A Fountain Green man is seeking court protection after the FBI and Internal Revenue Service launched a criminal investigation into what regulators say is a fraudulent real estate investment business that rivals the biggest financial fraud in Utah history.
Allen R. Jacobson said in court documents he needs protection from a court-appointed receiver who has taken control of his and his father's assets, along with their company, Management Solutions.
Wendell A. Jacobson and his son were named last month in a lawsuit by the Securities and Exchange Commission (SEC) that accuses them of operating a Ponzi scheme that took in more than $200 million from about 225 investors. A receiver, attorney John A. Beckstead of Salt Lake City, was appointed by U.S. District Judge Bruce Jenkins at the request of the SEC to take over the company and control assets and records, including personal property of the Jacobsons.
The same day the lawsuit was filed, a strike force of more than a dozen FBI and IRS agents backed by a search warrant raided Management Solutions and Wendell Jacobson's home, according to documents. The receiver then conducted a warrantless search of Allen Jacobson's home, his attorneys told the court.
"The receiver directed his agents to search Allen Jacobson's house, opening every dresser and nightstand drawer, peering in every closet, reading a personal journal and seizing documents that have no possible connection to the SEC's fraud allegations," said Jacobson's attorneys.
In requiring Jacobson to answer questions, "the receiver has taken a broad view of his authority under this provision and has asserted that this provision trumps Mr. Jacobson's Fifth Amendment right not to answer questions about assets he owns," Jacobson's attorneys said.
Receiver Beckstead also said he might share some of the information with the FBI and IRS, which would violate Jacobson's constitutional rights, his attorneys told the court. They are asking the court to modify the receiver's appointment so Beckstead does not have power over Allen Jacobson's personal affairs. They also want an order prohibiting the receiver from sharing any information from the search of Allen Jacobson's home.
Loren Washburn of Clyde Snow & Sessions, one of Jacobson's attorneys, declined further comment. Beckstead did not respond to an email and voice mail message seeking a response.
Investors were told that the Jacobsons bought multifamily apartment complexes with low occupancy rates, then rehabilitated them and improved management before selling them at a substantial profit in three to five years, according to the SEC lawsuit. Instead, a portion of their funds were used to pay returns to make it appear the companies were operating at a profit in what's known as a Ponzi scheme, the lawsuit alleges.