James Gary Sheets took the witness stand in his own defense Tuesday, testifying that his company, CFS, had an "internal rate of return" ranging from 29 percent to 23 percent yearly.
The profits of Coordinated Financial Services are an important point in Sheets' trial on 34 fraud and theft charges, because investors in the Working Fund program offered by another of Sheets' companies were promised a return of 17 percent yearly. Prosecutors say nearly all investors in Working Funds I and II lost their money.But when asked by his attorneys whether he intended to defraud anyone, tried to deceive clients or caused an investment to be made when he knew it was not authorized by the investor, Sheets was unequivocal: "Absolutely not."
The distinguished-looking, silver-haired Sheets spoke deliberately and calmly, outlining the way he was raised by his grandmother in Richfield after his mother died and talking about the way he started a paper route in fifth-grade, then shined shoes in a barber shop in sixth-grade and later set pins in a bowling alley.
After he graduated from Richfield High School in 1952, he won a four-year tuition scholarship at a Rotary convention. He attended the University of Utah four years but did not graduate. He also described his family life, including his 27-year marriage to the late Kathleen Webb Sheets, his work in a real estate office and his short career selling encyclopedias door to door.
Sheets entered the insurance business, then left to sell securities and manage an insurance brokerage business.
He and a partner started CFS on Jan. 1, 1971, he said. Before that, "I had learned a great deal about financial planning from this fine firm (Financial Services Corp. of America) that we represented out of Atlanta."
As CFS grew, it became a more complicated operation and Sheets hired managers who allowed him to go back into full-time selling. He confessed he was not a good manager himself and did not enjoy such duties as firing employees or refereeing employee problems.
The amount of money the company raised annually increased from $4 million to $34 million in 1984. In about 1980, he hired Steven Christensen as administrative assistant. He said Christensen allowed him to increase his sales work because of Christensen's "very effective management of my time."
"He was the brightest young man I ever met," Sheets said. Within a couple of years, "He knew more about our business than I did."
Christensen and Sheets' wife, Kathleen, were both murdered by bomber and forger Mark Hofmann.
By 1985, CFS had 120 employees in the Salt Lake home office and 250 others managing property nationwide, he said. He had given away more than half of his stock to some employees, and at the end, owned only 42.4 percent. Christensen owned 10 percent, he said.
The business began organizing partnerships focusing on ways to "minimize the income tax bite" for clients, he said. Sheets said clients were "tax-driven," searching for income tax shelters.
Meanwhile, more and more people began to look for shelter in real estate investments. As it became more difficult to buy sensibly in real estate, CFS shifted somewhat into energy tax shelters, he said.
He said the company was able to save a great deal of money for its investors, especially in the early years. Sheets proudly explained how his own family partnership saved money by having the partnership pay for the children's tickets for vacations in Hawaii while he bought his own.
In the first few years, he said, CFS' internal rate of return was 29 percent a year, although that dropped to 23 percent.
Under questioning by defense lawyer Peter Stirba, Sheets said company experts calculated this rate, which represented "what that money (invested) would have had to earn if it were placed somewhere else," in order to equal the savings to the investor.
That included savings in tax payments because of sheltered investments, he said.