Judge bars accountant testimony in alleged $200 million investment fraud case

Jeffrey D. Allred, Deseret News

SALT LAKE CITY — A father and son say the criminal fraud case against them is tainted because a prominent forensic accountant once retained for their defense switched sides and became an expert witness for the prosecution.

Wendell Jacobson and his son Allen Jacobson want a 3rd District judge to throw out the 15 counts of securities fraud and one count of pattern of unlawful activity they are facing. The pair offered investors ownership in apartment communities across the country through their company, Management Solutions Inc., based in Fountain Green.

“In this case, the Jacobsons cannot get a fair trial,” attorney Rick Van Wagoner said at a hearing Friday.

Van Wagoner argued that Gil Miller, senior managing member of Rocky Mountain Advisory, profusely tainted the case with the many roles he has played in the eight years the Jacobsons have been tied up in federal and state court.

Judge Paul Parker declined to dismiss the charges, but ruled that Miller won’t be allowed to testify at the Jacobsons’ trial. The judge also ordered the Utah Attorney General’s Office to set up a “taint team” to screen witnesses who had interaction with Miller and will allow defense attorneys to challenge whether those witnesses should be allowed to testify.

“He has literally worn every hat there is to be worn. I think that makes him a very odd person for both sides to deal with,” Parker said.

Van Wagoner said after the hearing he might appeal the decision.

Miller first worked as a consultant for the Jacobsons when the Securities and Exchange Commission started investigating them in 2011. Miller then became an accountant to the receiver appointed in the SEC civil case before being appointed as the receiver to manage the Jacobsons’ frozen assets. The state later hired him as an expert witness when it filed criminal charges against the father and son.

As the accountant for the Jacobsons’ lawyers in the SEC case, Miller was privy to documents, analysis and legal strategy, defense attorneys argued. Van Wagoner said Miller has also talked with the SEC, FBI, investors and state prosecutors through his work.

“If the state could put on a case Mr. Miller has not touched, OK. It can’t,” Van Wagoner said.

The SEC shut down the Jacobsons’ business in 2011, accusing them of running a $220 million Ponzi scheme. U.S. District Judge Bruce Jenkins ruled that Management Solutions was not a Ponzi scheme and the Jacobsons settled the case without admitting wrongdoing.

In 2015, the state filed criminal charges against the Jacobsons.

Prosecutors allege the Jacobsons, through a complex web of more than 200 corporate entities, raised more than $200 million from 400 investors with “material and pervasive misrepresentations” starting in 2008. They told investors they would buy apartment complexes with low occupancy rates at discounted prices, then renovate and sell them within five years, but failed to disclose that they diverted the money to run numerous other entities, according to the charges.

Miller’s involvement has been a point of contention ever since.

“The taint is everywhere,” said Marcus Mumford, the lawyer for Allen Jacobson.

Assistant attorney general Robert Steed told the judge that the state isn’t guilty of any “outrageous” conduct that would warrant the charges being dismissed. Miller, he said, is an expert witness and not a member of the prosecution team.

“It’s really just a legal issue that the courts deal with all the time,” he said.

Steed told the judge prosecutors having other ways of putting on their case without Miller, including hiring another expert.

Though the state didn’t accuse the Jacobsons of operating a Ponzi scheme, Steed said its case mirrors the SEC complaint. Basically, they told investors one thing and did another, he said.

Mumford said investors testified at a preliminary hearing that there were no misstatements made, and but for Miller’s testimony, the Jacobsons would not have been bound over trial. Van Wagoner said the receivership is now shut down and investors were paid 100 cents on the dollar.

“That doesn’t happen in a Ponzi scheme,” he said.

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