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SALT LAKE CITY — A Draper man and three associates allegedly bilked investors of $60 million in an alleged securities fraud scam as a means to fund his extravagant lifestyle, federal authorities say.
The Securities and Exchange Commission filed a complaint Thursday against Raymond P. Morris and James L. Haley of Draper; Jay J. Linford of Orem; and Luc D. Nguyen of Draper, claiming they misrepresented unregistered promissory notes as high yield, risk-free notes for an exclusive investment fund started by the owner of the Houston Astros baseball team.
According to the complaint, Morris, 42, organized the scheme in March 2007 and enlisted Haley, Linford and Nguyen, a Salt Lake attorney, to help him raise millions of dollars for the fund. Some 90 investors were guaranteed returns of at least 20 percent, the complaint says.
Morris, who owned E & R Holdings, Wise Financial Holdings and Momentum Leasing, told investors their money would be deposited in a secure account over which he had sole control and that the funds would never leave the account, the complaint says. The money was to be used only for "verification of deposit" purposes for private traders obtaining large lines of credit.
"In reality, Morris used investor money for personal expenses, including a luxurious home and several sports cars, and for making Ponzi payments to create an illusion of a successful investment," according to the complaint. Ponzi payments are bogus interest payments to earlier investors from capital raised from later investors.
Morris initially told Haley he could not join the fund unless an existing investor died. Less than a week later, he called Haley with news that an investor had died and Hayley could join if he raised $500,000 in three to five days, which he did, according to the complaint.
Haley, 49, went on to raise at least $20 million for the fund by "recklessly" repeating Morris' claims to investors, the complaint says. Haley, court documents say, kept $700,000 for himself, including payments on a new home and $25,000 a month for rent while the house was built. He owns Cornerstone Capital Fund and Vantage Point Capital.
Linford, 49, the owner of Freedom Group, raised about $1 million for the fund in the same manner.
Morris and Haley hired Nguyen, 40, to assist them with legal matters relating to soliciting investments. He later began seeking investors himself, saying he was an "SEC attorney" and touting the fund as "one of the best he had ever seen," according to the complaint.
None of the four men were registered with the SEC or licensed to sell securities, the complaint says.
The plan unraveled in April 2008 when Morris stopped making regular interest payments to investors. According to the complaint, he told investors that Homeland Security had frozen the accounts and that the Bernie Madoff case has caused banks to hold funds.
When investors complained and threatened to call the SEC, the suit says, Morris sent out phony bank statements showing he had more than $200 million deposited in Wachovia Bank.
E-mail:romboy@desnews.com
