(Bloomberg News) The U.S. Securities and Exchange Commission accused a father and son in Utah of using their membership in the Church of Jesus Christ of Latter-Day Saints to lure investors to a $220 million fraud.
The SEC won an emergency order to halt the alleged scheme by Wendell Jacobson and his son Allen Jacobson, after filing a complaint at U.S. District Court in Salt Lake City yesterday, the agency said in a statement. The men, who have raised money from about 225 investors, have operated the scheme since 2008, the SEC said.
The Jacobsons offered investors the opportunity to invest in apartment communities purchased at discount rates with the aim of renovating and selling them within five years, the SEC said. In reality, the investments are suffering significant losses and the Jacobsons have merely pooled investors' money into large bank accounts from which they siphoned funds to pay family and outside business expenses, according to the SEC.
"Wendell and Allen Jacobson misled investors to believe they were financially supporting what was portrayed as a widespread and reputable operation to revamp apartment communities and turn a significant profit," Ken Israel, head of the SEC's regional office in Salt Lake City, said in a statement. "Their promises were anything but truthful."
The Jacobsons falsely assured investors that the principal amount of their investment would be safe, and that they would receive annual returns ranging from 5 percent to 8 percent, the SEC said. They used new investor money to pay false returns to earlier investors to hide losses, according to the complaint.
Mark Pugsley, the Jacobsons' attorney, said in a telephone interview that the two men have cooperated fully in the investigation and intend to "vigorously defend the case."