, some investors were promised 12 percent to 18 percent for a period of about two weeks to around two months, or 10 percent for investments of about two to six weeks.  In truth, the indictment alleges, Deucher tailored the terms of return based on his need for money and what he believed would induce the investor to invest in his company.

According to the indictment, Deucher failed to disclose to investors that the property Marquis offered as collateral were not owned by the company, were substantially encumbered, or were in uninhabitable or blighted condition.  He also did not disclose that Marquis was insolvent, the indictment alleges, and was unable to make interest and principal payments to investors and that investor returns were being paid from the funds of new investors.  Deucher also allegedly failed to disclose that the securities he offered were not registered and that he was not registered or associated with a securities broker or dealer, all required by law, the indictment alleges. The indictment also alleges that Deucher transferred several million of dollars of investor money from business accounts he controlled for his own business and personal interests unrelated to the acquisition or rehabilitation of real property.

The potential maximum penalty for each of the 19 counts in the indictment is 20 years in federal prison.  The potential fine for the securities fraud count is $5 million.  Each wire fraud count has a potential $250,000 fine.  The case is being prosecuted by the U.S. Attorney’s Office in Salt Lake City and investigated by FBI special agents.  The Orem Police Department and investigators with the Utah County Attorney’s Office also participated in the investigation.

If you are a victim of the Marquis Properties Ponzi scheme please contact us, and feel free to tell your story in the comments below.

Copyright © 2016 by Mark W. Pugsley.  All rights reserved.