EDITOR’S NOTE: Lynn Packer, who freelances for City Weekly, is a trial consultant and has worked on several Utah cases, among them Caldera v. Microsoft, Lantec v. Novel, Jensen v. KTVX and State v. Weitzel. As a television reporter, Packer specialized in white-collar fraud stories, broke the Afco fraud story in 1981, and wrote an award-winning series on the Bonneville Pacific fraud for City Weekly. While he is not yet engaged as a consultant to any parties involved in Attorneys’ Title Guaranty Fund (ATGF)-related litigation, he may be at some point. If that occurs, he will cease reporting on this story for City Weekly.
The finger-pointing is dizzying, accusations are flying. The question is not whether a Utah-based investment scheme that is resulting in the foreclosure of dozens of luxury homes—many valued at more than $1 million—was fraudulent. The question is: Who masterminded the scam? Who is “Mr. Big”?
The so-called “Attorneys’ Title Fraud” gets its name from a small Utah branch of a national title insurance company that was supposedly holding millions in safekeeping, money that has since vanished. Promoters would often encourage home refinancing to free up equity for investing in what was called “The Program.” That program was supposed to make mortgage payments on the borrowed money, and eventually pay off big after two or three years. City Weekly has found no evidence that the Attorneys’ Title Guaranty Fund (ATGF) was aware of “The Program,” or that it was being operated through escrow accounts.
If this plan to tap home equity while promoters promise to make monthly mortgage payments sounds a lot like Utah’s Afco fraud of the mid-’80’s, then hello déjà vu. Back then, swindlers illegally raised money for their Glenmoor Village and Sherwood Hills projects with an investment scheme that centered on home equity loans, promises to make payments and assurances the investment was a sure thing. And, just like with Afco, dozens of homes have been foreclosed upon or are under foreclosures, like the condos owned by two Tooele widows. (See “Title Fight, Part I,” Oct. 3, City Weekly.)
There are even two Afco-related ironies: Convicted Afco con artist Carvel Shaffer is the attorney for one of the Attorneys’ Title defendants. And the Afco-inspired Utah Communications Fraud statute, designed to combat investment fraud, is not being used, so far, by prosecutors against Attorneys’ Title defendants.
Last month, the Utah Attorney General’s Office charged Attorneys’ Title escrow agent Clay Harrison, 40, with securities fraud and racketeering. So is Harrison—who is also an attorney—the person who directly presided over missing funds as a ringleader? Or as the ringleader? Or was he a victim of the promoters he was working with?
Harrison’s attorney said his client was not only not a ringleader, but not even a casual participant. “Clay’s trust account was used by others to perpetrate a fraud on a large number of people,” said his attorney, Jim Bradshaw. “Although Clay was not a participant or even had knowledge of the fraud, he feels terrible that his account was misused in that manner.”
Davis County promoters Calvin Paul Stewart, 55, and Alvin Anderson, 58, are also accused of committing securities fraud and racketeering. They, among others, were gathering investment dollars for “The Program,” then using it to reap supposed fabulous returns.
Many investors insist Stewart is Mr. Big and Anderson his top lieutenant. They claim they were conned into putting money into purported high-yield investments that somehow involved secret trades in international money markets.
But Anderson said Stewart is not a top dog and he, Anderson, is not his right-hand man.
“If you’ve ever met Paul, you’d never think of him as Mr. Big,” Anderson said. “He is not the type. Paul is an introvert, almost a hermit. Paul just does not fit the category of Mr. Big. He is not charismatic in any way, shape or form. You meet him and you think, ‘Where did that dumb guy come from?’”
Anderson said an escrow officer at Attorneys’ Title is actually the mastermind. He said it’s L. Dale McAllister, 41, one of the people who closed real-estate transactions when buyers and sellers sit down to sign documents and exchange checks. McAllister controlled money leaving the account, even signing or stamping the signature of his boss, Clay Harrison, to facilitate transfers. McAllister also faces criminal prosecution.
McAllister, though, told City Weekly he’s a victim, not a mastermind. He said Stewart only looks like a hayseed.
“Paul Stewart is extremely brilliant,” McAllister said. “He’s eccentric. He’ll wear the same black T-shirt every day for a month with his jeans that when he bends over, you see the crack of his rear end. People seeing him like that are going to think he’s not very smart.”
“I’m a huge victim as far as money goes,” McAllister said. He estimates he’s lost at least a million dollars. The man who ran a rug-cleaning business before former missionary companion Clay Harrison hired him told City Weekly, “I was simply an employee of an attorney who closed real-estate transactions.”
