Jury Convicts Man of Real Estate Ponzi Scheme

Allison Tussey —  July 26, 2011 — Leave a comment

Philip R. Lochmiller, Sr., after deliberating three hours, a jury returned a guilty verdict against the defendant for conspiracy, money laundering conspiracy, money laundering, and mail fraud. The guilty verdict was the result of a 10-day trial before U.S. District Court Judge Philip A. Brimmer.

No sentencing date has yet been set, although that hearing will take place in Grand Junction. Lochmiller is scheduled to be back in U.S. District Court, Denver, Colorado, on October 27, 2011, for a hearing on victim losses and restitution. He remains free on bond pending sentencing. Two other co-defendants, Philip Lochmiller, II and Shawnee Carver, had earlier pled guilty and await sentencing, which is scheduled for October 14, 2011.

Philip Lochmiller, Sr., Philip Lochmiller, Jr., and Shawnee Carver were indicted by a federal grand jury in Denver on December 15, 2009. A superseding indictment was returned on October 18, 2010. Lochmiller, Jr. pled guilty on November 16, 2010. Carver pled guilty on December 9, 2010. Both testified during the Lochmiller, Sr. trial.

According to evidence presented at trial, the superseding indictment, and other documents from the prosecution, Valley Mortgage, Inc. was incorporated in Colorado in September 1994 by Philip Lochmiller, Sr. The company originally engaged in the business or originating or brokering home mortgages. Lochmiller, Jr. owed 100 percent of Valley Mortgage‘s stock and was principal, officer and director. Lochmiller, Sr.‘s stepson, Philip Lochmiller, Jr., joined Valley Mortgage in 1999 as a mortgage officer. Lochmiller, Sr. later added the name Valley Investments as a does business as for Valley Mortgage. Lochmiller, Jr. eventually worked his way to become responsible for day-to-day operations of the company. Beginning in 2000, Valley Mortgage entered into the “affordable housing” real estate market by buying vacant land or existing mobile home parks, entitling the land so residential subdivisions could be built, and then selling lots with either a mobile home or a manufactured home on it.

Valley Investments purchased land with financing provided by the sellers in a “owner-carry” arrangement. Valley Investments then began to advertise in local newspapers and solicit investment funds from the public. The company promised returns from 10 percent to 16 percent, and in some instances, as high as 18 percent. In exchange, investors were promised a promissory note and a recorded first “Deed of Trust” on individual lots. The advertisements and verbal representations by both of the Lochmillers characterized the investment as a “solid security” secured and recorded by a Deed of Trust in the investor’s name. Both of the Lochmillers represented to investors that Valley Investments used investor funds exclusively to acquire property and finance the development of the subdivisions Valley Investments owned. Both the Lochmillers further represented that Valley Investments generated large profits by selling manufactured homes together with lots within the subdivisions. Investors were not told that Lochmiller Sr. had a prior felony conviction and a bankruptcy.

Between 2000 and 2005, Valley Investments acquired five properties purportedly to develop “affordable housing” subdivisions. Between 2000 and 2009, Valley Investments received over $30,000,000 from approximately 400 investor contracts. The Government’s expert forensic accountants shows that this influx of investor funds kept Valley Investments operating, particularly in its later years, and without investor funding, Valley Investments would have failed. The Government accounting analysis also determined that investor funds were used by both of the Lochmillers for purposes other than what investors were told. Further, incoming investor funds were used to make interest and principal payments to existing investors. Once investor money started coming into Valley Investments, the funds went to personal expenses, family expenses and other non-business expenditures. Both Lochmillers then engaged in monetary transactions involving more than $10,000 of the proceeds of the fraud.

Valley Investments did not own sufficient property or assets to secure the investments as represented. Unbeknownst to investors, the amount of investment funds, which were supposed to be secured by real property, far exceeded the value of the encumbered property and the business assets. Valley Investments failed to file all of the Trust Deeds and behalf of investors as promised, and many of the filed Trust Deeds were not the first encumbrances on the properties named and were thus worthless. Despite these facts, the Lochmillers and Valley Investment employee Shawnee Carver continued to misrepresent to investors that the business was thriving, and never disclosed to new investors how their money was being used.

Lockmiller, Sr. faces not more than five years’ imprisonment, and up to a $250,000 fine for one count of conspiracy. He faces not more than 20 years in federal prison, and up to a $500,000 fine, or twice the amount of the criminally derived property, for one count of money laundering conspiracy. He also faces not more than 10 years in prison, and up to a $250,000 fine, for each of 19 counts for money laundering, and not more than 20 years in prison, and up to a $250,000 fine for each of 10 counts of mail fraud.

U.S. Attorney John Walsh, FBI Special Agent in Charge James Yacone, and IRS-Criminal Investigation Special Agent in Charge Christopher Sigerson announced.

This case was investigated by the Federal Bureau of Investigation and the IRS Criminal Investigation and prosecuted by Assistant U.S. Attorneys Michelle Heldmyer, Pegeen Rhyne, and Tim Neff.

“Thanks to the entire trial team, including prosecutors and staff from the U.S. Attorney’s Office, the FBI and the IRS-Criminal Investigations, a jury found Philip Lochmiller, Sr. guilty of conspiracy, money laundering conspiracy, money laundering, and mail fraud. Today’s guilty verdict demonstrates that those who steal other’s hard earned money will be prosecuted to the fullest extent of the law,” said U.S. Attorney John Walsh. “Today’s guilty verdict is a victory for the over 400 victims in this case, many of whom are from the Grand Junction area.”

“Today’s sentencing reflects the tremendous dedication of our agents and the cumulative commitment of the FBI, U.S. Attorney’s Office, and IRS””Criminal Investigation to aggressively investigate and prosecute white collar criminals that prey on innocent victims,” said FBI Special Agent in Charge James Yacone. “Our efforts focused on seeking justice on behalf of the more than 400 victims throughout Colorado that have experienced financial devastation as a result of their involvement with Valley Investments.”

“Defrauding innocent investors by peddling sham investment schemes is a serious and far too common offense,” said Sean Sowards, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office. “IRS Criminal Investigation will work with our law enforcement partners to vigorously pursue and hold accountable those who perpetrate these schemes to get rich quick at the expense of honest Americans.”

This prosecution is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

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Allison Tussey

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