Vescor Capital Owner Charged In $140 Million Utah Real Estate Scheme

February 6, 2008 -- The founder and president of VesCor Capital was charged today with nine felonies for allegedly bilking 817 investors out of an estimated $140 million. The Utah Attorney General’s Office charged Val E. Southwick with nine second-degree felony counts of securities fraud for his involvement in a commercial real estate investment scheme.

According to an investigative summary by the Utah Division of Securities, Southwick and VesCor raised more than $445 million from banks, professional investors and unsophisticated investors. Southwick is alleged to have created approximately 150 different corporate entities in Utah, Nevada, and other states to solicit investors and to transfer funds between different company bank accounts.

VesCor purchased a handful of properties, including undeveloped land in Deer Valley, medical office buildings in Nevada and California, and industrial property in Montana and Nevada. Almost all of these properties had liens to banks and professional investors, leaving the unsophisticated investors unsecured.

The investors were allegedly told their money would be used to develop these properties and were given promissory notes pledging to pay 10-20 percent interest annually. Instead most of the money was used to make interest payments to earlier investors. No interest payments have been given to investors since mid 2006.

Southwick allegedly told investors the following:

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The company owned real estate valued at 200% of the amount given by investors.

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Investments were secured because the investors’ names would be listed on first trust deeds to the properties

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Investments would be used to purchase, develop, and sell property.

The investigative summary also alleges that Southwick raised money from investors without disclosing that he had been previously ordered by the Utah Division of Securities to cease violating the securities laws, that the company had a negative equity of $77 million at the end of 2004, and that investor funds were commingled with other investment funds and used to pay Southwick’s personal expenses and interest payments to other investors.

Today’s criminal charges are being filed at the same time as a civil lawsuit by the Securities and Exchange Commission (SEC) against VesCor, Southwick and other VesCor entities. The Utah Division of Securities investigated Southwick and VesCor entities with assistance from the Utah Attorney General’s Office and the SEC.

“Cases of this magnitude and complexity require the cooperation of state and federal offices,” says Utah Attorney General Mark Shurtleff. “By working together we were able to devote the resources to gather information from numerous investors in other states and overseas.”

“Investors appear to have lost $140 million of their life savings and retirement funds,” says Wayne Klein, Director of the Utah Division of Securities. “The fraudulent elements of the investment scheme remained hidden so long because Southwick kept assuring investors the company was profitable, then solicited money from new investors to pay interest to existing investors.”

Criminal defendants are presumed innocent unless they are found guilty at trial or plead to criminal charges. If convicted, Southwick could face up to 15 years in prison for each felony count. The investigations into VesCor are continuing and additional charges may be forthcoming against others who may have participated in this scheme.

Source: Utah Attorney General

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