Federal regulators have reached settlements with a Fountain Green father and son named in a lawsuit that alleged their real estate investment company was operating one of Utah's largest-ever financial frauds.
A motion by the Securities and Exchange Commission filed in federal court in Salt Lake City says that Wendell and Allen Jacobson, the owners of Management Solutions Inc., have signed and notarized offers of settlement.
The SEC sued the two and their company in December, saying they ran Management Solutions and related companies as a Ponzi scheme, taking money from later investors and using it to pay earlier ones to make it appear their projects were always profitable. They took in $200 million from 225 investors, many of them from Utah, the SEC said.
Ken Israel, director of the agency's Salt Lake City office, said Monday the agreements were reached through negotiations. He declined to provide details because the settlements still must be approved by SEC commissioners in Washington, D.C., and then by U.S. District Judge Bruce Jenkins, who is presiding over the lawsuit in Utah.
A court-appointed receiver will continue to gather assets and sell them in order to return money to investors, Israel said.
"We still stand by our allegations," he added.
Typically, SEC settlements mean the defendants do not deny some of the allegations against them and agree to return some monies and pay a fine.
Federal agents, working on a criminal investigation, searched and confiscated items from the Jacobsons' homes and businesses the same day the SEC filed its lawsuit. No criminal charges have been filed, and a spokeswoman for the U.S. Attorney's Office for Utah declined to comment on the status of the investigation.
The Jacobsons have previously denied wrongdoing. An attorney who represents them did not return phone calls and an email seeking comment Monday. Previously, the attorney said there are sufficient assets to repay all investors, and he portrayed Wendell Jacobson as a farmer who got in over his head when the business grew too large.
Utah investors in Management Solutions' projects, which were largely apartment buildings, were concentrated in Sanpete County, with others in Utah and Salt Lake counties, the SEC said.
According to the lawsuit, the Jacobsons commingled funds from all their projects despite telling investors they were funding specific projects, failed to invest 50 percent of their own money in each project as promised and falsely said their apartment complexes had never lost money.
In terms of funds collected from individual investors, the amount is close to that of Ogden businessman Val Southwick, who is serving a lengthy state prison sentence for the operation of his VesCor companies, which took in more than $200 million from individuals, according to a court-appointed forensic accountant appointed to examine VesCor's books.