Chesterton Tribune

 

 

Former realtor Don Johnson charged with 14 felonies

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Don Johnson, the former Duneland real estate agent whose broker’s license was permanently revoked by the state in 2012, has been charged with 14 felony counts, following an investigation by the Chesterton Police Department and the Indiana Secretary of State’s Securities Division.

The basic allegation: that Johnson sold securities related to a Tennessee real-estate venture which were not registered; and that he was not himself registered to sell securities.

The secondary allegation: that Johnson committed securities fraud.

Investigators say that Johnson’s alleged victims--six of them are listed in the charging information but the Secretary of States Office indicated today that there may be more--lost tens of thousands of dollars, which investigators say Johnson withdrew from his business in cash or used to pay personal bills.

Johnson is specifically charged with six counts of securities registration violation, alleging that he sold unregistered securities; six counts of broker-dealer registration violation, alleging that he sold or offered to sell securities without being registered to do so; and two counts of securities fraud, alleging that he “employed a device, scheme, or artifice to defraud”; or “made an untrue statement of material fact”; or engaged in business practices which “would operate as a fraud or deceit upon another person.”

Each count is a Class C felony punishable by a term of two to eight years.

Johnson, 49, of 222 Mineral Springs Road in Porter, was booked into the Porter County Jail at 11:30 a.m. Sunday, after being taken into custody by Chesterton Police while leaving his martial arts studio on Broadway.

Porter Superior Court Judge Roger Bradford set bond at $50,000 surety or $10,000 cash.

The Complaint

In January 2012, a man who would later be named in the charging information as one of Johnson’s alleged victims, filed a complaint against Johnson with the Chesterton Police Department. Shortly thereafter, Charles Williams, an investigator with the Secretary of State’s Securities Division, became involved. Williams and CPD Sgt. Chuck Rinker would eventually interview six persons who invested varying sums of money in Johnson’s business, Private Lending LLC.

Williams, in his probable cause affidavit, summarizes the complaint against Johnson this way:

* Johnson solicited moneys from persons “by guaranteeing a certain high-interest return on their money,” typically in a real-estate development venture in Tennessee.

* Johnson’s investors would then roll over their IRA accounts to Equity Trust Company, an independent IRA custodian, which in turn would transfer those moneys to Johnson’s company, Private Lending LLC.

* “Investors received promissory notes showing the guaranteed interest rate return” and signed by Johnson.

* In some cases, investors did receive interest payments as promised by Johnson, “for a period of time.”

* But then the interest payments would stop, and when investors “requested their investment back, Johnson told them it was unavailable.”

* Investors “were unaware that their money was missing” in the first place because the IRA custodian, Equity Trust Company, “would continue to send statements showing the money was in their accounts” and would continue to “bill them for custodial fees.”

Johnson himself was interviewed by Williams and Rinker in September 2012, at which time Johnson admitted that he was never registered to sell securities, that he had never registered his company to sell securities, and that the securities which he sold were themselves not registered, Williams stated in his affidavit.

“Johnson stated that the money he collected (from investors) would come into his company, Private Lending LLC, and he would take expenses from that account,” Williams stated. “Johnson is the only owner of said company and states that he did not keep an accounting for the business and doesn’t have any of the checkbooks for the Private Lending LLC account.”

A review of the bank records, however, showed the following, Williams stated: “money transferred to Johnson was then used to pay, what appeared to be, a few interest payments to other investors, was transferred to other bank accounts, was taken out in cash, and was used to pay personal bills of Johnson.”

Alleged Victims

Two of the alleged victims originally met Johnson when they hired him to buy or sell a house, Williams stated; two of them met him at their church, where “Johnson was an elder”; one was a part-time realtor at Johnson’s realty company in 2007; and one was the husband of a woman who had worked for Johnson.

* To one alleged victim Johnson promised 10-percent interest on a $300,000 investment on a seven-year promissory note. The investor received $2,500 monthly interest payments for around two years, after which time they became “less-than-full amounts” and then stopped completely. “Johnson refused to make any more payments or return the $300,000 principal,” Williams stated.

* To another alleged victim, Johnson promised a 100-percent profit “in one year,” if the man invested his $101,463.55 401K retirement fund into the Tennessee project. The man received only $35,000 to $36,000 from Johnson, Williams stated. And the moneys invested with Johnson accounted for 80 percent of all of his retirement funds.

* To a third alleged victim, Johnson promised a 15-percent return, in two years, on a $100,000 investment. The man advised investigators “that when inquiring about his investment, Johnson relayed to him that the downturn in the economy caused the Tennessee project to be put on hold,” Williams stated.

* To a fourth alleged victim--who belonged to Johnsons church--Johnson promised a 30-percent return on a $60,000 investment, from the woman’s National Steel retirement account. Five years after signing the promissory note, in February 2013, Johnson told the woman that “the downturn in the economy had halted the real estate project.” Still, the woman kept receiving statements from Equity Trust Company showing a balance of $59,000 or more, Williams stated, and did not realize that she’d “lost all the money” until she talked to her son about the situation.

From the Secretary of State’s Office

Indiana Secretary of State Connie Lawson released the following statement today: “Real estate schemes are some of the most common forms of investment fraud that come across my desk. I hope this case serves as a reminder to check with my office to ensure the investment is registered before investing. I would also like to thank (Porter County Prosecuting Attorney Brian Gensel) for his work. This arrest would not be possible without him.”

Although the 14 charges filed against Johnson are in connection with six alleged victims, “investigators believe there may be other victims in the Porter County area,” the statement said.

 

Posted 3/18/2014