Southwick used LDS Background to Bilk Investors
sltrib.com | 2/6/08 | Tom Harvey
Val E. Southwick, a smooth-talking businessman who sometimes used his LDS faith to persuade potential investors to part with their money, was charged Wednesday with nine felonies in what federal and state authorities describe as a massive Ponzi scheme that bilked about 800 investors out of as much as $180 million.
Criminal charges filed in state court and a federal civil complaint say the Ogden businessman used a spider web of 150 or so interconnected companies to raise $445 million over 17 years of operation from banks and professional sophisticated investors. The latter included at least several elderly investors who, on promises of high returns and that their money was safe, invested their entire life savings with Southwick at a time when his companies were broke.
"Mr. Southwick had such enormous personal appeal that they all believed him," said Wayne Klein, the director of the state Division of Securities. The massive fraud may be the largest in Utah history. Among creditors are several hundred Utahns and investors from 29 other states and three foreign countries.
The criminal charges and a civil complaint filed in federal court by the U.S. Securities and Exchange Commission were filed after negotiations, said Max Wheeler, Southwick's attorney. Southwick has agreed to plead guilty in the state case and reach an agreement with the SEC over the civil complaint, though details are still pending, Wheeler said.
"Here's one of the biggest criminals that has ever been in the history of Utah and they're treating him like he's a VIP or something," said Jonathan Horne, who invested $2.1 million after meeting personally with Southwick in January 2005.
Southwick lured investors with promises of high returns, competent management and promises that their money was safe, according to an investigative summary released by the Division of Securities. He also relied on his membership in the LDS Church, according to investigators and several investors. "Southwick emphasized his membership and ecclesiastical roles in The Church of Jesus Christ of Latter-day Saints during solicitation meetings with investors," the investigative summary says. "Southwick showed his LDS Temple Recommend, or mentioned its existence, to several investors, and his office contains LDS ' memorabilia,' all of which appeared designed to breed a sense of trust between Southwick and investors."
Instead of Southwick secure investments paying as much as 24 percent a year, he "operated a massive Ponzi scheme, paying existing noteholders with funds from new investors," the SEC complaint says. The millions of dollars, much of which is not accounted for, often was used to repay earlier investors and cover living expenses for Southwick and his family. (Excerpt).