Posted: Jul 18, 2012 8:06 PM by Erin Schattauer - MTN
Updated: Jul 18, 2012 8:09 PM
A Bozeman man is back in Gallatin County jail and charged in connection with an alleged Ponzi scheme that reportedly defrauded millions of dollars from investors in 20 states and six countries.
Richard F. Reynolds, also known as Richard Adkins, is being held in the Gallatin County Detention Center on a $10 million bond. He faces 20 felony charges that include operating a pyramid scheme, theft by embezzlement, failure to register as a securities salesperson, failure to register a security and fraudulent practices.
Reynolds, 50, is accused of operating a Ponzi scheme involving 140 investors from May 5, 2009 through Aug. 11, 2011. Court documents claim Reynolds made payments to the investors from money obtained from later investors rather than from profits or other income.
Court papers detail several counts of embezzlement and refer to those who entrusted money to Reynolds only by their initials.
"(Reynolds) misled the investors by making untrue statements or omitting material facts when he failed to tell them that he was not investing their money and instead was using it for his Ponzi scheme and/or his own personal use," papers filed in Gallatin County District Court state.
On June 29, 2010, an administrative assistant who had worked for Reynolds contacted the Commissioner of Securities and Insurance (CSI) and reported that he was operating two investment companies in Montana - Buffalo Exchange and Buffalo Extension - in which was soliciting investments and then using investors' funds for personal use and to pay investors, court documents state.
Another former employee contacted the CSI on June 29, 2010 to report that Reynolds was raising money from investors and using those funds to pay previous investors as well as for his own personal use.
Both former employees told the CSI that Reynolds owned an umbrella company known as United and that there were "pyramid schemes" under United, court papers state.
One person told officials that Reynolds "used his affinity with various ministers, pastors, evangelists and other church-related people...to solicit investors into his scheme," court documents state. Court papers list several pastors who reportedly solicited investors for Reynolds.
Reynolds would reportedly pay the pastors about 10 percent of the money they introduced to him for his scheme. The pastors would then become Reynolds' employees and he would issue then W2 forms for their earnings, court documents state.
"In the fall of 2011, the pastors told the CSI that they became suspicious of (Reynolds) because (he) cut off contact, did not return investor money when investors requested and started making promises that the pastors believed he could not keep," court documents state.
Reynolds and his wife have been associated with 31 bank accounts at Bank of America and Wells Fargo, CSI discovered.
"A review of the bank records obtained pursuant to the Investigative Subpoena shows that the Defendant and Lori received at least $5,388,343 in investment funds from over 140 investors located in Montana, Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Louisiana, Maryland, Michigan, Mississippi, Missouri, New York, North Carolina, Tennessee, Texas, Virginia, Washington, Wisconsin, Canada, Germany, South Korea and Russia," court papers state.
CSI determined in an investigation that Reynolds misappropriated about $5,388,343 and used about $4,367,425.11 of that for his and his wife's own personal use and used about $1,020,917.89 for his Ponzi scheme.
An employee for several of Reynolds' companies told the CSI that she was concerned that Reynolds was engaging in illegal activities and that "he is not concerned about who he hurts - seniors, and even single parents with kids."
He is scheduled to appear before District Court Judge Holly Brown at 2:30 p.m. on Tuesday.