Litigation Release No. 23250 / April 30, 2015
Securities and Exchange Commission v. Joel I. Wilson et al., Civil Action No. 12-cv-15062 (E.D. Mich.)
Michigan Businessman Sentenced to Up to 20 Years for Defrauding Investors
The Securities and Exchange Commission announced that on April 24, 2015, the Honorable Joseph K. Sheeran of the Bay County Circuit Court in Bay City, Michigan sentenced Joel Wilson to concurrent prison terms of 105 months to 20 years and 80 months to 10 years on six criminal counts. The Court ordered that he pay $6.5 million in restitution, plus $11,000 to the Michigan Attorney General's Office for the costs of extraditing him from Germany. Wilson, 32, of Saginaw, Michigan, had been previously found guilty by a jury in March 2015 of fraudulent sale of securities, sale of unregistered securities, and continuing a criminal enterprise or racketeering and larceny.
The criminal charges arose out of the same facts that were the subject of a civil enforcement action that the Commission filed against Wilson on November 15, 2012. According to the Commission's complaint, Wilson defrauded investors who bought unregistered securities offered by his company, Diversified Group Partnership Management, LLC, and sold through his brokerage firm, W R Rice Financial Services, Inc. Wilson raised approximately $6.7 million from approximately 120 investors who bought Diversified Group's securities from September 2009 through October 2012, and used the funds to finance his business of buying, renovating, and selling houses in and around Bay City, the Commission alleged.
Although Wilson promised investors that he would invest their money in real estate that would yield returns of 9.9% per year, he used most of it to make unsecured loans to his real estate business, which did not generate enough income to repay the investors. Wilson also diverted $582,000 of investor money to pay personal expenses, including $75,000 he used to buy W R Rice Financial, $46,780 he spent on travel, and $35,000 for his wife's business. In addition, Wilson used investors' money to pay for a sponsorship and tickets to the Saginaw Sting football team and to buy thousands of dollars worth of tickets to the Detroit Red Wings.
The Commission also alleged that Wilson raised additional funds for his real estate business through stock sales for another of his companies, American Realty Funds Corporation, which traded on the OTC Bulletin Board under the symbol ANFDE at the time and is now no longer listed. The complaint alleged that there were misrepresentations and omissions in some of the reports the company filed with the Commission, which Wilson signed, including that American Realty had failed to make loan payments and that its purportedly independent directors have undisclosed personal and business relationships with Wilson.
The Commission's complaint, filed in the U.S. District Court for the Eastern District of Michigan, charged Wilson and Diversified Group with violations of the registration and antifraud provisions of the federal securities laws and American Realty with violations of the antifraud and reporting provisions of the federal securities laws. When Wilson failed to answer the Commission's complaint, the Court granted the Commission's motion for entry of a default judgment against him. On July 26, 2013, the Court entered a Second Amended Final Judgment against Wilson, which permanently enjoined Wilson from future violations of the federal securities laws and ordered him to pay disgorgement of $6,403,580, prejudgment interest of $290,319, and a civil penalty of $7,500 for a total of $6,701,399. The Commission also entered a final administrative order on October 17, 2014, barring Wilson from associating with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in an offering of penny stock.