Lochmiller cast as predator, victim in opening arguments at trial
DENVER — Philip Rand Lochmiller preyed on the hopes of his investors as he operated Valley Investments in Grand Junction like a private bank for himself and his family, prosecutors told a federal jury Wednesday.
Hardly so, countered Lochmiller’s attorney, during opening arguments in Lochmiller’s trial on conspiracy, money-laundering and fraud-related charges.
“This case is about broken promises and broken dreams caused by (Lochmiller’s) dishonesty and fueled by his greed,” Assistant U.S. Attorney Tim Neff told the nine-woman, six-man jury in U.S. District Judge Philip A. Brimmer’s courtroom.
Rather than being a predator, Lochmiller fell prey himself to the harsh economic conditions of 2007 and 2008, said Lochmiller’s court-appointed attorney, Daniel Smith, who insisted, “Valley Investments was a small business in Grand Junction with big ideas.”
“This isn’t Madoff,” Smith said, referring to the collapse of a Ponzi scheme in which Bernie Madoff bilked his clients out of billions of dollars, for which he is now in prison.
Lochmiller is accused of heading a Ponzi-like scheme that claimed $30 million from investors, mostly in Grand Junction and on the Western Slope.
One of the main issues in the case is the allegation that Lochmiller kept secret from his investors the fact he was sentenced to three years in prison in 1986 in California on 30 counts of securities fraud.
Prosecutors contend that had investors known more about Lochmiller’s background, which also included a 1984 bankruptcy, few would have invested with him. They also contend investors would have wanted to know that the Colorado Division of Securities wrote Lochmiller in 2001, asking that he stop advertising and selling unregistered securities.
The division, however, took no other action until it closed the business in 2009.
Smith attacked the allegation that the Philip Lochmiller who served prison time in California is the same Philip Lochmiller now on trial in Colorado. That forced prosecutors to question witnesses about whether their investment decisions might change if they knew someone in Valley Investments had a criminal record or previous financial problems.
Rate of return
Witness Victoria Folkestad, who invested hundreds of thousands of dollars in Valley Investments, told the jury unprompted that if people knew of such a criminal and financial record, “You wouldn’t want to invest your money with them.”
Folkestad, the first of dozens of investors expected to take the witness stand during the trial, testified she was attracted to Valley Investments both by the 14 percent annual return rate the company offered and its stated mission.
“We liked the idea of providing low-cost housing,” Folkestad testified.
Folkestad sought to close out her investment in 2008 and early 2009, but it was frustrating to deal with Lochmiller, who didn’t respond directly to her repeated requests for her principal and interest, an amount totaling just under $400,000, she testified.
“I just wanted to know what you want me to do,” Folkestad quoted Lochmiller as saying on several occasions.
Folkestad said she agreed to terms with Lochmiller giving her trust deeds to land worth more than a supposed $800,000 during an April 1, 2009, closing meeting at a title company, but she noted that a letter from Valley Investments promoting new investments also had an April 1 deadline.
Desire to withdraw
Another investor, Mariana Gibson, testified she trusted Lochmiller enough that she loaned him $100,000 on his personal guarantee without the added security of a trust deed.
Gibson learned later, though, trust deeds she held for Valley Investments’ Sunburst Terrace project in Vernal, Utah, were recorded in Mesa County.
In May 2009, Gibson said she was trying to contact Lochmiller to arrange to withdraw $50,000 from her account to buy a house. She said she remained unaware of the company’s problems until her last unsuccessful effort to reach Lochmiller.
“I was told two days before it came out in the newspaper (that Valley Investments had been seized by state regulators) that everything was wonderful,” Gibson testified.
Smith noted ripples of global financial instability that were shaking the national economy might be expected to have an effect in Grand Junction. Smith suggested to Gibson she should have been concerned, pointing to the troubles of AIG, the insurer that was bailed out by the federal government.
“Did that concern you?” Smith asked.
“Not as much as on the local level,” Gibson said.
Today is the third day of the trial, which is expected to last five weeks.