SALT LAKE CITY — The mayor of Cedar Hills and a partner fraudulently solicited more than $2.3 million in investments for an equity firm they ran out of their homes, federal authorities allege.
Mayor Eric A. Richardson and Christopher D. Hales were named Wednesday in a U.S. Commodity Futures Trading Commission complaint filed in U.S. District Court. It lists six alleged violations of the Commodity Exchange Act and seeks to impose civil penalties totaling at least $840,000 each.
Through their company, Bentley Equities, Richardson and Hales collected more than $1.1 million from 38 participants in a commodity futures trading pool and individual investment accounts. They misappropriated at least $557,000 for personal use, including food, clothes, cars, utilities and credit card payments and $71,000 to pay clients in a Ponzi scheme, according to the complaint.
Hales solicited another $1.2 million from at least 14 people for the Bentley fund and individual accounts, the complaint says.
Hales, 31, is currently serving a 90-month sentence in federal prison for masterminding a financial scam that took individuals and lending institutions for $12.7 million. Hales used the money to live a lavish lifestyle, including throwing $100,000 parties in Las Vegas.
Richardson, 38, was mentioned in court documents associated with Hales' other legal troubles but was not charged with a crime. Federal agents searched Richardson's home and removed several boxes in September 2010 in connection with the case.
Court records from that case show Hales had no source of legal income and hadn't had a "legitimate" job since 2006. Prosecutors say a search of his Draper house turned up more than $28,000 in cash hidden in flower pots. He drove a vehicle registered to Richardson to avoid the ignition interlock device placed in his own car as a result of a DUI conviction, court documents say.
Richardson has served as Cedar Hills mayor since January 2010 and served a term on the City Council before that. In issues unrelated to the federal allegations, Richardson finds himself on the hot seat in his city role.
A group calling itself Cedar Hills Citizens for Responsible Government is trying to oust Richardson amid allegations of improperly using city funds. They claim he and former city manager Konrad Hildebrandt, who resigned Tuesday, moved $371,726 from city recreation funds to the city's golf course to make it appear profitable, unlawfully gave Hildebrandt a raise and obscured or withheld information from the public.
Attempts to reach Richardson, who was traveling Wednesday, were not successful.
Hales and Richardson formed Bentley Equities in April 2009. It currently is in default for failing to pay its annual franchise tax fees. Neither Hales nor Richardson ever registered with the commodity futures commission, which enforces the Commodity Exchange Act. Commodity futures are agreements to buy or sell a commodity at a specific date in the future at a specific price.
The partners held themselves out as highly successful, experienced traders.
"Defendants knew that these representations were false or recklessly disregarded the truth while making them," the complaint says. "Defendants were not successful commodity futures traders, and their trading accounts suffered consistent monthly losses."
The commission seeks a court order barring Richardson and Hales from doing business, a full accounting of their activities and a $140,000 fine for each of the six alleged violations.