Be Wary of Real Estate Deals That Turn Out to Be Ponzi Schemes
The Utah Attorney General's Office and the U.S. Department of Commerce say the conviction of William Hammons should serve as a warning about unscrupulous advisers promoting phony investments. Hammons, 66, was found guilty of securities fraud, unlicensed sales of securities and racketeering."At its core, this was a case about greed and the depths to which the defendant was willing to sink, all in the name of money," Assistant Attorney General Che Arguello said in a statement.
Hammons was a sales agent for VesCor, a company that said it engaged in financing, acquisition, ownership, development and management of commercial and residential real estate in the Western United States.
But VesCor was in debt from the early 1990s when it set up shop, said Arguello. The company was run by Val E. Southwick, currently serving a nine- to 135-year prison sentence after being convicted in 2008 of securities fraud, he added.
"Don't let yourself or your loved ones get sucked into someone else's investment fraud," Keith M. Woodwell, director of the Utah Division of Securities, said in a statement.
Arguello said the evidence presented at the trial showed VesCor had all the characteristics of a classic Ponzi scheme, including:
- Business activity depended solely on outside investor money.
- Investors' money wasn't used as promised.
- New investor money was used to pay promised returns to previous investors.
- VesCor promised unusually high rates of return compared to the promoted risk.
- Certain investors received preferential treatment.
Before investing, consumers are urged to contact the securities office in their state and the U.S. Securities and Exchange Commission to see if the firm they're considering working with is registered. See the SEC's "High Yields" and Hot Air for information on how to protect yourself as an investor.