PORTLAND, Ore. - A federal jury in Portland on Wednesday convicted three former owner/operators of Summit Accommodators, Inc., of Bend, of conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with a 10-year, multimillion-dollar fraud scheme.
Federal prosecutors said the defendants used $75 million of client funds for undisclosed personal investments in real estate, investments in businesses in the Bend area, and loans to business associates and family members.
Sentencing in the case is scheduled for Oct. 23 before U.S. District Judge Anna J. Brown.
"Attorneys, certified public accountants and business executives who, motivated by greed, lie to clients to gain use of their money for personal purposes are especially deserving of prosecution and punishment," said U.S. Attorney Amanda Marshall. "This office and our federal and state partners will do whatever it takes to bring dishonest professionals to justice."
After three weeks of trial and 2 1/2 days of deliberations the jury found CPA Mark A. Neuman and Attorney Lane D. Lyons, both of Bend, and Timothy D. Larkin, of Redmond, guilty of conspiring to defraud the clients of their former business, Summit Accommodators, Inc., by misrepresenting how they would hold and use client funds.
Several thousand clients entrusted them with more than $1 billion from 1999 to 2008, when the business closed and filed for bankruptcy. Brian Stevens, another former owner/operator of Summit, previously pleaded guilty to identical charges and testified against his former partners.
Neuman and Stevens created Summit in 1991 to help customers take advantage of lawful federal income tax deferral transactions, officials said.
In a typical transaction, a customer would sell income--producing property, allow Summit to hold the proceeds of the sale, then buy another income-producing property within 180 days. Federal income tax laws then allowed the customer to defer paying taxes on the profits from sale of the first property.
Summit eventually opened affiliate offices in Texas, Washington, Utah, Montana, Wyoming, Nevada, and Lake Oswego, Oregon.
In 2002, Neuman and Stevens hired Larkin as Summit's chief operating officer. In 2005, Neuman and Stevens hired Lyons as Summit's in-house counsel. In 2006, Larkin and Lyons became equal partners in Summit with Neuman and Stevens.
The trial evidence showed that although Neuman and Stevens began using their clients' exchange funds for personal investments before 1999, they promised their clients their exchange funds would remain in Summit bank accounts and would only be used to complete their tax deferral exchanges.
Neuman was responsible for creating Summit marketing brochures and Summit's website. Both falsely promised Summit would maintain client funds in bank accounts or in government securities.
From 2004 through October 2008, Summit held between $49 million and $109 million of its customers' money in a typical month. The defendants routinely transferred large amounts of client money to Inland Capital Corp., another company they owned and controlled.
Through Inland, the conspirators used client funds for over 100 real estate projects in Central Oregon in which one or more of them had direct personal interests, prosecutors said.
The co-conspirators hid the fraud scheme by concealing from most of Summit's employees and from most of the owner-operators of Summit's branch offices that the conspirators were using Summit customer money to invest in real estate and for loans to themselves and others.
In February 2007, when Summit's clients and branch owner-operators began to express concern about the safety of Summit clients' money, the conspirators lied by saying that all Summit client money was deposited and maintained in financial institutions or invested in highly secured short term notes.
For 10 years, prosecutors said, the conspirators intentionally concealed from clients that they used large amounts of client money to enrich themselves.
The Oregonian reports the scheme unraveled after the recession sent land values plummeting in Central Oregon. The business closed and filed for bankruptcy protection in 2008.
The case was investigated by the Federal Bureau of Investigation; IRS, Criminal Investigation; the United States Postal Inspection Service; and the Oregon Division of Finance and Corporate Securities. Assistant U.S. attorneys Seth D. Uram and Donna Maddux handled the prosecution of the case.