Lochmiller profile: History of Fraud
When Philip R. Lochmiller opened his business, Valley Mortgage, in Grand Junction 14 years ago, he was reviving an old family business that had boomed for a while and then busted, badly, in California in 1984.
When that family business, Lochmiller Mortgage, went bust, it did so in a big way.
Philip Lochmiller, who by that time was living in Woodland Park, Colo., was charged with 60 counts of securities fraud involving an estimated $400,000 in losses by investors in Lochmiller Mortgage. Under a plea agreement, he pleaded guilty to half the charges and was sentenced to prison for three years, with a recommendation from the judge that he spend his time in minimum security, according to court documents.
Philip Lochmiller’s attorney, Cliff Stricklin of Denver, said his client’s crimes in California have no bearing on what has happened in Colorado with Valley Mortgage, which has been known since 2007 as Valley Investments.
Stricklin said Lochmiller’s criminal history in California “was a long time ago. The way Phil has lived his life has overcome that.”
Valley Investments was closed recently by a Denver District Court judge at the behest of state securities regulators. The FBI and state regulators are investigating the firm, but no criminal charges have been filed against the 61-year-old Lochmiller in Colorado.
Lochmiller’s criminal history also is his family history. When he went to prison, so did his business associates, who happened to be his brother and mother.
His brother, Stephen Reid Lochmiller, was sentenced to four years in prison, and his mother, Jo Alice Lochmiller, was sentenced to three years. All three were sentenced in connection with the operations of short-lived Lochmiller Mortgage in Vista, Calif.
A judge authorized spending $110 for newspaper classified advertising to make sure that as many as 1,600 people who lost money with Lochmiller Mortgage Co. of Vista had the chance to attend his sentencing and make statements in court, according to news accounts in The San Diego Tribune.
The charges against Philip Lochmiller, according to the news accounts, stemmed from his sales of corporate notes to 20 investors, who invested about $416,500 from November 1981 to July 1983.
Most of the investors were elderly and told authorities they lost their life savings. Most also told authorities they were attracted to the investments by television commercials touting the company’s stability, according to the newspaper accounts.
Lochmiller matriarch Jo Alice sold corporate notes to investors and worked on a commission basis, according to court papers.
Jo Alice “was assigned to a branch office in Escondido, California, because she knew many people in that community. She had sold real estate for 12 years and had worked as a solicitor for a mortgage company in that area,” the court wrote. “Lochmiller Mortgage advertised on television, in newspapers and through circulation of fliers. Jo Alice Lochmiller appeared on numerous television commercials. Investors were attracted by promises of high interest and assurances the Lochmiller family business had been serving the community for 60 years.
In fact, Lochmiller Mortgage was not affiliated with and did not have the backing and support of the well-established 60-year-old Lochmiller family businesses.”
Philip Lochmiller first set up Valley Mortgage on Main Street in downtown Grand Junction, then moved to the current location at 1445 N. Seventh St.
Lochmiller never was a member of the Grand Junction Area Chamber of Commerce, chamber President Diane Schwenke said.
In 2008, the Colorado Division of Real Estate fined Lochmiller $4,400 for violating laws relating to mortgage brokering. The division has not made public investigative documents and two complaints that led to the fine.
Lochmiller failed to tell his investors at Valley Investments about his criminal background as a seller of unregistered or nonexempt securities in California, according to documents filed by Colorado Securities Commissioner Fred Joseph.
Stricklin said it’s an open question as to whether Lochmiller was required to make such a disclosure, given the nature of the crimes in another state and the time that has passed.
Lochmiller agreed to cooperate with regulators rather than force those issues, however, his attorney said.
Joseph obtained an injunction in Denver district court to stop Lochmiller from selling unregistered securities in Colorado. The court also appointed the Grand Junction law firm of Rider and Quesenberry as receiver of Valley’s assets.
Early estimates suggest Valley investors lost $20 million and possibly more in the company’s collapse, Rider said last week.
The FBI also is investigating the company and has set up a hotline for Valley investors, 303-575-7012.
Lochmiller ran advertisements in Colorado newspapers, advertising guaranteed return rates of 14 percent or more that often attracted older investors looking for strong returns, some investors said.
Many of the people he met at a Valley investors picnic were elderly, said one investor, who asked not to be identified. The investor said he was able to retrieve his money when he sensed something there wasn’t quite right.
Another investor, Dale Kruse of Craig, left his name on a piece of paper from a yellow legal pad taped to the front door of Valley, asking, “Please call us immediately about our investments.”
He invested with Valley after his father-in-law had success with his investments, Kruse said, but decided to pull his money out this year.
“With all these Ponzi schemes going on, such as with (convicted fraudster Bernie) Madoff,” Kruse said he deemed leaving his money with Valley Investments too risky.
He was to get $60,000 back in May and $60,000 in June, Kruse said.
Instead, he got “no money, no help and nobody to talk to,” he said.
Lochmiller had negotiated with him and offered to raise his annual return rate to 14 percent in hopes of persuading Kruse to leave his investment in place for two more years, Kruse said.
He turned down the offer, but his father-in-law took a similar one, Kruse said.
Lochmiller has not fled, but is unable for legal reasons to respond to requests such as Kruse’s plea taped to the company door, Stricklin said.
Stricklin said he and other attorneys are “in daily contact with (Lochmiller) and are working through all of the complex issues in this problem. Under our direction he is not responding to questions about Valley Investments from individuals.”
The gate to Lochmiller’s house at 21 and M roads is chained and locked. The receivers of the business, Kirk Rider and Lloyd Quesenberry, hired a locksmith Thursday to gain entrance to the Valley Investments building after they were unable to get the key from Lochmiller.
The Sentinel has not been able to determine Lochmiller’s whereabouts from the time he completed his prison term to the time he moved to Grand Junction.
One of the companies he established in connection with Valley Investments was called S&P Properties, but it’s not clear whether the name refers to the first names of him and his brother.
After she was sent to prison, Jo Alice Lochmiller asked the California Court of Appeal to lessen her sentence, contending her 10, three-year, concurrent sentences amounted to double punishment.
The court turned her down, saying she “took the life savings of a group of elderly citizens.
She did so by making separate sales to 11 individuals on 10 occasions over a three-month period. This was not one act or one indivisible course of conduct. To accept her argument, she could have continued to take the savings of every citizen in San Diego County and be punished no more than if she had done so to one individual.”