SPECIAL REPORT: Alleged Colorado Ponzi Schemer Had Criminal Record For Securities Fraud, Previous Bankruptcy Record; Allegations Reminiscent Of ASD/Golden Panda Cases
EDITOR’S NOTE: This story is about securities and fraud allegations leveled in Colorado against Philip R. Lochmiller and others. The case was brought amid assertions Lochmiller was operating a real-estate Ponzi, although the backdrop of the story is similar to the backdrop of the story on the “advertising” Ponzi allegations against Florida-based AdSurfDaily. Some of allegations against Lochmiller are strikingly similar to the allegations against ASD President Andy Bowdoin. Part of the story backdrop also shares a common venue: Vernal, Utah.
Lochmiller had a real-estate development in Vernal, which also was home base to the so-called “Arby’s Indians,” a sham “tribe” of which ASD mainstay Curtis Richmond was a member. The “tribe” used the address of a Vernal doughnut shop as the address of its “Supreme Court,” and became known as the “Arby’s Indians” because it held a meeting at an Arby’s restaurant in Provo, Utah, in 2003.
There are no assertions that the Lochmiller, ASD and “Indian” cases are in any way related or that Lochmiller had any ties to ASD or “tribal” figures. However, ASD members — as well as members of AdViewGlobal (AVG) and Golden Panda Ad Builder (GP) — may find the similarities in the Lochmiller and ASD cases instructive.
Here, now, the story . . .
A Colorado man sentenced to prison in California in the 1980s on state charges of securities fraud was indicted Dec. 15 in Denver on federal charges of securities fraud. Philip R. Lochmiller, 61, of Mack, settled in Colorado after his release from prison and started a new company, prosecutors said.
That Grand Junction-based company, which first was called Valley Mortgage in the 1990s and is known today as Valley Investments, now is at the center of a new firestorm in a complex Ponzi scheme case that includes spectacular allegations of forgery and real-estate fraud in Colorado, Idaho and Utah.
Investor losses could exceed $30 million. Also indicted and arrested for multiple felonies in the Colorado case were Philip R. Lochmiller II, 38, of of Olathe, Kansas, and Shawnee N. Carver, 33, of Grand Junction. If convicted, the defendants face dozens of years in federal prison. Each is free on bond, awaiting court appearances and trial.
Lochmiller II is Lochmiller’s son.
Certain assets, including a Rolex watch and a vintage 1955 GMC 450 American fire truck, already are being auctioned by a court-appointed receiver to raise money for an estimated 400 fraud victims.
Family Fraud Affairs
Records show that Philip R. Lochmiller was sentenced to three years in a California state prison in the 1980s after he was charged with 60 counts of securities fraud and pleaded guilty to about half of them.
Also sentenced to prison in the California case were Lochmiller’s mother and brother. Jo Alice Lochmiller, Lochmiller’s mother, pitched the California scheme involving a Vista-based company known as Lochmiller Mortgage Co. on TV. She was sentenced to three years.
Lochmiller’s brother, Stephen Lochmiller, was sentenced to four years, according to news accounts at the time.
The 1980s scheme operated in the Greater San Diego area and resulted in 1,600 investors being bilked out of a total of $5 million. Jo Alice Lochmiller, who pleaded guilty to 10 counts and was sentenced to three years on the most serious one and given concurrent three-year sentences on the other nine, appealed her sentence.
Jo Alice Lochmiller argued her intent was not to fleece customers but to raise money for Lochmiller Mortgage. She further argued that she should not be punished for each separate sale of unregistered securities and that her sentence was unfair because it subjected her to double punishment.
A California appeals court consisting of a three-judge panel unanimously rejected her claim.
“Because each unlawful sale [of unregistered securities] occurred at different times for different amounts of money to different victims, punishment for each separate sale is not prohibited by Penal Code section 654. A single object, to obtain money, does not bar multiple punishment for separate crimes,” the panel wrote.
“The situation here is analogous to that of the robber who commits several robberies and claims he had one objective, to gain money,” the panel wrote.
Citing case law, the panel wrote, “[W]here there are consecutive robberies in several communities . . .Â over a period of several hours, a defendant may not bootstrap himself into avoidance of additional penalties by claiming that the series of divisible acts, each of which had been committed with a separate identifiable intent and objective, composed an indivisible transaction.”
Under Jo Alice Lochmiller’s logic, the panel wrote, a defendant could fleece millions of people and expect to be punished as though she had fleeced only one person.
“Lochmiller, through her part in the unlawful scheme, took the life savings of a group of elderly citizens,” the panel wrote. “She did so by making separate sales to 11 individuals on 10 occasions over a 3-month period. This was not one act or one indivisible course of conduct. To accept her argument, she could have continued to take the savings of every citizen in San Diego County and be punished no more than if she had done so to one individual.”
Parallels To ASD
The Colorado Ponzi case against Philip Lochmiller, his son and Carver is drawing comparisons to the fraud case against Florida-based AdSurfDaily and Georgia-based Golden Panda Ad Builder, the so-called “Chinese” option for ASD members.
