This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Utah County real estate guru Mike Watson has settled a lawsuit filed against him by federal regulators, agreeing to return $18.3 million taken in an investment scheme and pay a $130,000 fine.
The Securities and Exchange Commission filed the accord this week in the federal court lawsuit brought in March. It accused Watson of running a Ponzi scheme in which money from new investors was going to pay off initial investors to make it appear the enterprise was profitable while continuing to attract new monies.
Investors poured $27.5 million into Mike Watson Capital on assurances from Watson that he had never lost money on a real estate deal, according to regulators. But in 2008 the scheme began to collapse, and he stopped making interest payments and didn't return investors' principal, they said.
Watson, 41, of Mapleton had conducted real estate seminars around the nation since forming his company in late 2004. The seminars were aimed mostly at real estate professionals, some of whom spent tens of thousands of dollars to attend. They also got "coaching" sessions on how to invest in undervalued real estate, make improvements and then either operate them as businesses or reselling them.
At the seminars, Watson sought investors for real estate projects, assuring them that their investments were protected by equity in the properties, according to the SEC and regulators from Washington state.
Instead, Watson found that as he got more and more investments, his interest obligations rose but the income from projects did not keep pace, regulators said. Watson then used more of new investments to pay off initial investors and less on actual property purchases, the SEC suit said, and the scheme started to unravel in 2008.
One of the more than 120 investors from 21 states put in as much as $450,000.
As part of the settlement, Watson did not admit or deny the allegations in the SEC lawsuit, but he is prohibited from contesting any of the facts. The agreement also says it does not affect any possible future criminal actions against him.
U.S. District Judge Dee Benson signed the final judgment against Mike Watson and his company on Tuesday.
Neither Watson's attorney nor those from the SEC returned a phone call or email seeking comment.
Another man named in the case, Joshua F. Escovedo, 36, of Spanish Fork, who was in charge of raising funds for Mike Watson Capital, already entered into a settlement with the agency. He agreed to a permanent injunction prohibiting him from further violations of federal securities laws but it did not include a fine or requirement to return monies earned from the company.
The $18.3 million Watson is required to repay includes $16.38 million of principal and $1.95 million of interest.