Two men are accused of bilking investors of hundreds of thousands of dollars one while serving as a counselor in an LDS stake presidency in a fraudulent furniture-financing scheme that targeted, among others, a prominent University of Utah football coach.
In charges filed Monday, investigators wrote that Michael Kay Smith and Quintin Fullmer Smith promised a return of 18 percent to gain investments of at least $1.8 million from 18 victims. Their biggest investor was Norm Chow, the Utes' offensive coordinator, who invested $500,000, court documents state.
The Smiths' business, Newport Financial, bought the contracts of furniture customers who could not qualify for traditional financing. The Smiths understated the default rate of the furniture customers and lied about the solvency of the company, which operated only with new investor money, investigators wrote. At least five of the investors did not receive their promised payments; they lost at least $911,000, charges state.
The charges do not indicate whether Chow's investments were returned, and Chow declined to comment. Chow, a three-time national Assistant Coach of the Year, began coaching the Utes this year, continuing a 38-year career in the NCAA and the NFL. He was the offensive coordinator for three national championship teams, and he has coached three Heisman Trophy winners and six NFL first-round draft picks. He coached at Brigham Young University from 1973 to 1999 and played for Utah from 1965 to 1967.
The scheme allegedly lasted from September 2005 through August 2009. Since 2007, Michael Smith had served as first counselor in the Salt Lake University LDS 2nd Stake presidency, which was dissolved in April during organizational changes. Several of the victims met the Smiths through relatives; at least one attended church with Michael Smith, investigators wrote.
"Church leaders have repeatedly condemned get-rich-quick schemes and financial deceptions in all their forms," said Scott Trotter, spokesman for The Church of Jesus Christ of Latter-day Saints. "For years, they have taught members to follow wise and honest financial management principles in their business and personal lives."
Salt Lake County prosecutor Sim Gill would not comment on whether Michael Smith's church leadership role factored into the alleged violations or whether any of the victims belonged to church wards within the former 2nd Stake. Gill also would not comment on why the state's newly toughened affinity fraud law, which deals with fraud against members of identifiable groups such as religions or ethnicities, was not applied in this case.
"This was principally a securities fraud investigation," Gill said. "â¦ We went with the strongest charges in the [case]."
Gill said the case is one of the first brought by a new white-collar crime unit in the county attorney's office. About seven attorneys now are dedicated to prosecuting nonviolent felonies, Gill said. Previously, securities fraud cases were prosecuted chiefly by the state attorney general.
The Smiths each were charged with six counts of securities fraud and one count of pattern of unlawful activity, all second-degree felonies.