Who, in McAllister’s mind, was Mr. Big? “There’s no doubt it was Paul Stewart.”
McAllister said he’s now penniless and homeless as a result of the scandal. His marriage is in tatters.
Anderson and Stewart are not yet homeless, but close. Each has been evicted from his upscale home: Stewart from his Parade of Homes model at Draper’s South Mountain, Anderson from his North Salt Lake home at Eaglewood Estates. For several weeks, they resided together in yet another North Salt Lake luxury home involved in what promoters called the “The Program.” For a while, three white Corvettes, belonging to Anderson, Stewart and confidant Gary R. Mickelson—who also moved in—would be parked in the driveway of the home at 36 South Ironwood Drive in North Salt Lake.
But the bank is closing in on that home as well, and two of the three Corvettes were up for sale, according to Anderson. Part of their concept was using a home’s equity to reap an investment windfall, resulting in the ownership of a luxury home, virtually for free. The prospect of getting a mansion with no money down and no payments—“The Program” made those—was a deal straw buyers like children, parents, friends of promoters and outside investors found hard to refuse.
Promoters often targeted expensive homes that contractors or owners were having a hard time selling, even at a discount.
“Sellers were being approached claiming they will receive full listing price. In exchange, the seller has to deposit a certain amount of proceeds at Attorneys’ Title to be held in an escrow account for a certain period of time,” said state securities investigator Jude Archuleta.
Even Utah radio personality Tom Barberi found the prospect of easily selling his $550,000 home on East Aerie Cove enticing. Barberi testified last week at the preliminary hearing of 49-year-old mortgage broker Renae Bolson, of Syracuse, Utah. She attracted criminal prosecution by helping facilitate the loan on Barberi’s house, and dozens of others, working closely with promoters and McAllister.
Barberi, unlike many investors, merely saw the deal as a way to move hard-to-sell property, not as a way to profit additionally. But what was similar is the way “The Program” began failing to make the promised mortgage payments, raising the specter of foreclosure.
Mortgage broker Keith Cook, also of Syracuse, Utah, was briefly a member of the inner circle with Stewart and Anderson. But when the FBI began an investigation three years ago in a probe that eventually fizzled, Cook, 44, parted company.
“What it boils down to, like any scam you hear of, are promises of 5 percent, 10 percent, 20 percent a month,” Cook said.
So who masterminded “The Program”? “I was being told Paul Stewart was the man and Attorneys’ Title worked for him,” Cook said.
So goes the finger-pointing. And that’s just for starters. Part of the blame game involves Utahns accusing Californians and others of being the true scamsters.
Anderson said he didn’t even know how the money he was raising was being invested. Only Stewart had those contacts. The former high school student body president and state wrestling champion said he didn’t know much of Stewart’s business.
“I bet it’s not 25 percent,” Anderson said, professing little knowledge of how money was being made. “I am not his chief lieutenant. I am a good friend of Paul. I think he has been duped.”
Under Anderson’s theory, Mr. Big is not even a Utahn, but one of the out-of-state purported financial wizards who were investing money raised and pooled by Stewart, Anderson and others. Their program had tentacles reaching into Arizona, Nevada, California, Washington state and elsewhere. Was there a Mr. Big, or several Mr. Bigs at the end of each tentacle?
The Out-of-State Prime Bank Traders: The Rogue’s Gallery
Most investors were told their money would remain in an Attorneys’ Title trust or escrow account. Some were told it was “show money,” money that would not be put at risk but merely shown—used as collateral—to assure outside venture partners that Stewart and his associates were legitimate players. Anderson allegedly told some investors the money would be kept safe and used only to “leverage” the deals.
But the money did leave the account. In droves. While promoters were allegedly telling their investors the investment deals were low risk or no risk—“a sure thing”—the insiders were in fact making ultra-high-risk investments with financial traders, many of whom had checkered pasts. In hindsight—some will argue with foresight—“Program” money was sent to a rogue’s gallery of prime traders, some of whom are suspected of illegal conduct, others already convicted of illegal conduct.
McAllister said the very first investments were supposed to make the insiders and their investors fabulously rich, with enough money left over for the humanitarian aid programs that were part of Stewart’s pitch. McAllister managed the account, he said, at Paul Stewart’s direction, signing or stamping his boss’s name to effect withdrawals and transfers. (Those who think he’s Mr. Big use the term forgery, although the state has not charged him with that crime.)
