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It was once touted by federal regulators as the largest financial fraud in Utah history, but a federal judge ruled Thursday that a Fountain Green real estate investment company accused of defrauding investors was not a Ponzi scheme as it has been historically defined, though specific transactions might have been illegal.

In a detailed 44-page decision, U.S. District Judge Bruce Jenkins ruled the company called Management Solutions Inc. was on the whole not a Ponzi scheme as the Securities and Exchange Commission alleged when it filed a lawsuit against the company and its owners in December 2011, alleging they fraudulently took in more than $200 million from at least 220 investors.

Jenkins acknowledged in a ruling tracing the legal history of Ponzi schemes from Charles Ponzi in 1919 to Bernie Madoff in 2008 that there were various financial irregularities as the company was operated by owners Wendell A. and Allen R. Jacobson, including "many Ponzi characteristics." But he said those irregularities need to be dealt with transaction by transaction, and not as a single, giant fraud.

"It seems to me that the 'Ponzi presumption,' in equity, as to third parties, should be of limited use — indeed, only in those cases as blatant and as plain as the original Charles Ponzi case and the more recent Madoff case: assetless and fraudulent from day one," the judge wrote in a ruling released Thursday. "This is not that case."

An attorney for Wendell Jacobson, Stephen Quesenberry, said that while his client already has settled the case against him personally and agreed to a $140,000 fine and possible future repayments to investors, he feels vindicated.

"When they raided Wendell's business in Fountain Green in December 2011, an SEC representative went on TV and said 'Wendell Jacobson is the Bernie Madoff of Utah,'" Quesenberry said. "This decision puts that to rest. Wendell Jacobson is not the Bernie Madoff of anywhere."

SEC Regional Director Ken Israel declined comment, saying the ruling affected the court-appointed receiver and not his agency.

The ruling also represents a victory for some investors who had opposed the designation that the whole enterprise was a Ponzi scheme because it would have allowed a court-appointed receiver to "claw-back" money from some of them who received returns in excess of their capital investments depending on when the payments were made.

Rob Clark, an attorney for the McDermott family of investors, said the ruling was an important one for investors because it means they will be treated much the same when refunds are made.

"It keeps all investors on a equal footing," he said.

The Management Solutions case has been complicated and contentious from the beginning, pitting not just the SEC against the Jacobsons, but investors against the receiver, attorney John Beckstead. At stake were hundreds of millions of dollars worth of property, mostly apartment buildings in various states.

Beckstead declined to comment on Jenkins' decision.

Beckstead had proposed a plan to sell almost all the assets at an auction and had recruited a "stalking horse" buyer who would have had an inside track in buying the properties.

But investors had banded together and opposed that proposal, arguing it was sweetheart deal for the probable buyer and would have resulted in losses of millions of dollars. Beckstead eventually abandoned that plan.

Now, the investors are proposing their own liquidation plan in which they will take over the properties themselves, sell some and manage the apartments until they can be sold for a better price.

"The bottom line is that the investor plan will add tens of millions of dollars of value to the estate while also avoiding administrative costs and burdens to the effect that, in the end, all the stakeholders will be benefitted," said Greg Hoole, the attorney for the investor group.

Jenkins noted the Jacobsons put money from various projections into a single entity then used that as a pool to fund their obligations, including for projects that did not meet promised returns for investors. Part of the definition of a Ponzi scheme is that money from new investors are used to pay off existing investors to make a failing enterprise appear profitable but Jenkins said that was not the case with many of the transactions directed by the Jacobsons.

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