KNIGHT RIDDER/TRIBUNE BUSINESS
NEWS
| Wednesday, November
18, 1998 BY STEPHEN POWER, THE DALLAS MORNING NEWS
Nov. 18--The Securities and
Exchange Commission said Tuesday that it has filed a federal lawsuit against
five Texans who allegedly took part in a scheme to con hundreds of investors
in 18 states out of more than $14 million.
The defendants -- who officials said include one Dallas resident and
one Grapevine resident -- allegedly persuaded clients to invest in nonexistent
bank notes that they claimed would generate returns of between 6 percent
and 18 percent a month.
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investing the money, SEC officials said, the defendants
bought cars, houses, furniture and other personal items and used the remaining
money to attract more clients. Although similar schemes have become common
in recent years, the case announced Tuesday involves more money than any
other brought to court in Texas in recent memory, the head of the SEC's
local office said.
"It's becoming a significant problem in the Southwest and one which we're trying to alert the public to," said Harold F. Degenhardt, the SEC's district administrator. "These were essentially unsophisticated investors, but even sophisticated investors have been sucked in." The Texans named by the SEC included Quentin D. Hix, 50, of Dallas; Gene Coulter, 62, of Grapevine; Carolyn Don Hicks, 63, of Sulphur Springs; Carl L. Weaver, 46, of Blossom; and Robert Cord, 44, of Seabrook. Neither Mr. Hix nor Mr. Coulter returned messages left at their residences. Mr. Cord was being held in Oklahoma City on Tuesday on an unrelated federal offense, a U.S. Bureau of Prisons spokesman said. The remaining Texas defendants could not be reached. Four other individuals named in the case are from out of state. Mr. Degenhardt said the SEC believes the defendants spent at least half of the $14.5 million they raised, but added, "we expect that [amount] to increase as we get further into discovery." A federal district court judge in Dallas, Sidney A. Fitzwater, agreed Friday to freeze the assets of the nine individuals and seven companies named in the case. The judge also appointed a Dallas attorney, Michael J. Quilling, to act as a receiver, whose job is to determine what assets can be sold to help investors recoup their losses. Mr. Degenhardt said investigators have not determined how many investors lost money in the scheme but said the amount is "in the hundreds" and spread across at least 18 states, New Zealand and Antigua. In a typical scheme, Mr. Degenhardt said, the defendants would buy newspaper advertisements in Dallas and Houston promoting investment opportunities with "the world's leading banks." The defendants would then hold seminars at hotels in which they promised returns of between 6 percent and 18 percent on a typical investment, he added. Instead of paying the investors, the SEC said in its court filing, the defendants "used most of the ... funds for personal expenses," such as vehicles, furniture and in one case, a swimming pool. The defendants typically stalled clients until they could find new investors and new money to buy themselves time, Mr. Degenhardt said. "These things generally have a short life span," said Mr. Degenhardt, whose agency was helped by the Texas State Securities Board and FBI agents and the U.S. Attorney's Office in Houston. "No matter how gullible people are, at some point they're going to become restless." Court documents filed by the SEC state that the defendants carried out their scheme since September '96. The defendants generally offered few specifics about how investors' money would be used, Mr. Degenhardt said. According to court documents, materials handed out by the defendants said the money would provide funding to international banking firms for loans to underdeveloped countries under the auspices of the International Monetary Fund. "People asked very few questions and those who did were generally placated by more general talk," he said. ----- Visit The Dallas Morning News on the World Wide Web at http://www.dallasnews.com/ (c) 1998, The Dallas Morning News. Distributed by Knight Ridder/Tribune Business News.
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