The lawyer for a Fountain Green man accused of running a huge Ponzi scheme said Friday his client operated a legitimate business that was destroyed by zealous federal regulators.
Stephen E. Quesenberry, the attorney for Wendell A. Jacobson, denied allegations by the Securities and Exchange Commission that his Sanpete County client was running a gigantic fraud through his business, Management Solutions Inc., and said the business was not insolvent as the agency claimed.
 |
Join the Discussion |
 |
Post a Comment |
"There was no fraud or deceit," Quesenberry told U.S. District Judge Bruce Jenkins in a hearing that was set to discuss key issues in the case. "There were no untrue statements of material fact. There was no Ponzi scheme."
The SEC sued Jacobson and son Allen in December alleging they were operating a Ponzi scheme in which money from new investors went to pay off earlier investors to make it appear the company was profitable. In fact, the agency says, Management Solutions was insolvent and dependent on using investors’ monies for expenses, including personal ones for the Jacobson family.
The agency alleges that more than $200 million came from about 220 investors. Jenkins ordered the assets of the companies and Jacobsons frozen and appointed a receiver to control the companies. Allen Jacobson has reached an agreement with the SEC to release his personal property and funds from the control of the receiver.
SEC attorney Daniel Wadley outlined for Jenkins the evidence the agency has in the case. It included the company’s books, which showed money was repeatedly moved around between limited liability companies that were supposed to hold investor monies for particular projects. Instead, money was mingled and used to pay interest to investors in other projects or other expenses, Wadley said.
He said the Jacobsons lied to investors about how their money would be used or failed to tell them important information that would have allowed them to make a more-informed decision about their investments.
"Untrue statements were made to investors," he said.
Wadley pointed to a deal in Tennessee, where he said Wendell Jacobson set up a straw buyer to purchase an apartment building for $2.7 million, who in turn "sold" it to a Jacobson-controlled entity. Jacobson then sold the property to investors for $7.2 million without disclosing he had just purchased it for considerably less, the SEC attorney said.
"The investors were purchasing [the property] from Mr. Jacobson for more than three times what Mr. Jacobson had just purchased the property for," Wadley said, adding investors should have been told about Jacobson’s role.
The hearing was expected to resume next week.
Twitter: @TomHarveysltrib
Copyright 2012 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
