KSL Investigates Why Federal Court-Ordered Payments To Crime Victims Often Go Unfulfilled
Mar 14, 2019, 10:08 PM | Updated: 10:37 pm
NEPHI, Utah – It took 40 years for rancher Paul McPherson to save up $900,000 by raising cattle and selling John Deere tractors. It took his tax and financial adviser four years to steal McPhersons’ lifetime of work — and court ordered restitution may never recover McPherson’s loss.
“I’d go on very few vacations in my life,” said Paul McPherson.
McPherson and 21 other victims trusted Tom Edward Andrews to guide their finances into moneymaking ventures. Andrews invested their money into funds called the Jackson Trust and the Lincoln Financial Group.
In 2016, that trusted tax adviser – who 25 years ago went to high school with McPherson’s kids – pleaded guilty to securities and mail fraud.
In his plea agreement, Andrews told the court he controlled the accounts he steered his clients to invest in, and then used $5.5 million of his investors’ money for his own benefit and living expenses.
“If he could spend that much money that quick, and have nothing when he got through, there’s no way he knew the value of a dollar and how hard it was to get,” said McPherson.
Andrews was sentenced to serve 97 months in prison and repay $8.3 million in restitution to his victims. The judge ordered him to pay a minimum of $250 per month when released. Andrews is also required to pay $25 every three months, or 50 percent of his income, whichever is greater, during his time in prison. That’s little consolation to McPherson.
“It’s like somebody sticking a big knife in your gut,” said McPherson.
Hotbed of Fraud
McPherson and his victims are not alone in Utah. The state is a hotbed of fraud. In the three years since Andrews’ case, more swindlers have been caught and sent to prison.
Wayne La Mar Palmer guaranteed safe real estate income to his investors. Last year he pleaded guilty to wire fraud and money laundering, and was ordered to repay his victims $52 million.
Financial planner Henry Brock promised his investors tax-free retirement account withdrawals. He pleaded guilty last year to tax evasion and securities fraud. He owes victims $12 million.
In cases of financial fraud, large restitution orders can ring hollow.
“People feel like oh, well, isn’t that great. I’m going to get some restitution,” said Salt Lake City based attorney Mark Pugsley.
He said most never do. “They wait and they wait, and they never get a payment, or if they do, it’s minuscule,” said Pugsley.
KSL Investigators reviewed half a dozen recent fraud cases.
In all, judges weighed the total loss, thecriminal’s ability to repay, and set a restitution amount, often with a payment plan.
Those payments varied between $100, $200, and sometimes $500 per month once the defendant was released from prison. The judges set smaller payments during the prison stays as well.
Utah Crime Victims Owed Millions
It adds up to a massive amount.
“$800 million,” said John Huber, the U.S. Attorney for Utah.
He said his office would be lucky to collect four million of that this year.
“Our grandmother taught us the adage you can’t squeeze blood from a turnip,” said Huber.
In most of these cases, the money is already gone.
A 2018 Government Accountability Office report found nearly 90 percent of restitution nationwide is considered noncollectable.
Utah Politician Owes Restitution
But what about cases where there is money?
Utah State Representative Phil Lyman, R-Blanding, owes taxpayers $90,000 for damages caused by a protest ride he organized in San Juan County back in 2014. The judge ordered Lyman to pay the restitution at $100 per month, and Lyman is making the monthly payment. But federal law limits restitution orders to 20 years. When KSL Investigators did the math, Lyman may only pay $24,000, about a quarter of his total restitution amount.
“I don’t have to go beyond that,” said Lyman.
KSL Investigators learned taxpayers have paid Lyman $109,045 since his restitution order was entered against him. He earned wages as a San Juan County Commissioner, fees from public bodies for providing accounting work, and now wages as a state lawmaker.
“I don’t have to say hey, you know what, I’m going to be a really good guy and do much more than the judge did because I don’t agree with what he did,” said Lyman.
But just weeks after KSL Investigators started asking questions, federal prosecutors decided to take Lyman back to court. In a motion filed Wednesday, they asked a judge to increase Lyman’s monthly payment to $500. If the judge approves, prosecutors say Lyman will repay his full restitution amount in 18 years.
While it may be easier for taxpayers to swallow those losses, victims of fraud like Paul McPherson will have to resort to other ways to claw their losses back. So far, McPherson has received three checks, totaling $413.75 out of $900,000 he is owed. He plans to earn back his losses the way he earned them in the first place. Hard work.
“That restitution order is worth nothing to speak of,” said McPherson.
What You Can Do
Prosecutors can lien homes, sell off personal property, garnish lottery winnings and income tax refunds. Victims of fraud can try other tactics to recover some of their losses.
They may be able to file suit against connected businesses or other entities, and try to recover some money indirectly. It’s best to consult an attorney.
Avoiding a financial fraud is key lesson. Lawyer Mark Pugsley maintains this top ten list for avoiding financial scams. He also said key red flags to watch out for include: being rushed into a deal, being offered earnings that are out of whack with what the market is offering, and a general lack of paperwork.
It’s also good advice to run someone’s name through a search engine to search for past malfeasance.
In addition, federal prosecutors warn Utah residents to be aware of what’s called “affinity” fraud, where con artists gain trust of friends, family, coworkers, or fellow church members to convince them to invest money and promise unusually high returns.