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The mayor of the city of Cedar Hills in Utah County is being sued by federal regulators for allegedly soliciting investor funds for commodities trading then fraudulently using some of it for personal expenses and doctoring accounts to cover losses.
This is the second time the name of Mayor Eric A. Richardson, 38, has come up in a fraud case along with that of Christopher D. Hales, 31, who is serving a 7½-year federal prison term from a separate mortgage and bank fraud case.
In a lawsuit filed Wednesday, the Commodities Futures Trading Commission alleges that Richardson and Hales, joint owners of a company called Bentley Equities LLC, fraudulently solicited monies from 38 clients.
Richardson and Hales took in about $2.3 million but then used $557,000 for personal expenses such as for autos, food, clothing and credit card payments, the lawsuit says. They used another $71,000 to make payments to existing clients "in the manner of a Ponzi scheme."
The two also falsely claimed that they actively managed more than$1 million in trading accounts and had made hundreds of thousands of dollars in profits with software that could guarantee successful trades, the complaint says.
In fact, it says, they never managed more than $480,000 in trading accounts at any one time and lost about $1.3 million of client funds.
"To conceal their trading losses and misappropriation, defendants issued false account statements to participants and clients by altering trading statements," the lawsuit says.
The Commodities Futures Commission alleges those activities violated various federal laws and is asking that Richardson and Hales be enjoined from future violations of federal laws, be fined an unspecified amount and ordered to disgorge monies they misused.
Richardson did not return an email and a voice mail seeking comment.
In 2010, Richardson's name came up when Hales was indicted on fraud charges. Federal investigators said Richardson participated in four allegedly fraudulent schemes but he has not been charged.
According to prosecutors:
• Richardson was a "cohort" of Hales who participated in a "securities fraud scheme" that bilked a man out of $300,000 involving a nonexistent $25 million certificate of deposit.
• Hales, Richardson and another man scammed a mother and son out of $244,000 supposedly invested in computer servers with a company called PMI that could predict stock market fluctuations.
• Hales and Richardson were allegedly involved in a "car loan scheme" in which vehicle prices were inflated and excess money from loans skimmed off.
• Hales, Richardson and two others bilked a Bosnian immigrant family who spoke little English out of their home in a scheme in which the family was loaned money to meet family financial emergencies but then, despite assurances to the contrary, their house was sold out from under them.