Ponzi scheme conviction a warning to others | Crime
This is a news release from the Utah Attorney General's Office and Department of Commerce.
The Utah Attorney General's Office and Department of Commerce say the conviction of William Hammons should serve as a warning to the public about unscrupulous advisers promoting phony investments. On February 24, Hammons, 66, was found guilty on three second-degree felony counts of securities fraud, three third-degree felony counts of unlicensed sales of securities and one second-degree felony count of racketeering.
"At its core, this was a case about greed and the depths to which the defendant was willing to sink, all in the name of money," says Assistant Attorney General Ché Arguello, who prosecuted the case.
The charges stem from the defendant's role as a sales agent for VesCor. The company purported to engage in financing, acquisition, ownership, development and management of commercial and residential real estate in the Western U.S. But VesCor was in debt from its inception in the early 1990's. The company was run by Val E. Southwick who is currently serving a nine-to-135 year prison sentence after being convicted in 2008 on nine counts of securities fraud.
"Don't let yourself or your loved ones get sucked into someone else's investment fraud," says Keith M. Woodwell, Director of the Utah Division of Securities, "Our division can let investors know if a someone is licensed to sell securities and if the securities are properly registered."
Evidence at the trial showed VesCor had all the characteristics of a classic Ponzi Scheme, including:
Business activity was completely dependent on outside investor money. Investors' money was not used according to stated and promised purpose. New investor money was used to pay promised returns to previous investors. VesCor promised unusually high rates of return compared to the promoted risk. Certain investors received preferential treatment.
Hammons was the most successful VesCor sales agent and brought in nearly $50 million from at least 215 investors between 1996 and 2006. He was paid more than $10 million in commissions and enjoyed a lavish lifestyle with expensive properties and luxury vehicles. By July 2007, investors were owed more than $52 million in promised returns. A civil lawsuit has been filed against Hammons demanding the return of his commission payments.
"My hope is the verdict will bring justice to those who were wronged but also deter others who consider lying to investors in order to get their money," says Attorney General Mark Shurtleff.
Four investors testified at the trial that they were promised a safe investment in commercial real estate at an annual return of 14% - 16%. Hammons said the equity would always double the amount of liabilities, their investments would not be "pooled" with other investor money and VesCor and Southwick had a 30 year record of honesty and timely payments to investors. None of that was true and the four investors lost more than $1.1 million.
Investors also did not know Southwick had been sanctioned three times by the Utah Division of Securities or that Hammon received a 6% commission on new investor money, plus other incentives including a Mini Cooper automobile, Rolex watch and personal guarantees on his investments.
The jury acquitted Hammons of one count of securities fraud and one count of selling a security without a license. Both counts involve investor Waldo Perkins, a retired physician and St. George neighbor of the defendant, who lost nearly $1 million dollars in VesCor.
The defendant is scheduled to be sentenced on Friday, April 15, 2011 at 9:00 a.m. before Fifth District Judge A. Lynn Payne in St. George, Utah. Hammons could face up to 1-15 years in prison for each count of securities fraud and racketeering and up to five years in prison for the unlicensed sale of securities.
The case was investigated by Sheila Thomas with the Utah Division of Securities. Paralegal Scheree Wilcox from the Attorney General's Office assisted in the prosecution.
Before investing, the public is urged to visit www.securities.utah.gov.