SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 22195 / DECEMBER 15, 2011
SEC v. Management Solutions, Inc, Wendell A. Jacobson and Allen R. Jacobson, Case No. 2:11-cv-01165 BSJ (USDC Utah, Filed December 15, 2011).
SEC OBTAINS ASSET FREEZE AND OTHER RELIEF IN $220 MILLION OFFERING FRAUD
On December 15, 2011, the Securities and Exchange Commission obtained a temporary restraining order and an emergency asset freeze in a $220 million real estate based offering fraud and Ponzi scheme orchestrated by Wendell A. Jacobson and Allen R. Jacobson through Management Solutions, Inc. and over 200 other entities controlled by the Jacobsons. In addition to the asset freeze, the court has appointed a receiver to preserve and marshal assets for the benefit of investors.
The complaint alleges that Wendell Jacobson and his son Allen Jacobson operate from a base in Fountain Green, Utah, and offer investors the opportunity to invest in limited liability companies (LLCs) in order to share ownership of large apartment communities in eight states. It is alleged that the Jacobsons have been soliciting investors personally and through word of mouth and appear to be using their memberships in the Church of Jesus Christ of Latter-Day Saints to make connections and win over the trust of prospective investors. The complaint further alleges the Jacobsons have been representing that they buy apartment complexes with low occupancy rates at significantly discounted prices, renovate the properties, improve their management, and aim to resell them within five years. Investors are promised they will share in the profits derived from rental income at the apartment complexes as well as the eventual sales. However, it is alleged that in reality the LLCs are suffering significant losses and the Jacobsons are merely pooling the money raised from investors into large bank accounts from which they are siphoning money to pay family expenses and the operating expenses of their various companies. They also are allegedly paying earlier investors with funds received from new investors in classic Ponzi scheme fashion.
The Commission’s complaint charges Management Solutions and the Jacobsons with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and charges the Jacobsons with violations of Section 15(a) of the Exchange Act. The complaint seeks a preliminary and permanent injunction as well as disgorgement, prejudgment interest and civil penalties from Management Solutions and the Jacobsons.
The SEC’s investigation was conducted by Alison Okinaka, Scott Frost, Paul Feindt and Norm Korb; the litigation will be led by Daniel Wadley and Tomas Melton. The SEC acknowledges the assistance of the United States Attorney’s Office for the District of Utah, the Federal Bureau of Investigation and the Internal Revenue Service in this matter.