Utah senator taking another shot at affinity fraud

His bill, aimed at those who exploit victims' trust, would make it easier to get more money in court.
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A Utah state senator is taking another shot at a huge problem called affinity fraud, in which a member of a group takes advantage of a shared bond of trust and defrauds another.

This time, Sen. Ben McAdams, D-Salt Lake City, is aiming to make it easier for people who have been defrauded by someone using connections to a church or other group to recover triple damages through a lawsuit.

McAdams has filed a bill to be taken up when the Legislature convenes on Jan. 23 that amends state securities laws. It would add to his measure last year that created an added criminal penalty for people who take advantage of a relationship of trust to carry out fraud.

His bill would loosen the standards for when a victim of affinity fraud can recover triple damages, also called treble damages, in a lawsuit. State law currently says that can occur when the act was intentional or reckless. McAdams wants to add the standard of negligence, meaning the perpetrator should have known that what they were pitching was not legitimate.

McAdams said he hoped the change would bring more lawsuits against those who perpetrate such crimes and help regulators deal with a tidal wave of affinity fraud that has come to light in the past few years.

"To help to do the work of the government [regulators] we're bringing in some of the victims of these frauds who may be more willing to step out and see that their best chance of recovering the money they're losing is by bringing a lawsuit and stopping the perpetrator," McAdams said.

Keith Woodwell, director of the state Division of Securities, said he supports the bill, though it deals with private suits that don't necessarily involve his regulatory agency. The bill would make it easier for fraud victims to collect more money in a private lawsuit, he said.

"Negligence is a lower standard than recklessness or intentional," he said. "So if you can show it was reckless or intentional you get treble damages or if you can't show reckless or intentional but you can show that it was at least negligence and it was affinity fraud then you can still get the treble damages."

Because most Utahns are members of The Church of Jesus Christ of Latter-day Saints, many in recent years have been victims of fraud by others who prey on them through church affiliations.

Just a little over three weeks ago, the Securities and Exchange Commission sued a Fountain Green father and son, Wendall A. and Allen R. Jacobson, alleging they used their LDS connections to market real estate investments. The pair operated a Ponzi scheme that took in more than $200 million, according to the lawsuit.

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