In October 1999, McAllister wired about $415,000 of the money, which was not supposed to leave the Attorneys’ Title account, to a company called the Sterling Enhancement Group in Dallas, Texas. “The Program” expected to reap upwards of a staggering $320,000 a month from that investment alone. But shock set in when Sterling allegedly made no payments. In April 2000, the Utah promoters apparently convinced Sterling to return the principal, but “The Program” was now well behind on promised payments to investors. It was running well in the red when it was supposed to be running in the black.
At the very same time the Utah money was being invested with Sterling, a promoter in the United Kingdom introduced nine of his investors to what was called “a program” with Sterling. They were told, according to the Financial Services Authority in London, that their money was being placed in a “high-yield program” and a “bank debenture trading program.” The New Jersey Attorney General has filed suit against Sterling Enhancement in connection with the alleged U.K. fraud.
The United States’ Securities and Exchange Commission also refers to such deals as “prime bank” schemes wherein profit is “generated by trading various debt instruments in secret markets accessible only through authorized traders.”
“The instruments are said to be issued by major world financial institutions with the support of the Federal Reserve, World Bank, and other well-known organizations. In fact, these instruments are fictitious, the markets nonexistent,” according to SEC literature.
In November 1999, even before the Sterling deal was failing to generate returns, Stewart directed that $1 million be sent to a Robert Calloway’s company, The CRP Group, in Mission Viejo, Calif. That was followed in December with $1.05 million sent to yet another international money trader, Trevor Prider and his Trade Direct Company of Westminster, Calif. Prider got $1.05 million. Then $40,000 was wired to a Scottsdale, Ariz., bank, purportedly on behalf of a George David Roberts and his company, Manchester Financial. Roberts was recently criminally charged in Utah County for investment activity largely unrelated to “The Program.”
All of those deals reportedly went bust, according to a lawsuit against Prider. The Utah Attorney General accuses the insiders of turning the alleged fraud into a Ponzi scheme where new investor funds were being used to pay principal and interest to previous investors, who thought their money still resided safely in an Attorneys’ Title escrow account.
McAllister said when the Sterling deal began failing, there was a push, in March 2000, to send more money to Calloway to make up for the loss.
“Everybody went like gangbusters to close as many deals as we possibly could, thinking every dollar sent to Calloway would return 32-fold,” McAllister said. “Paul was telling us all there would be a huge payoff for everyone. He would talk about numbers—like Calloway in six weeks will be sending us $32 million. That will pay for everything promised everybody, buy everyone’s houses that were promised, and lots and lots left over for us all to divide up.”
McAllister said he never met Calloway and only knew him as an African-American of large girth. The money invested with Calloway also allegedly vanished, according to McAllister.
Calloway told City Weekly he barely knew a Paul Stewart. “I met Paul Stewart one time. I couldn’t tell you anything else.”
Did Stewart give Calloway $1 million to invest? “It’s been so convoluted, who knows who did what?” Calloway said. He said he merely heard a rumor that Stewart “took a bunch of money from some people, people had hawked their houses—from one county alone, over $32 million.”
McAllister, traveling with Stewart, met another purported California broker dealer they sent money to—Trevor Prider. McAllister said he and Stewart were picked up at the airport in Orange County by a Hans Tschebaum, currently in federal prison for parole violation. McAllister believed Tschebaum was linking Stewart with the California money brokers. They were taken to the office where Prider’s Trade Direct was purportedly trading money among the world’s prime banks. McAllister recalls seeing a beehive of investment activity:
They had an operation set up with a lot of high-tech equipment, different types of high-tech computers that could trace the trading of medium-term notes. And they pulled up on the computer and showed us how they were trading medium-term notes. Our million would be added to their $167 million that they trade and these are the kind of percentages that they make, that’s why we can guarantee you can get this 250-300,000 a month on a regular basis. They showed us their charts and what they made of the last two or three years.
Another of Prider’s entities, CFC Finance Ltd., was officed in Santa Monica, but was registered in the tiny Caribbean island of Antigua, where, among others, Russian crime rings stashed their money. Prider claimed he could package a $10 million “Statements of Account” that could be used to trade medium-term notes, returning as much as 300 percent per week.
Prider ended up vanishing, along with most of the money Stewart’s group had given him. Prider, an Australian citizen, fled back Down Under when authorities were closing in, according to a California attorney who has sued Prider.
Meanwhile, the $40,000 sent to Roberts with Manchester Financial, through a Sherry Stewart (no relation to Paul) in Scottsdale, Ariz., was also supposed to multiply like rabbits. Even though the money was wired from the Attorneys’ Title account, Roberts was not a Paul Stewart contact, but one of another mortgage broker involved in “The Program.” McAllister recalls Roberts was going to take the $40,000 and generate payments of $60,000 a month for the next 10 months. After that, millions more would be produced to pay off the house involved in that particular deal.
