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SEC Busts Utah Operations for $10M in Restitution

The SEC on Wednesday sued three men, two of whom are already in prison, accusing them of bamboozling victims of $10 million in Utah.

SALT LAKE CITY (CN) — The SEC on Wednesday sued three men, two of whom are already in prison, accusing them of bamboozling victims of $10 million in Utah.

Thomas Edward Andrews, 39, of California, pleaded guilty to mail fraud and securities fraud on Dec. 15, 2016 and was sentenced to 8 years in federal prison and restitution of $8.4 million. Most of his victims were longtime family friends, the SEC says in the federal complaint.

“Almost all of Andrews’ victims were people he had known while growing up in Nephi, Utah. These individuals were unsophisticated in investment matters and accustomed to doing business on a handshake,” the SEC says. Andrews ran his scam from 2010 to 2015, with help from his “full-time personal assistant,” Scott Walter Christensen.

Christensen, 46, of Utah, pleaded guilty on Nov. 3, 2016 to securities fraud and lying to a federal officer and was sentenced to a year and a day in prison and criminal restitution of $1 million.

Andrews told his victims to liquidate their other investments and invest in the Jackson Trust. “In fact, the ‘Jackson Trust’ did not exist and Andrews was simply misappropriating his clients’ funds for his own use,” the SEC says.

He simply set up an account called the Jackson Trust at a local credit union, deposited his victims’ money in it and took the money as he pleased, according to the complaint. Then he set up “the Lincoln Trust” and did the same thing. He spent the money on “cars, mobile homes, alimony, trips to Disneyland, guns, dining out and numerous stays at luxury resorts in California. He bought one or two new vehicles every month, often choosing luxury cars,” according to the SEC.

Christensen helped defraud the victims by, among other things, cutting and pasting phony account statements, photocopying the cut-and-pasted documents and sending them to the victims. Andrews paid him $1 million for this, which he spent on his “home mortgage, car payment, wife’s car payment, and … various items such as a computer, jewelry, guns and an ATV and trailer.”

The scheme ended in late 2015, when investors got wise.

In the second case, also in Federal Court, the SEC sued Michael D. Shumay, 61, of American Fork, a CPA. He was also a corporate secretary and treasurer of two Utah water companies, American Fork Irrigation Co. and Lehi Irrigation Co. His trick was “misappropriating dozens of shares of unauthorized stock in the companies, [and] selling them to unsuspecting investors,” the SEC says. It says he swiped at least $435,500 this way, and also took outright “at least $633,396 from the companies,” and concealed it by juggling the books.

The SEC seeks disgorgement, penalties and wants Shumway barred from serving as an officer or director in any company that must register with the SEC.

Categories / Criminal, Securities

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