Judge OKs plan to help defrauded investors
The Chapter 11 reorganization plan approved this month involved a restructuring of approximately $30 million in secured debt that was part of an elaborate Ponzi scheme orchestrated by admitted scam artist Val E. Southwick, who perpetrated one of Utah's largest financial frauds. Investigators with the Utah Securities Division and the U.S. Security and Exchange Commission said that Southwick operated a Ponzi scheme and used new investments to pay off old investors.
Assistant attorney general Charlene Barlow said Monday that the North Silver Lake Lodge fraud involved various schemes, including bilking investors on real-estate deals.
"Southwick told investors he was going to purchase real estate and failed to provide full disclosure," she said. In a Ponzi scheme, money from new investors is used to pay earlier investors. Barlow said that although Southwick bought property with part of the money he took from investors, he used some of the money to pay off old investors, as well as other fraudulent uses.
Although Southwick had raised tens of millions to further the development of the Deer Valley property, little actual work had been done. Prosecutors said Southwick also used investor money to pay for his personal mortgage, vacations, LDS tithing and attorneys' fees.
According to a news release from the North Silver Lake Lodge creditors' lawyers, the proposed resort property near Deer Valley had been owned by entities affiliated with Southwick, who recently pleaded guilty to nine criminal counts for violating Utah securities law in connection with his solicitation and structuring of real-estate investments. Many of the participants in North Silver Lake Lodge were seniors who had invested their life savings or retirement funds in the multimillion-dollar project.
As part of Southwick's plea deal, he agreed to work with the Securities and Exchange Commission to repay the victims. He faces up to 15 years in prison on each count.
The Chapter 11 reorganization plan for North Silver Lake Lodge was confirmed in U.S. Bankruptcy Court for the District of Utah, "resulting in full payment to all of the debtor's unsecured creditors," the news release said.
New investors, working with the debtor, purchased the notes held by most of the small investors and agreed to pay them all back in full, said David Neale, the attorney representing new owners of the property, Regent Properties of Beverly Hills, Calif.
"My clients believed in the project and were willing to invest the time and energy to make sure people were taken care of," said Neale. "The new plan contemplates ongoing development of the project to construct 54 high-end condo units."
Contributing: Ben Winslow.
E-mail: jlee@desnews.com
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