It was fall 2006, months after Val Southwick's VesCor companies had stopped paying interest to hundreds of unsuspecting investors, when a Colorado dentist decided to hand over $372,000 of his retirement savings.
St. George resident Bill Hammons said he tried to tell his friend not to turn over the money to the Ogden businessman-turned-scam artist.
"I told him specifically, and I even called him again before, on the day he was going to send his money. I told him don't do it. I said, seems like things are not right," Hammons said in deposition for a lawsuit.
Still, according to court documents, Hammons accepted fees for the transaction by Baer, who became the last among 800 or so people who still are owed about $180 million as the result of what is believed to be the largest fraud scheme in state history.
Those "referral fees" were among at least $7.9 million Hammons received from Southwick over the years for helping bring in tens of millions of dollars from investors to VesCor, supposedly for real estate development and commercial loans. Much of the money came from Mormons in Las Vegas, where Hammons was once a commercial real estate agent and an LDS bishop, and from southern Utah, where he eventually retired.
Southwick now resides in the Utah State Prison in Gunnison, serving what probably will amount to a life sentence for operating his companies as a giant Ponzi scheme in which he paid off initial investors with proceeds from newer ones. Hammons goes to court this week for a preliminary hearing on 10 criminal charges related to his involvement with Southwick.
"Hammons was the single-largest salesperson for VesCor," according to a statement from an accountant hired to examine VesCor's books. "Tens of millions of dollars flowed into VesCor because of Hammons' efforts."
Hammons denies criminal wrongdoing. If convicted, the 63-year-old faces up to 5 years in prison for each of five 3rd-degree felony charges, and 1-15 years for each of five 2nd-degree felony charges, plus possible fines.
Hammons' defense strategy relies on the argument that he was not soliciting or selling investments and did not receive "commissions." Rather the latter were "finders fees," and he contends he was fooled by Southwick, just like other investors.
"Bill was a victim," said Clifford Dunn, Hammons' St. George attorney. "He invested millions of dollars in VesCor. He was duped along with everybody else and he did not manage other people's money. He did not solicit people's investments. As people said, 'What have you invested in?' he would tell them, and VesCor would run with it and people would run with it."
Hammons' involvement with Southwick runs through numerous families, including his own. He's estranged from one of his daughters, who with her husband lost hundreds of thousands of dollars in VesCor. His wife's mother and father invested their life savings of $300,000 through Hammons, leading to angry family recriminations. A sister, as well as St. George neighbors and members of his former LDS ward in Las Vegas, also were drawn in. Even Hammons' former partner on an LDS mission got burnt.
Lezlie Gammell said she and her immediate family invested almost a $1 million through Hammons, who for a time had been the bishop of their LDS ward in Las Vegas. Her 91-year-old mother-in-law invested, as did her mother and stepfather, as well as an aunt.
She vigorously disputes Hammons' assertions that he responded only when people asked him where he was earning his money and that he did not actively promote VesCor. Gammell recalls a meeting among her, husband Rick and Hammons in his office to discuss an initial investment of $35,000.
"I can picture this scene like it was yesterday. He sat at this round table . . . he just laid one check in front of another in front of us, one check in front of another, all these checks [that} apparently this company was writing to all these people. Then he went over that all they do with their money is they go on these extravagant vacations. And they were loaded. They had every toy you can imagine."
In addition, Gammell said Hammons offered her husband fees for bringing in other people.
Gammell's mother-in-law, Olive Gammell, 91, invested "into the six figures," said Bary J. Gammell of Midvale, who is Olive's son and Lezlie's brother-in-law. He said his mother invested because Hammons appeared to be a prosperous, knowledgeable businessman who had also been the bishop of her son's LDS ward.
"I'm upset that he misled us and the things he told are apparently not true," said Bary Gammell. "I'm upset he would take money from the elderly and invest it in this. Based in hindsight on his commercial real estate background, I would expect he should have known this whole thing was bogus. He would have had to have known."
Hammons received a 6 percent fee for the money people invested in VesCor because of him, and an additional 5 percent if they reinvested at maturity, according to his testimony in a deposition. Company documents labeled the 120 or so people who have invested through him as The Hammons Group.
"I never wanted it called the Bill Hammons Group," he protested in a deposition. "It wasn't my group."
Documents gathered in lawsuits, however, show that VesCor classified the payments to Hammons as commissions, listed him as a reference and showed he was intimately involved in some decisions for clients.
"Bill called this morning with the following reminders," said one internal e-mail. "Moving half of [the] money from Marilyn Barnes from Apex to Sienna, [and] Kristy Jones -- has 200K to invest[,] 1/2 will go to Apex and the remaining 1/2 to Sienna.
"Bill said these investors have more money that could potentially be invested; however, they are 'nervous Nellys' and need to be taken care of with the [documents] . . . etc."
Investors even alerted Hammons to their worries that there was no guarantee VesCor was legitimately handling their money.
"Insofar as I know, there is no annual auditing by a reputable firm," one wrote to Hammons in September 2005. "The bottom line appears to me to be that we are relying on VesCor's history of honorable dealings."
The charges against Hammons state he told investors Southwick had an impeccable 30-year record with investors but that he failed to mention a string of lawsuits and judgments against him or divulge information about three sanctions by regulators in Utah and Nevada. By the time investors began sharing their worries with Hammons in fall 2005, Southwick and anyone associated with VesCor were prohibited by an agreement with the Utah Division of Securities from taking new money from investors.
In his deposition, Hammons admitted he never did any research on the company, instead taking Southwick's word that the VesCor companies were making as much as a 36 percent return year after year.
An accounting by the Salt Lake City office of PricewaterhouseCoopers shows that Hammons received more than $15.3 million -- including at least $7.9 million in fees or commissions -- from VesCor from the years 2000 to 2008, even as he and his Bilo 1989 Trust invested $3.8 million. In claims to the court, Hammons said he and the family trust had invested $7.26 million since 1993.
"Even using the investment amounts from the claims, Mr. Hammons and the Bilo Trust received more than $7.6 million more than they invested," said John Curtis, a CPA at PricewaterhouseCoopers, in a declaration filed in federal court.
Documents provided to the court-appointed receiver in VesCor's subsequent bankruptcy showed that Hammons has a net worth of $5 million, living off interest and commissions since his retirement in 2000 or 2001.
"Given the magnitude of money he received from VesCor, it is likely that all of his assets have their genesis in money from VesCor investors," Gil Miller of PricewaterhouseCooper said in another court document.
In a deposition, VesCor receiver Robert Wing, who is trying to recover money for investors, was questioning Hammons and kept referring to the money he received as commissions, in keeping with the way they were designated in company records.
A flustered Hammons reacted: "Number one -- this was so simple and so innocuous to start with, I mean, it was just -- it was just a little referral fee thing. And then as more and more people were happy, they referred more and more people. It kind of reached a tipping point where people were throwing money at Val Southwick ... because he paid on time for a long time."
Sometime after the Ogden businessman's companies stopped paying investors, as pressure mounted from those who had invested through him, Hammons wrote Southwick an e-mail.
"You have relied on me to help you deflect lawsuits so you can concentrate on the business problems," Hammons wrote. "I have done so in every instance, but what I am learning from what I see is that a lawsuit is your only motivation to solve problems with an investor."
Hammons concludes by saying, "Sorry to be preachy but only your true friends can tell you the truth and have you accept it and act on it. I am disappointed."
