Lawyer – Ted Russell Schwartz Murray – Guilty! White Collar Crime Speaker Chuck Gallagher Comments

As the time of decision grew near, the only thing that Ted Russell Schwartz Murray could likely have wished for is another storm.

The trial which began on Sept. 8, 2008, was interrupted by Hurricane Ike, and concluded with the return of the guilty verdicts yesterday.  A Houston federal jury has convicted Ted Russell Schwartz Murray, a lawyer licensed in Texas and Florida, of conspiracy to commit mail fraud and securities fraud in connection with the operation of Money Mortgage Corporation of America, a subsidiary of Premiere Holdings, LP, a real estate investment program.  Murray was also convicted Murray of making a False Statement on Tax Returns for the years 1999 and 2000.

Murray and co-defendants David Isaac Lapin and Jeffrey Carl Wigginton, Sr. were all charged by indictment in August, 2006. Lapin and Wigginton pleaded guilty in August 2008 to the conspiracy to commit mail fraud and securities fraud for their roles in the scheme and are pending sentencing in Nov. 2008.  Murray was charged separately in a second indictment with the tax offenses.

Every choice has a consequence.  As a business ethics and white collar crime speaker I have seen over and over the consequences of greed motivated actions.  For a fraud to exist three things exit: (1) need; (2) opportunity and (3) rationalization.  The verdict was guilty.  The question is what was the motivation of Murray and his co-conspirators.

According to the US Attorney’s news release:

During trial, the United States presented its evidence proving that between 1996 and 2001, Murray, 57, conspired to commit mail fraud and securities fraud in the promotion and marketing of the Premiere 72 or “P72″ mortgage investment program. Murray testified at trial and denied he had made false representations to investors when the program was promoted with promises of (1) 12% interest; (2) 1st liens on real estate; (3) 72 hour liquidity; and (4) 70% loan to value ratio. However, the evidence proved that so-called interest payments were actually set aside from a portion of the investor’s principle and returned to them as interest; many loans were not secured by 1st liens on real estate; and many loans were not based on a 70% loan to value ratio. Lapin, a co-conspirator in the scheme, testified that he and his co-defendants failed to disclose to investors the fact that loans on certain projects were actually in default at the time the funds of new investors were placed in these loans. An expert witness, qualified in forensic accounting, testified that the Premiere 72 program was conducted like a Ponzi scheme, where the money from new investors is used to pay earlier investors.

Mortgage Crisis – no wonder.  With practically free money and a country that seemed to believe that real estate had no ceiling, the opportunity was right the perpetration of such a fraud.  Likewise, in the current economic climate with fear leading the way, others will rise to fill the void.

While admitting that the above material facts were not disclosed to investors, Murray blamed his partners claiming Lapin had failed to live up to his fiduciary duties and both Lapin and Wigginton failed to disclose to investors that Premiere Holdings charged fees ranging from 15 -25% from investor funds. Murray denied any responsibility to disclose any material facts to investors.

With sentencing following in March 2009 the failure to accept personal accountability will no doubt play a role in the length of sentence.

Over 500 people invested in the fraudulent mortgage investment program promoted by Murray and his co-conspirators.  During the five year period the scheme operated, Premier Holdings, LP, Murray and his co-conspirators generated more than $200 million in gross receipts. Premier Holdings, LP, filed for bankruptcy in Oct. 2001 at which time the company had more than $160 million of investor funds tied up in the fraudulent scheme.  Murray filed for personal bankruptcy a short time thereafter.

The jury found Murray guilty of all 20 counts submitted to the jury arising from the scheme to defraud investors including the conspiracy charge, 14 counts of mail fraud, and four counts of securities fraud. The conspiracy conviction and each of the convictions for mail fraud carry a maximum statutory penalty of five years imprisonment. The securities fraud counts of conviction each carry a maximum penalty  of  10 years imprisonment.  Each count also carries a maximum fine of $250,000.

In addition to the scheme to defraud, Murray was also charged and convicted in a separate case with two counts of making a false statement on his tax returns based upon evidence which proved that Murray disguised personal expenses as business expenses and deducted a portion of those expenses on his tax returns, including a $29,000 Rolex watch, payments to casinos, a series of payments totaling over $5 million for return of principal to investors, payments for a $1 million ownership interest in the building where Premiere held its offices at 11451 Katy Freeway, and gifts to family members.  Murray faces a maximum of three years imprisonment and a $250,000 fine on each of two counts of conviction.

Considering where we are today – economically – I would not be surprised to see that the sentence would err on the heavy side.  For those who read this – if you know Murray perhaps you could give some clue as to what motivated his behavior.  Obviously, Murray was educated and hence would know the difference between right and wrong, between ethical behavior and unethical behavior.

Comments are welcome

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