Prison Sentences Imposed on Three Former Owners of Summit Accommodators in Bend for $13.7 Million Fraud
|U.S. Attorney’s Office December 17, 2013|
PORTLAND, OR—Yesterday, U.S. District Court Judge Anna J. Brown imposed prison sentences on Mark Neuman (78 months), Tim Larkin (54 months), and Lane Lyons (54 months) for lying to and misleading clients about how they held and used millions in client funds while operating Summit Accommodators Inc., previously headquartered in Bend, Oregon. In addition to their prison sentences, the defendants must each serve three years of supervised release.
“Attorneys, certified public accountants, and business executives who, motivated by greed, lie to clients to gain use of their money for personal purposes are especially deserving of prosecution and punishment,” said U.S. Attorney Amanda Marshall. “This office and our federal and state partners will do whatever it takes to bring dishonest professionals to justice. Besides seeking tough sentences for white-collar fraudsters, we will continue to go after their ill-begotten assets to compensate victims of these schemes.”
On July 3, 2013, on the 17th day of trial, a jury in federal court in Portland convicted the three former owner/operators of Summit Accommodators Inc., of Bend, of conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with a 10-year fraud scheme. About 10,000 clients entrusted them with almost $1 billion from 1999 to 2008, when the business closed and filed for bankruptcy. The defendants used $75 million of client funds for undisclosed personal investments in real estate, investments in businesses in the Bend area, and loans to business associates and family members.
Neuman and his business partner Brian Stevens, both certified public accountants, created Summit in 1991 to help customers take advantage of lawful federal income tax deferral transactions. In a typical transaction, a customer would sell income producing property, allow Summit to hold the proceeds of the sale, and then buy another income producing property within 180 days. Federal income tax laws then allowed the customer to defer paying taxes on the profits from sale of the first property. Summit eventually opened affiliate offices in Texas, Washington, Utah, Montana, Wyoming, Nevada, and Lake Oswego, Oregon.
In 2002, Neuman and Stevens hired Larkin as Summit’s chief operating officer. In 2005, Neuman and Stevens hired Lyons as Summit’s in-house counsel. In 2006, Larkin and Lyons became equal partners in Summit with Neuman and Stevens.
The trial evidence showed that although Neuman and Stevens began using their clients’ exchange funds for personal investments before 1999, they promised their clients their exchange funds would remain in Summit bank accounts and would only be used to complete their tax deferral exchanges. Neuman was responsible for language in Summit marketing brochures and Summit’s website. Both falsely promised Summit would maintain client funds in bank accounts or in government securities.
From 2004 through October 2008, Summit held between $49 million and $109 million of its customers’ money in a typical month. The defendants routinely transferred large amounts of client money to Inland Capital Corp., another company they owned and controlled. Through Inland, the conspirators used client funds for over 100 real estate projects in Central Oregon in which one or more of them had direct personal interests.
In 2006, defendant Lyons warned his partners in a confidential memo that “the use of exchange funds by Inland constitutes...a misrepresentation to our clients under their exchange agreements” and further stated if the use of client funds came to light “fraud charges will be leveled” against each owner. Despite this warning, the defendants continued to solicit and take in new client funds until days before shutting their doors.
The co-conspirators hid the fraud scheme by concealing from most of Summit’s employees and from most of the owner-operators of Summit’s branch offices that the conspirators were using Summit customer money to invest in real estate and for loans to themselves and others. In February 2007, when Summit’s clients and branch owner-operators began to express concern about the safety of Summit client money, the conspirators lied by saying that all Summit client money was deposited and maintained in financial institutions or invested in highly-secured short term notes.
“Summit clients lost millions while the owners of Summit Accommodators tried to make easy money,” said Kevin Rickett, Acting Special Agent in Charge of the FBI in Oregon. “While today’s sentencing brings about closure to this criminal investigation, we should remember the long-term toll that such scams can have on the victims.”
“Fraud, like many financial crimes, threatens the financial health of our communities,” stated Tamera Cantu, Assistant Special Agent in Charge of IRS-Criminal Investigation. “IRS-Criminal Investigation is committed to ensure that those who engage in these illegal activities are investigated and brought to justice.”
Summit co-owner Brian Stevens previously pleaded guilty to identical charges and testified against his former partners at trial.
This case was investigated by the Federal Bureau of Investigation; IRS-Criminal Investigation; the United States Postal Inspection Service; and the Oregon Division of Finance and Corporate Securities. Assistant U.S. Attorneys Seth D. Uram and Donna Maddux handled the prosecution of the case.