December 16, 2011
SEC Charges Father and Son with Running Ponzi Scheme In Utah
The SEC continues its post-Madoff crackdown on Ponzi schemes (which nevertheless continue to proliferate). Yesterday the agency charged Wendell A. Jacobson and his son Allen R. Jacobson with selling purported investments in their real estate business in Utah that turned out to be nothing more than a wide-scale $220 million Ponzi scheme.
According to the SEC, the Jacobsons offered investors the opportunity to invest in limited liability companies (LLCs) in order to share ownership of large apartment communities in eight states. The Jacobsons solicited investors personally and through word of mouth, and appeared to be using their memberships in the Church of Jesus Christ of Latter-Day Saints to make connections and win over the trust of prospective investors.
The SEC alleges that the Jacobsons represent that they buy apartment complexes with low occupancy rates at significantly discounted prices. They then renovate them and improve their management, and aim to resell them within five years. Investors are said to share in the profits derived from rental income at the apartment complexes as well as the eventual sales. But in reality, the LLCs are suffering significant losses and the Jacobsons are merely pooling the money raised from investors into large bank accounts from which they are siphoning money to pay family expenses and the operating expenses of their various companies. They also are paying earlier investors with funds received from new investors in classic Ponzi scheme fashion.
After filing its complaint today in federal court in Salt Lake City, the SEC obtained an emergency court order freezing the assets of the Jacobsons and their companies.
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