Roberts is reportedly a Mormon and a former San Diego attorney who was disbarred and eventually wound up in Utah. About the same time Utah money was allegedly going to Roberts via Sherry Stewart, she was reportedly placing funds with Colorado money traders Paul Bryan and David Christenson. Those men have also been successfully sued by a Russian investor in Michigan, civilly, for an alleged prime-bank scam. The complaint said the two claimed to be former members of the CIA. According to court pleadings, Bryan entered “a plea of insanity in connection with his plot to murder his wife Ramona Bryan, who became disfigured, and the assassin he hired was killed as a result of that plot.”
Stewart’s “inner circle”—as McAllister calls them, himself included—were so sure they would rake in millions through their prime-bank trading connections, that they traveled as a group to Washington state to organize corporations to handle their fortunes. Stewart told an associate he was going to Seattle “to see Uncle Sam.” Uncle Sam turned out to be David Carroll Stephenson of Tacoma, Wash. Stephenson claims to be an international lawyer. He provided his Utah clients seminars and set them up in corporations with names like Astrotech Enterprises, Inc., Seagull Capital Unlimited and Quest Investments International, Inc.
Stephenson, though, is not a real attorney. And he currently resides at a state prison in Walla Walla, Wash. Like some who are associated with “The Program,” he is a so-called “constitutionalist.” Many constitutionalists believe the federal government created a corrupt system of land ownership wherein the federal government actually owns property and “landowners” rent the property through payment of property taxes. Stewart, in a pleading related to a civil suit against him, said the United States and State of Utah are insolvent, and have no power through their courts to force collection of a debt he owes one of his investors.
The group also used its view of the law to fight eviction. Anderson stayed in the house on Englewood’s Fairway Drive until a sheriff’s deputy showed up with eviction papers. To stave off eviction, indeed, to claim the house as his own, Anderson had filed a document constitutionalists often use in an attempt to claim property: a land patent declaration.
According to charging documents, “Program” promoters did not tell investors how they were making money and whether they had removed funds from the Attorneys’ Title account. Like the traders who were supposedly investing the money Stewart, Anderson and others were pooling, Stewart and Anderson had less than stellar pasts. Investors claim the promoters failed to disclose their dark pasts and may have embellished their résumés.
Paul Stewart, for example, allegedly told investors he had degrees in law and finance. He graduated from Brigham Young University in 1973, but with a degree in recreation education. Stewart did postgraduate work in leisure studies at the University of Utah, according to the records office.
Stewart never revealed to new investors that in March 2000, he had been ordered to cease and desist form selling securities or aiding and assisting others to sell securities. That hand-slap had been the result of FBI and state investigations.
Stewart had taken out personal bankruptcy twice, in 1985 and 1988. Court records show he left dozens of investors, mostly in California, unpaid.
“A lot of [LDS] church members were involved,” recalled a Tustin, Calif., investor.
A California bishop, one of Stewart’s general partners in a prior business, pitched fellow Mormons. “It involved some sort of money exchange or bank that was involved in making some sort of currency exchanges,” the investor said. “It was rather vague. They assured us it was a way of making fast money.”
He said Utah has “the distinction of being the bankruptcy and fraud capital of the United States. … A lot of it relates to church membership—we are a rather trusting people, and have a tendency to invest because we assume they have good business practices.”
Centerville businessman John Hollingshead partnered in a California investment with Stewart during the ’80s. When contacted by City Weekly, he asked if Stewart was still involved in dealing with prime-bank notes. Hollingshead believed Stewart had legitimate financial contacts in the United Kingdom and connections with old-line banks. “If you knew the right people, you could turn money for very sophisticated and technical bank situations, and make a lot of money,” Hollingshead said.
Those ventures were called the Harmony and Prime Investment partnerships. Investors got nothing back. Hollinsghead said Stewart warned investors the deals were high risk, and noted most people only put in about $5,000.
Hollingshead recalled Stewart, at the time, worked as an accountant for a Centerville sign company. “He had very strong comments on what I would call ultra-conservative views on government and also very unique views related to the [LDS] church. He would talk about old history, church history, and how he thought it was different now than it was then, and I think that bothered him.”
Alvin Anderson was also slow to tell investors about his past. Anderson had served time in 1986 and 1987 at the Utah State prison, after convictions on three separate frauds.
