President and CEO of Pac Equities – Michael Rich – Sentenced to 20 Years in Prison!

Twenty years in federal prison for fraud – by anyone’s standards, that’s painful. But this story goes, in some ways beyond pain. You see…Michael Rich - just sentenced to 20 years in prison is 71 years of age. (Rich

is also known as Richard Forbes Williams and Michael Richard Brown.)

What a way to retire. But the rest of the story is his wife, Phyllis Marks Rich, age 70, was sentenced to 51months for her role as chief operating officer in the fraud.

Phyllis Marks Rich is also known as Phyllis Marks, Phyllis Berg, Phyllis Henning, Phyllis Swetcoy, Phyllis Laff, Phyllis Hurba and Phyllis Johnstone. Gotta admit here I’m confused with all the names. Either there is a multiple personality issue, she’s been married more times that I would care to know, or she loves alias names. Go figure? Either way, Rich was also ordered to pay $13,400,138.79 in restitution to more than 300 victims.

The total fraud according to the US Attorney’s office was substantial. Pac Equities had an office in Bend, Oregon, and purported to manage profitable real estate development projects, including a subdivision in Phoenix, Arizona, a high-density townhouse development in Salem, Oregon, a dairy in Culver, Oregon, a resort complex in Ocean Shores, Washington, commercial buildings in Redmond, Oregon, and an industrial park in LaPine, Oregon. Rich and Pac Equities also purported to make profitable loans. They facilitated these activities by soliciting investors to invest in real estate development projects and loans with the promise of annual returns of 10% or more, which were paid on a monthly basis. They represented that the investments were secured by trust deeds and always had at least 30% in equity, with no more than 70% loan to value ratio. The evidence at trial, however, showed that in selling real estate investment contracts, Rich misrepresented a variety of things about his educational background, his employment history, and the nature and security of the contracts, which caused over 300 people to invest over $18,000,000 with Pac Equities.

Rich and Pac Equities created the facade of a successful business by using investor principal to make monthly payments to investors. They represented that these payments constituted interest earned from profitable investment and loan activity. They used this facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans. These amounts were insufficient to meet monthly interest obligations which Pac Equities owed its investors.

“It can be devastating when the financial well-being of an individual falls into the wrong hands through trickery and deceit,” said Kenneth Hines, the IRS Special Agent in Charge for the Pacific Northwest. “The days are numbered for those who peddle false hopes and dreams, and prey on investors for their own personal financial benefit.”

Rich and his company would then use the money received to create a “facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans,” the U.S. Attorney’s Office said. “These amounts were insufficient to meet monthly interest obligations that Pac Equities owed its investors.” Basically nothing more than a big Ponzi scheme.

Here’s a question! For those who were swindled: what caused you to make the first investment with the Rich’s? Knowing that more than 300 investors were conned – it would be helpful to others to share your experience.

Earlier this evening I got off the phone with another individual who was conned under a huge Ponzi scheme and the effect to this person is devastating. Not only did he lose his life’s savings planned for his retirement, but the effect has been far reaching as it relates to him mentally and emotionally.

Consider responding to these questions:

1. What about Rich’s investment attracted you?
2. How were you first introduced to Rich and his investment scheme?
3. When did you first find out it was a sham?
4. Did you ever refer others to Rich thinking that you were helping them?
5. What effect has this had on your life?

Know that you can reply without revealing any identifying information.

PLEASE COMMENT!

Chuck Gallagher, business ethics speaker, signing off…

Dumb and Dumber – Terrance Healy and Todd Olynciw Plead Guilty To Stealing from The Hartford and Tax Fraud! Oh, Well!

When you write about a massive Ponzi scheme or substantial fraud with multiple variations and many victims, you come to expect intelligence when the fraud is discovered. Then, however, you come across a fraud that reminds you that all frauds aren’t well thought out. As I state often, every choice has a consequence. In this case I just shake my head as the crime was dumb from the beginning!

Todd Olynciw was a project management manager at The Hartford Insurance Company (“The Hartford”) and was responsible for managing office renovations. Terrance Healy was the owner and operator of Sundrop Corporation, a business engaged in interior design and furniture installation for Connecticut and Massachusetts companies. Seems that Healy admitted that he conspired with Olynciw to transport in interstate commerce furniture that was owned by and belonged to The Hartford, knowing that the furniture was stolen and taken by fraud.

Hum…stealing furniture and reselling it. Now, if you’re going to commit a fraud is that the brightest thing to do? Actually, committing a fraud is dumb no matter how you slice it. But conspiracy to commit a fraud is inherently flawed. Two involved together in a fraud mean you start with a 50% chance that someone will have an “ethics” moment and confess. But on with the story…

On numerous occasions between 1998 and 2005, Healy paid Olynciw a total of approximately $71,854 for furniture that was owned by and belonged to The Hartford. On several occasions, Olynciw caused the stolen furniture to be transported from a facility in Massachusetts to Healy in Connecticut. But there’s more to the story…as it doesn’t stop here.

Healy and Olynciw also conspired to defraud the Internal Revenue Service. (That is never a smart thing to do!) Starting in approximately April 2000, Healy gave Olynciw cash for the stolen furniture so that Olynciw could avoid detection and assessment by the Internal Revenue Service for these payments. Olynciw did not report the payments that he received from Healy for the stolen furniture on his federal income tax returns.

The Outcome:

Olynciw elected to plead guilty to mail fraud and tax evasion. He is scheduled to be sentenced on April 30th. Healy, age 62, just plead guilty and is facing 5 years in prison and up to a $250,000 fine. The Hartford lost $876,437 as a result of the scheme, and Olynciw received more than $395,720 in illegal kickbacks.

Comments:

As a white collar crime and business ethics speaker, I see so often the impact that choices have made on people’s lives. You do reap what you sow. Both Healy and Olynciw will likely spend time in federal prison. That is not a place to begin one’s retirement – as it appears Healy will be doing.

When Healy and Olynciw take their first steps into federal prison – when they go through processing – when they are given their prison uniform…then it will begin to settle in – crime doesn’t pay!

Your comments are welcome!