Valley Investments trio indicted
The owner of failed Valley Investments is to appear in federal court today in Grand Junction to answer charges in connection with the failure of a company that authorities allege operated as a Ponzi scheme.
The failure of Valley Investments caused the loss of about $31 million from about 400 investors, the U.S. Attorney’s Office in Denver said in a statement.
Valley Investments owner Philip Rand Lochmiller was arrested without incident Wednesday. He, his son, also Philip R. Lochmiller, and an employee, Shawnee Carver, were indicted on multiple counts Tuesday.
The younger Lochmiller was at large Wednesday, and authorities were working to arrange a court date for Carver, who was out of state dealing with a death in the family, the U.S. Attorney’s Office said.
The elder Lochmiller was arrested without incident, U.S. Attorney’s Office spokesman Jeff Dorschner said.
The elder Lochmiller, 61, faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, 20 counts of money laundering and 10 counts of mail fraud.
“Oh my,” said one jubilant investor, Bruce Bainter, “What could be more satisfying at this time of year? I’m going to open a bottle of wine and have a drink. That makes me feel so good.”
Bainter, who lost much of the life savings he had hoped to donate to various causes, said he can’t attend the hearing today.
Lou Zangerle and his wife, Charlotte, plan to be in court, though. He and his wife “want to be there and look him to his face and ask, ‘Why did you lie to us? How can you lie to us straight in the face?’ “
Lochmiller’s attorney, Cliff Stricklin of Denver, said he was “disappointed the government has chosen to react this way. Though we’ve been in constant contact with the government, they have never once asked to hear from Phil about his work at Valley Mortgage. It appears they were dead set on filing criminal charges even without gathering all of the facts.”
Lochmiller has been part of the Grand Junction community for 15 years, has kept his promises and will continue to do so, Stricklin said.
“I guess we’ll have to wait to tell Phil’s side in court,” Stricklin said.
Lochmiller invoked the Fifth Amendment protection against self-incrimination when he was called to court in Denver last summer to testify in the case that established the receivership for Valley Investments, 1445 N. Seventh St.
Lochmiller served a prison term in California after pleading guilty to securities fraud there. The indictment said Lochmiller never disclosed his criminal background to investors or that he had received a cease-and-desist order in 2001 from the Colorado Securities Division to cease the offering and advertising of unregistered securities. The Lochmillers also failed to disclose previous bankruptcies, the indictment said.
Lochmiller, according to the U.S. Attorney’s Office, opened Valley Mortgage, later to become Valley Investments, in 1994 as a mortgage broker and originator. Around 1999, the Lochmillers and others entered the affordable-housing, real-estate-development and housing-for-sale business.
Valley Investments acquired five properties, which the Lochmillers told investors were to be developed as affordable-housing subdivisions, the indictment said.
Valley Investments owns three mobile-home park developments in Colorado, one in Utah and one in Idaho. The Colorado holdings include Country Living Park in Mack, land in Dinosaur and a park in La Junta.
Both Lochmillers solicited investments from individuals by promising short-duration, high-return monthly payments, the indictment said.
Advertisements characterized the investments as a “solid security” secured and recorded by deeds of trust in investors’ names.
The Lochmillers told investors they used investment funds only to acquire and develop affordable-housing projects, and that the company generated large profits by selling manufactured homes together with lots within their subdivisions.
Some investors were promised returns as high as 18 percent annually.
Investors received promissory notes and first deeds of trust on individual lots, worth a minimum of $20,000 at a 50 percent loan-to-value ratio.
Valley Investments did not own sufficient property or assets to secure the investments, the indictment said, and the Lochmillers and Carver, the personal assistant to the younger Lochmiller, continued to solicit investor funds even though they knew the business was failing to generate sufficient profit.
“The Lochmillers and Carver continued to misrepresent to investors that the business was thriving, and did not disclose to new investors how their money was being used,” the indictment said.
Investigators found many of the first deeds of trust were not, in fact, the first encumbrance and were therefore worthless. The indictment also alleges Carver notarized forged signatures of investors for fraudulent releases of deeds of trust.
Investor Jacque Loesch of Battlement Mesa said she was pleased Lochmiller had been arrested.
“He’s pretty well ruined my life,” Loesch said. “It’s a good thing I’m not a real down person. I’m basically living off Social Security.”
Loesch invested her IRA with Valley Investments, only to see it disappear.
The receivership has said it has found Valley Investment assets worth about $5.5 million, or one-sixth of the more than $31 million invested.
Stricklin said the indictment “will make it even more difficult for the note holders to get any return of their assets the receiver hasn’t already drained” from Valley Investments.
The younger Lochmiller faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, eight counts of money laundering and 10 counts of mail fraud.
Carver faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering and 10 counts of mail fraud.
Money laundering is punishable with up to 10 years incarceration, and the penalty for mail fraud is up to 20 years incarceration.