Investors to justify business to state

GJ’s Valley Investments and its Denver attorney prepare for June hearing

Edith Woodring watches with grim anticipation as her grandson Jeffrey Nichols calls the FBI hotline number that investors with Valley Investments have been asked to call. The recorded message requested that callers leave their name and phone numbers, but gave scant information about the FBI’s investigation into the company

Valley Investments officials have a June 1 hearing before the Colorado Securities Commission to show why the company should be allowed to continue selling securities in the state.

Valley Investments and principal Philip R. Lochmiller will go to the hearing represented by Cliff Stricklin, the attorney who successfully prosecuted a federal insider-trading case against former Qwest chief Joe Nacchio and now is a partner with the Denver-based law firm of Holland and Hart.

Among the fraud allegations against Lochmiller are that he failed to disclose to potential investors that he was convicted of felonies in 1985 in California for selling unqualified securities, and the securities he offered at Valley were being offered in violation of state law.

Several investors, meanwhile, said they hope Valley is plagued merely by a poor economy from which it eventually can recover.

Stricklin struck a similar note with an e-mailed response Friday to The Daily Sentinel.

“Philip Lochmiller has been part of the Grand Junction community for over 15 years and for nearly that long he has had hundreds of satisfied customers with Valley Investments,” Stricklin wrote.

“These tough economic times we are in are unprecedented since the Great Depression and even the safest investments are difficult to sustain. Even so, Phil is working hard with his attorneys and other officials to come up with thoughtful solutions to resolve this situation and put Valley

Investments’ customers first. Grand Junction knows Phil as a community leader, neighbor and friend.  He is facing this challenge head on and will do the right thing.”

Many of those same investors, though said they picked up on some subtle warning signs in recent weeks.

The FBI has set up an investors’ hotline for Valley customers, 303-575-7012, which asks investors to leave a message.

A California investor said Friday afternoon he was unable to get to the hotline after several calls because it was busy.

Officials said the hotline was overwhelmed Friday and asked callers to be patient as investigators deal with the high numbers of callers.

One investor who stood in front of the Valley Investments building, 1445 N. Seventh St., on Friday morning said he had recently picked up on one of the signs of problems. No one was in the Valley

Investments building Friday and there was no response to phone calls there or at Lochmiller’s cell phone, which said his voice-mailbox was full.

The investor said he recently decided to withdraw money from Valley, but was told by Phil Lochmiller Sr. the company didn’t have the cash on hand because it was being used to develop a mobile-home park in La Junta.

Instead of returning the money, the investor said, Lochmiller offered to boost the interest rate on his investment from 14 percent to 16 percent.

Ultimately, the investor said, he agreed and left.

“We never heard from him again,” the investor said of Lochmiller.

Officials with the state Securities Division said they couldn’t discuss what precipitated the investigation into Valley Investments, which is not affiliated with Valley Financial Services or Valley Insurance, officials at both businesses said.

Valley Investments, however, had been ordered to appear before the securities commissioner in Denver on May 15, also to explain why Valley and Lochmiller shouldn’t be prevented from selling securities. The company was given an extension to the June 1 hearing.

Investors interviewed at Valley Investments’ offices and by telephone Friday said they had invested in low-income housing developments being built by Valley in several locations across the Intermountain West.

Among the locations where investors said they had been told that Valley had projects were Mack; Vernal, Utah; Pocatello, Idaho, and an unidentified location in New Mexico.

Investors said they were given trust deeds to their investment property, but some said close inspection revealed the documents were without official seals to indicate they had been recorded in county offices.

“We knew from the beginning that it was a risky investment,” said Noreen Fry, who invested with Valley Investment along with her mother, Edith Woodring, who said she was pleased with the company, until now.

“I thought they were wonderful,” Woodring said.

A small monthly payment on her investment with Valley was the cushion she needed to maintain on a limited income, said Fry, 62.

Phil Lochmiller Sr. was “very professional,” Fry said, but she did notice that when she visited the office, “They made sure you saw who they wanted you to see, even if you had to wait.”

She had decided to withdraw her money from Valley so she could invest it in her son’s business,” Fry said.

She never could reach Phil Lochmiller at the office, she said. Each time she tried, she was told he was out of the office, but would contact her immediately on his return, Fry said. Lochmiller never did call her, she said.

Lochmiller, according to the filing by the securities commissioner, advertised in the Summit Daily newspaper, and a potential investor contacted the company after seeing it there.

The unidentified investor told investigators that Lochmiller said he could earn up to a 14 percent return, and investors could be paid simple interest on a promissory note or earn compound interest by leaving the interest invested.

Investments were secured by trust deeds on individual lots in increments of $20,000 to $30,000 at a 50 percent loan to value. A $60,000 investor would receive two notes for $30,000 each and two trust deeds on two parcels.

Lochmiller told the investor he sold 175 lots in the previous year.

One investor who called The Daily Sentinel noted that Lochmiller had met all of his obligations, but the investor was concerned his payments for June wouldn’t come in.

“We’re hoping it’s not a Ponzi” or pyramid scheme, in which early investors are paid with the proceeds from later investors. “We’re hoping he’s just run into some financial difficulties.”

It’s not uncommon for parties to reach settlements before hearings such as the one scheduled for June 1, said Jerry Rome, deputy securities commissioner.

The situation with Valley on Friday was “pretty fluid,” Rome said.

The recorded message on the FBI hotline says the FBI is preliminarily investigating Valley
Investments, and the state securities officials said their investigation is separate from that of the FBI.


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