SALT LAKE CITY (CN) - A recidivist Ponzi operator ran a $60 million scam while he was on parole and subject to home visits, searches and other restrictions, 16 investors say in a lawsuit against Utah, its prison system and its Board of Pardons and Parole. The plaintiff investors say they lost a total of $27 million.
The plaintiffs, led by Jon Van de Grift, say the state failed to monitor parolee Richard Higgins from 2005 to 2008.
Higgins was convicted of securities fraud in 1999.
His second scam centered on the purchase and financing of apartment properties around the country and included double closings, giant commissions and false tax returns, the investors say in their state court complaint.
The SEC charged Higgins for the second scam in 2008, and the plaintiff investors filed a previous lawsuit against Higgins and several banks, title companies and legal firms in 2010.
According to the investors' most recent complaint: "The State of Utah and its departments, officials and employees did not adequately supervise Higgins, and, as a result, he was able to travel extensively, take in and defraud investors of millions of dollars, and execute a multi-state real estate investing scheme though Madison Real Estate Group LLC, and other companies he owned and operated, that turned out to be a $60 million Ponzi scheme."
All the while, Higgins was "subject to home visits and searches by defendants, obligated to prove to defendants that he was fully employed in an employment approved by his probation officer, and expressly prohibited from, among other things: 'handl[ing] peoples money in escrow or and other manner,' being 'self-employed or a principle [sic] in any company, limited partnership or any other entity,' and leaving the State of Utah, even briefly, without prior written permission from his probation officer," the complaint states. (Brackets in complaint.)
But Higgins traveled out of state "with or without prior written permission," handled million of dollars "of other peoples money" in accounts bearing his name, failed to attend mental health therapy and blew off more than $2 million in restitution to victims of the first scheme during his parole, the investors say.
"This action seeks to hold the State responsible for its own acts and omissions allowing one of the more notorious and recent Utah frauds - the Madison Group Ponzi scheme - to incubate and flourish right under the noses of State officials. ...
"At a minimum, defendants should have observed the violations of Higgins' parole, revoked it and warned investors in Madison Group of Higgins' past conduct and parole violations," the complaint states.
The investors seek punitive damages for negligent supervision, failure to warn and gross negligence.
They are represented by Marcus Mumford.
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