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Lance Bandley and Tonya Papanikolas reporting A father and son face felony charges for scamming investors out of almost one million dollars.
Nine people invested in their used car business, not knowing the company was a fraud.
Scott & his son Zach Rhoads were gathering money from nine investors, and buying cars with it to sell. But the state says as time went on, the Rhoades started pocketing more of the money for themselves.
Ralph Butler has a box full of files on investments he made in a used car dealership.
Ralph Butler: I've always been careful about where I put my money, and I really thought this was safe."
But Butler is now out $200,000.
Ralph Butler, Lost Money in Investment Scam: "I end up losing probably half of what I have."
Butler was giving money to a man named Scott Rhoads to buy cars at auction. Then Rhoads and his son Zach would sell them at his car lot called "AutoRama" and give Butler back his money, plus 250 dollars profit per car. For each investment, Butler received a promissory note with the car's vehicle identification number or VIN. For awhile, he did get paid.
"Ralph Butler: "This went on for a year and a half and I was making a really good return, and I thought I had security with the notes and the VIN numbers."
But it turns out, AutoRama didn't even own all the cars. Scott and Zach Rhoades were using the same VIN numbers with different investors.
"Unfortunately the money wasn't used for the used cars as they said. It was used for their own personal expenses, and the investors lost everything," says Utah Division of Securities Director Wayne Klein.
Jenifer Montierth, Lost Money in Investment Scam: "He was borrowing money from everyone on the same car."
Jenifer Montierth also invested in the scam.
Jenifer Montierth: "I lost all the equity in my home."
Klein says for two years the men collected around $800,000 in promissory notes from investors with the promise they would get their money back, plus $250 dollars for each car sold.
"Where they were told they would have so much profit it was irresistible to walk away, and they kept rolling it over into new investments," says Klein.
Montierth and Butler both told us friends had warned them about Scott Rhoads. The state says if they'd looked closer, they would have found a history of cheating. In 1991, Rhoades was convicted of failing to deliver car titles for a business he ran called "Dusty's Car Dealership."
State employees say they hope investors take this case as a warning.
Wayne Klein, Division of Securities Director: "If they're making any sort of investment in an individual's business, then the people need to be licensed."
To find out if a promoter is licensed through the state, call the Division of Securities. The state says you should also look into their prior business background and ask for a prospectus.
AutoRama has been shut down, and a new, licensed car business is now opening in its place.
