This is an archived article that was published on sltrib.com in 2008, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Posted: 9:53 PM- State Rep. Mike Morley is facing lawsuits in Utah and New York, seeking to recoup $3 million "loaned" to him by a hedge fund that allegedly defrauded millions of dollars from investors.
But the topic is off-limits for Chance Williams, who is challenging Morley for the Republican nomination in House District 66. Williams is making ethics the centerpiece of his campaign, but says he was told not to raise the issue at a Meet The Candidates event Thursday night in Spanish Fork.
"This lawsuit shows everything that everyone has always been saying about him," Williams said, adding that GOP Legislative Chairman Gordon Lowe has told him nothing negative will be allowed at the event. Lowe did not return a message today.
Utah County Republican Chairwoman Marian Monnahan said she wants to "keep things civil," but issues and voting records are fair game. She cringes, however, when asked about a filing by the Securities and Exchange Commission naming Morley.
"I thought in this country you were innocent until proven guilty," she said.
Thomas Melton, the SEC attorney who filed the case, said the agency isn't accusing Morley of wrongdoing, but wants him to repay $3 million of "ill-gotten funds" he received from an investment fund he joined.
Morley had $5 million invested through Thompson Consulting Inc., a Cottonwood Heights-based firm headed by Kyle J. Thompson, in a pair of hedge funds.
Thompson and others had solicited millions of dollars from 90 other investors, including a number of seniors, promising healthy returns with almost no risk.
But Thompson and business partner David Condie took considerable risks, the SEC alleges, sinking millions in a subprime lender whose stock tanked in March 2007. Between July 31 and Aug. 17, 2007, the funds' assets plummeted from $54 million to $200,000.
However, before the funds collapsed, Condie moved $3 million out of the fund to Morley to make up for losses Morley suffered, the SEC said. The agency described Condie as a distant relative of and "purportedly one of Michael Morley's attorneys." A total of $2 million ended up in Willowbend, a 109-acre development in Vernal where Morley has an interest.
The company called the transfers to Morley a "loan," but there were no loan documents and the SEC said Morley has been "unjustly enriched" and should repay the money.
Morley also has been named in a lawsuit in New York by Richard Kelter, a California real estate developer who lost millions in the fund's collapse.
"As far as I'm concerned, that's our money and we're going to chase him until the cows come home," Kelter said. "I'm surprised if he's a state legislator that he's put himself in a position like this."
Morley referred questions to his attorney, Douglas Griffith, who said Morley knew nothing about the first $1 million transferred to a holding company in his name, and later asked to withdraw $2 million to invest in Willowbend.
"Kyle Thompson had some explanation that by doing this, that and the other, he would get the money to Mr. Morley," Griffith said. "That was of no concern to Mr. Morley. He had the money in his account and he was withdrawing less than half of [his $5 million investment] out."
Griffith said the SEC is concerned because of the timing and size of Morley's withdrawal, "but we think that we can establish he was merely withdrawing part of his proceeds and establish that he had not been unjustly enriched."
But Kelter says Morley got special treatment before the fund managers gambled away the rest of the investors' money.
"They saw it going down so they robbed the money in there before they made the last big bet," he said.
The U.S. District Court for Utah set an April 28 date for defendant responses to the complaint - two days after Republican delegates will vote for a nominee in the legislative race.
All of this is something Williams wants to talk to voters about Thursday night in Spanish Fork.
"It's important for the county delegates to be aware of."
smcfarland@sltrib.com" Target="_BLANK">smcfarland@sltrib.com
gehrke@sltrib.com" Target="_BLANK">gehrke@sltrib.com