12/16/05
Bend,
Oregon Residents and Corporation Indicted in $17 Million
Securities Fraud Scheme
Eugene, Oregon – Karin J. Immergut, the United States Attorney
for the District of Oregon, announced that Michael Marks Rich, Phyllis
Marks Rich, and Pac Equities, Inc., were indicted yesterday by a federal
grand jury in Eugene, Oregon for securities fraud. The indictment alleges
that over $17,000,000.00 was obtained through the scheme. Michael Rich
is also known as Richard Forbes Williams, Richard Morgan Forbes, and
Michael Richard Brown. Phyllis Rich is also known as Phyllis E. Marks,
Phyllis Irene Forbes, Phyllis Berg, Phyllis Henning, Phyllis Swetclay,
Phyllis Laff, Phyllis Hurba, and Phyllis Johnstone. Michael Rich is
68 years of age, Phyllis Rich is 69 years of age, and they have a residence
in Bend, Oregon.
The indictments
allege that defendants Michael Rich, Phyllis Rich, and Pac Equities,
Inc., carried out a scheme to defraud investors in securities offered
by Pac Equities, Inc., through various misrepresentations. The indictments
allege that Pac Equities, Inc. sought investors in real estate projects
with the promise of annual returns of 10% or more, which were often
paid on a monthly basis. It originally provided trust deeds to secure
investments, but later persuaded investors to assign their interests
to Pac Equities, Inc. in exchange for shares or securities in one of
its three funds. These funds were ostensibly operated to earn income
for the investors.
The indictment
further alleges, however, that Pac Equities, Inc. had minimal sources
of income which were insufficient to cover its monthly interest obligations
to investors. New investor money was therefore paid to satisfy existing
investor obligations, creating the perception of a successful business.
This perception was furthered by misrepresentations about the value
of certain holdings, and the loan to value ratio of each holding. Each
investment was ostensibly secured by a trust deed, but in at least some
circumstances the total amount of interests assigned to investors by
trust deeds was more than the value of the property. Similarly, property
associated with Pac Equities, Inc. was used to secure loans. In at least
some circumstances, the total value of the loans was more than the value
of the property.
Each defendant is charged in a two count indictment. One count alleges
securities fraud, and one count alleges the forfeiture of assets which
constitute proceeds of the fraud. Securities fraud is punishable by
up to twenty years in prison. Each defendant has been ordered to appear
for arraignment in United States District Court in Eugene, Oregon on
December 27, 2005.
The Federal Bureau
of Investigation, the Internal Revenue Service, Criminal Investigation
Division, and the State of Oregon, Division of Finance and Corporate
Securities, are jointly investigating this case.
A criminal indictment is only an allegation and not evidence of guilt.
Defendants Michael Rich, Phyllis Rich, and Pac Equities, Inc., are presumed
to be innocent unless and until proven guilty. For further information,
contact Assistant U.S. Attorney Sean B. Hoar at 541-465-6792.
