The two allegedly promised an 18 percent return on investment to clients and attracted at least $1.8 million from 18 victims beginning in 2005. Their biggest investor was Norm Chow, the former Utes' offensive coordinator, who invested $500,000.
The 66-year-old father pleaded guilty to two counts of third-degree felony attempted securities fraud as part of a plea deal with prosecutors, while Quintin Smith, 33, pleaded guilty to two counts of misdemeanor attempted securities fraud.
On Monday, 3rd District Court Judge Elizabeth Hruby-Mills suspended a prison sentence of up to 10 years for Michael Smith, opting instead to send the man to jail for one year, along with 36 months probation.
Quintin Smith's one year jail sentence was suspended in favor of 24 months probation and 180 days in the Davis County jail, which has a work release program.
The father was immediately handcuffed after the sentence was handed down Monday, while his son who broke into sobs as his father was led away was allowed to have until Friday to sort out the logistics of reporting to a different county jail.
According to charging documents, the Smiths ran a business called Newport Financial that bought the contracts of furniture customers who could not qualify for traditional financing. The Smiths understated the default rate of the furniture customers and lied about the solvency of the company, which operated only with new investor money, the documents state.
At least five of the investors did not receive their promised payments and lost at least $911,000 in the deal, the documents state.
The scheme allegedly lasted from September 2005 through August 2009.
During that time, Michael Smith served as first counselor in the University LDS Church 2nd Stake presidency in Salt Lake City, which was dissolved in April 2011 during organizational changes. Several of the victims met the Smiths through relatives, but at least one attended church with Michael Smith, investigators said.
Quintin Smith's attorney, Bradley Nykamp, told the judge Monday that the father-son duo had good intentions when they started their business the son had seen the business model run successfully in the past but the business quickly spiraled downward with the economic recession that began in 2007.
"They honestly believed they could run this business successfully," Nykamp said, adding that they would not have asked for the money from friends and family if they thought they knew what the "end result" would be.
Defense attorneys for the Smiths asked for probation so they could work on repaying the large amount of restitution, while prosecutor Steven Gibbon asked for prison for Michael Smith, and jail time for Quintin Smith.
"This is not a case where there was a business that was not being run very well," Gibbon said. "Representations that were made were rose-colored glasses assessments."
One victim, John Vandecamp, spoke during Monday's sentencing, saying that he had invested $60,000 in the company while he was attending graduate school.
"We trusted in them," he said. "We put forth significant amounts of money we had earned."
Letters from other victims asked the judge for leniency and for the Smiths to not be incarcerated so they could work to repay the restitution. Chow asked in his letter that Michael Smith, his "life-long friend," not to be sentenced to jail.
"Needless to say, my wife and I are deeply disappointed in what has transpired, but frankly, find very little need for incarceration," he wrote.
A restitution amount was not resolved in court Monday, but another hearing for Quinton Smith was set for Dec. 9, and another will be held next year when Michael Smith is released from jail.