The state of Utah is seeking to fine two men for their involvement in a plan to have investors buy an airplane on eBay as a way to raise money to send World War II veterans from Utah on a trip to Washington, D.C.
The Division of Securities said Monday that Paul McSweeney and Craig Ostlund, former directors of the Our Unsung Heroes charity, face a securities fraud hearing Nov. 19. The state is seeking a $45,000 fine and to have the two men stop offering any securities.
The division said McSweeney and Ostlund offered two Draper investors a 17.5 percent return on a $15,000 investment in 2006 for an airplane purchase but failed to disclose important financial information and offered an unregistered security that violated the Utah Securities Act.
The investors were told that their investment would be used to buy an airplane through eBay and that flight lessons with the airplane would help pay for the veterans' trip to Washington, the division said.
Ostlund claimed that Our Unsung Heroes had certified flight instructors who would offer flight training, and if the organization "went under," the investors' money would be refunded after the airplane was sold, according to the division. McSweeney and Ostlund sold the investors a promissory note with a yearly return of 17.5 percent for a term of three years.
In February 2006, the investors obtained a loan for $15,000 and wired the money to the eBay seller. But later in the year, they received three late payments. They hired an attorney when McSweeney and Ostlund stopped making interest payments. The investors still are owed $8,384.41, the division said.
McSweeney and Ostlund failed to disclose to the Draper investors that Ostlund previously filed for bankruptcy twice, McSweeney filed for bankruptcy in 1999, Ostlund faced $1,000 in unpaid civil judgments, and that McSweeney faced $3,500 in unpaid civil judgments.
The division said McSweeney and Ostlund are not affiliated with the Operation Hero Flight charity that recently sent a group of Utah World War II veterans to Washington.Contacted by the Deseret Morning News on Monday, McSweeney, who lives in Mapleton, declined to comment. Ostlund, of Draper, also would not comment Monday.