Federal prosecutors said Philip Lochmiller did not disclose his previous felony conviction in a securities case to investors; prosecutors made the same assertion against Bowdoin, adding that Golden Panda President Clarence Busby did not reveal his previous run-in with the SEC in a securities case alleging that Busby was involved in a prime-bank scheme.
At the same time, prosecutors in the Lochmiller case said both Lochmiller and Lochmiller II had bankruptcy filings that were not disclosed to investors. Busby also had a bankruptcy that was not disclosed to Golden Panda members, prosecutors in the ASD case said.
At the same time, the AVG autosurfÂ — purportedly based in Uruguay and now collapsed –Â appears to have close Bowdoin family ties and appears to have risen from the ashes of the alleged ASD Ponzi scheme. Prosecutors alleged Philip Lochmiller’s family scheme in Colorado surfaced after his previous scheme in California collapsed and that the Colorado scheme also collapsed.
Company name changes also are present in both the alleged Lochmiller and ASD schemes, according to court records.
Feds Outline The Lochmiller Colorado Scheme
“Between November of 1999 through April 2008, Valley Investments acquired five properties purportedly to develop affordable housing subdivisions,” prosecutors said.Â “To finance the properties, Lochmiller and Lochmiller II advertised and solicited investments from individuals by promising a short duration high percent interest rate to be paid monthly. The advertisements characterized the investment as a ‘solid security’ secured and recorded by a Deed of Trust in the investorâ€™s name.”
The properties were in Colorado, Idaho and Vernal, Utah. With respect to the Vernal property, prosecutors said, Lochmiller, Lochmiller II and Carver “secured at least 12 separate investments, all with purported first Deeds of Trust, on Lot 34, Country Living Park, a lot with a rental trailer.”
Indeed, prosecutors said, the trio sold 12 “first” positions on the same Utah property. Similar shenanigans were pulled in Idaho and Colorado, and prosecutors alleged that some people bought “first” positions in properties that already had been sold.
Despite the fact Lochmiller was warned in 2001 by the Colorado State Securites Commission to cease and desist from selling unregistered securities, the scheme continued unabated, prosecutors said.
In January 2004, “[Philip] Lockmiller and others traveled by air to Cancun, Mexico,” prosecutors said. In February 2004, Philip Lochmiller “caused two wire transfers for $25,000.00 each, one from his Mesa National Bank account and one from his Community First Bank account, to be sent to a recipient in Mexico as a down payment on the purchase of a furnished condominium located in Puerto Aventuras, near Cancun, Mexico.”
In April and May 2004, Philip Lochmiller made various wire transfers to pay for the condominium in the famous resort area of Cancun, prosecutors said, adding that Lochmiller and his son traveled to Mexico by air at least 18 times.
“The Lochmillers and Carver continued to misrepresent to investors that the business was thriving, and did not disclose to new investors how their money was being used,” prosecutors said. “Also, because there were not sufficient funds, the defendants did not file all of the Trust Deeds on behalf of investors, and most of the filed Trust Deeds were not the first encumbrance of the properties named and were thus worthless.”
Carver was charged with notarizing forged signatures of investors for fraudulent releases of Deeds of Trust.
â€œInvestors should always remember the old saying that if it looks too good to be true, it probably is,â€ said U.S. Attorney David Gaouette of the District of Colorado. â€œUnfortunately, there are many people out there who are unscrupulous and tempting potential investors with false claims. Law enforcement will investigate these criminals and our office will prosecute them, but the public needs to be wary and only invest after thoroughly checking out these claims of large profits.â€
A veteran FBI agent said the agency was pursuing financial fraudsters aggressively.
â€œThese arrests demonstrate the FBIâ€™s continuing commitment to aggressively investigate complex financial crimes, especially when the targeted victims are vulnerable and elderly,â€ said James Davis, special-agent-in charge of the Denver FBI office.
Davis lauded victims for their willingness to cooperate in getting to the bottom of the mess.
â€œWe are especially appreciative of the tremendous cooperation from the victims in this case. The success of this investigation to date is tribute to the combined efforts of our federal law enforcement partners, including the IRS-CID, U.S. Postal Inspection Service, and the U.S. Attorneyâ€™s Office in Grand Junction.â€
An IRS agent who specializes in financial crime said the agency was leaving no stone unturned in the case.
â€œMoney laundering creates an untaxed economy that uses legitimate businesses to conceal criminal activity,â€ said Christopher M. Sigerson, special-agent-in-charge of IRS Criminal Investigation Unit in Denver. â€œIRS-CI has the financial investigators and expertise to follow the money and deprive criminals of their gains.â€
He was backed by a colleague in the U.S. Postal Inspection Service.
â€œPostal Inspectors partnered with fellow law enforcement agencies in this investigation to assure the arrest of individuals utilizing the U.S. Mail for fraudulent means,â€ said U.S. Postal Inspector In Charge Shawn Tiller. â€œThis is an offense the Postal Inspection Service takes very seriously.â€
Philip R. Lochmiller faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, 20 counts of money laundering and 10 counts of mail fraud.
Lochmiller II faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, eight counts of money laundering and 10 counts of mail fraud.
Carver faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, and 10 counts of mail fraud.