Anderson’s first conviction was a 1982 theft by deception case when, as an insurance salesman, he collected premiums for a policy he never had issued. Instead of jail, he was put on probation and given a chance to make restitution. In 1985, authorities learned he had stolen from another insurance client in order to help make restitution payments. That time he got a prison sentence. During the same year, Anderson pled guilty to another theft charge on a so-called Statute of Liberty scam. Anderson collected money from school children to help pay for the restoration of the Statute of Liberty. Instead of sending the money to the restoration foundation, he pocketed it.
“He was supposed to make restitution as part of parole. I think I got $250 of $25,000,” said one of his victims.
Anderson said he didn’t feel like he was deceiving anyone by withholding historical information. He also said he was unaware Stewart had twice taken out bankruptcy, but that information would not have made any difference in his business ventures with Stewart.
Anderson, a returned LDS missionary, has been known to network with members of his LDS wards. Until a few months ago, he was serving as an LDS branch president (an office similar to bishop) of the Davis County jail.
“I’ve never talked to people about church,” Anderson said, claiming he does not use religion to persuade investors. Some investors, though, recall Anderson as identifying himself as an LDS bishop.
Anderson also said he’s more of a disciple of Stewart’s, not an apostle. Stewart’s right-hand man, according to Anderson, is Gary Mickelson, the man with whom both shared the luxury North Salt Lake home. Anderson said he first met Mickelson through a multi-level marketing venture and was later introduced to Stewart. “He and Paul have been together through this whole thing and before,” Anderson said.
Mickelson, according to Anderson, does odd jobs. A licensed pilot, Mickelson “will fly places for people.”
McAllister described Mickelson differently. “Gary is a gopher,” he said. “He’s a really nice guy. But he’s not that bright. He hasn’t had any money for 20 years, so if someone said, ‘Here’s $10 to run this errand,’ he’s off and running.”
But could Mickelson be the ringleader, hiding behind a gopher image? A former employee of Main Street Financial believes Gary Mickelson is Mr. Big. Michael Jacobsen, a former employee of the Salt Lake City company where many of the home loans were brokered, was under the impression Mickelson came up with the idea to tap home equity for investment funds.
“Al and Gary are as much involved as Paul is,” said Jacobsen. “Gary is the one; initially just needed cash. He is the one who came up with the idea of getting homes involved in the equity.”
How does she know? “They told me,” Jacobsen said.
Mickelson, an East High graduate, told City Weekly he had nothing to do with “The Program.” “I know everybody, but I was never a part of it,” Mickelson said.
Mickelson knows Stewart from a few years back, when Stewart was overweight and suffering back problems. “I got him going to the gym,” Mickelson said.
Mickelson also put him on the Body-for-LIFE program, which involved protein drinks and supplements. “He had a bad back because he had too much up front,” Mickelson said.
Stewart “went down to almost 200 pounds from 250,” Mickelson said. Stewart, however, weighed in at 250 pounds when he was booked into Salt Lake County jail this March.
Attorneys’ Title Guaranty Fund: A Deep Pocket?
“Our position is that Paul Stewart, Alvin Anderson, Dale McAllister and others were involved in a very complex scheme to defraud,” said Bob Cohen, attorney for Attorneys’ Title Guarantee Fund (ATGF).
The company operates in several states similar to a McDonalds franchise. It’s a title insurance company owned by and operated through lawyer-members who issue title insurance policies as part of their law practices.
“The fund is responsible for title insurance contracts and has honored them,” Cohen said. “Lenders and others that had insurance contracts have received millions connected with deal.”
The Florida lawyer said it is “a small fringe of people who do not have title insurance who are attempting to look for a deep pocket” and are suing ATGF. He said a number of people who still have cases pending against his client “were very involved in the same conduct that they complain of. It’s mortgage fraud. … It’s an issue between them and their lender more than us.”
He said investors suing ATGF would be like a car buyer suing Ford Motor Company for a single, corrupt salesman at one Ford dealership. His client, ATGF, had “nothing to do with the clowns,” Cohen said.
He portrays Harrison as “a local attorney who had authority to write title insurance; an employee got mixed up in it. It has nothing to do with my client.”
McAllister, who was the closing officer for Harrison’s “branch” of ATGF, backs Cohen up. “As far as I was concerned, it was something we were doing separate form the title company,” McAllister said.
Cohen does not believe suits against his company will make it to trial. He said of a dozen cases pending, “Probably half or more have had any record activity. That’s how strong the cases are.”
Some small investors who claim they were defrauded could have committed mortgage fraud themselves when tapping their home equity through second mortgages to acquire investment funds. As the search for Mr. Big goes on, could it turn out there are also dozens of “Mr. Littles”?