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A St. George man, facing 10 criminal charges for his alleged role in what appears to be Utah's largest financial fraud, is suing a state agency for failing to help protect him from the scam.
In a complaint filed in federal court, Bill Hammons is charging that the Division of Securities failed in its duty to police Val Southwick, the Ogden man now serving prison terms for bilking investors through his real estate development companies generally known as VesCor.
Hammons was the single largest sales agent of VesCor, and allegedly assisted Southwick in defrauding investors of more than $45 million, according to court documents. About 800 investors were owed about $180 million when VesCor collapsed in 2007. Investigations show that VesCor was a Ponzi scheme in which money from newer investors is paid to more mature ones to make it appear the business was prospering.
Hammons, according to a lawsuit, lured investors to VesCor with promises of secure investments with high returns. From 1998 to 2006, Hammons received $10.4 million in commissions or referral fees and made $1.2 million on his own investments with VesCor.
Now Hammons is facing a February 2011 trial on felony charges in the case. But in a complaint filed as part of a federal court lawsuit, he charges that the Utah Division of Securities failed to help protect him from VesCor after the agency sanctioned Southwick in 2002.
As part of the 2002 deal with VesCor, the division was required to obtain a list of current investors and find out whether they had been informed of their right to rescind their investments, Hammons' attorney, Clifford Dunn, argues in the complaint. He charges the division failed to carry out those duties.
If Hammons and others "had received notice of the 2002 division agreement and an appropriate and clear letter of rescission, they would not have continued to invest with VesCor," the suit says.
Hammons is asking for unspecified damages to be determined at trial and that the division be responsible for all or part of any monies Hammons is ordered to pay in an action brought against him by the court-appointed receiver of VesCor.
In a response filed in court, an attorney for the Division of Securities says the 11th Amendment of the U.S. Constitution bars suits against state government agencies in federal courts. A spokeswoman for the division declined to comment further.
Hammons, 65, who was charged in January 2009, now has a 10-day jury trial set for Feb. 14, 2011, in St. George.
Hammons is charged with four counts of securities fraud, four of sales of securities by an unlicensed agent, one of abuse of a vulnerable adult (for investments from a couple in their 70s) and one of conducting a pattern of unlawful conduct. Hammons faces possible prison sentences of 1 to 15 years in jail for the second-degree felonies and 0 to 5 years for third-degree charges.
Besides Southwick and Hammons, the only other person charged criminally in the VesCor case is Shawn Moore, 44, a top VesCor manager. He is facing 12 felony charges for his alleged part in the real estate investment scam.
A three-day jury trial in Moore's case is scheduled to begin Jan. 12 in Salt Lake City.
No other participants in the scam are expected to be charged criminally, though many are being sued in federal court in an effort to recover monies.