South Jordan Man Sentenced to 78 Months in Prison for Real Estate Investment Fraud Scheme
Received Around $49 Million from Investors; Paid About $37 Million in Ponzi Payments
|U.S. Attorney’s Office September 17, 2013|
SALT LAKE CITY—Kenneth Case Tebbs, age 42, of South Jordan, will spend 78 months in federal prison after pleading guilty to one count of wire fraud in connection with a real estate investment scheme. U.S. District Judge David Sam imposed the sentence Monday afternoon in U.S. District Court in Salt Lake City.
Judge Sam scheduled an October 10, 2013, hearing to resolve restitution issues in the case. Tebbs must report to the U.S. Bureau of Prisons to begin serving his sentence on October 28, 2013. He will be on supervised release for 36 months when he finishes his prison sentence.
According to a sentencing memorandum filed by the U.S. Attorney’s Office, buying and selling residential properties and undeveloped lots was a hot and profitable investment during Utah’s real estate boom from 2004 to 2007. Starting in 2005, Tebbs, through his two companies, Twin Peaks Financial and MNK Investments, attempted to take advantage of the boom by promising significant annual returns of 18 percent plus origination points ranging from one to five percent to investors. However, federal prosecutors say his business plan exceeded economic reality and beginning in 2006, the investment plan quickly migrated to a Ponzi scheme that could only be sustained through soliciting more investors.
In a plea agreement reached with federal prosecutors, Tebbs admitted that in 2006, he expanded Twin Peaks’ business to focus on the purchase and acquisition of large subdivision projects of approximately 20 lots. At this point, Tebbs claims he began to lose control of the business. Money that was needed to fund these larger projects quickly exceeded Twin Peaks’ incoming cash flow. He admitted deciding that the way to sustain Twin Peaks’ business operations was through the infusion of new investor money. He also admitted recognizing that Twin Peaks could not continue to sustain its ongoing purchases or larger projects. Consequently, the number of investors quickly exceeded the number of investment properties under Twin Peaks’ ownership and control. To keep the business going through new investments, Tebbs admitted he began falsifying and forging recording stamps on old trust deeds and provided new investors with “new” trust deeds, knowing that multiple investors were now secured by the same property.
As the Ponzi scheme progressed, Tebbs admitted knowing that the total amount of new investor funds used to pay old investors far exceeded any cash flow stemming from the Twin Peaks properties.
“It’s difficult to know what was going through the defendant’s mind as he continuously lied to investors about the soundness of rolling over their investments and returns, knowing full well their investments were not even worth the paper on which fabricated trust deeds were printed and provided to investors,” Assistant U.S. Attorney Mark Y. Hirata wrote in the sentencing memorandum. “The defendant’s excuse of losing control of the business, while convenient, cannot mask his irrefutable knowledge of a failing business, bereft of profits, and his unmistakeable efforts to exploit investors willing to part with their hard-earned money, inheritances, and retirements so that they too could take advantage of the defendant’s genius in cornering Utah’s real estate market.”
Hirata argued for a sentence of 78 months given the egregious nature and circumstances of the Tebbs’ Ponzi scheme.
According to the plea agreement, Tebbs accepted money from investors ranging in amounts from $15,000 to as much as $11.3 million. During the fraud period, he admitted receiving approximately $49 million from investors and paying out approximately $37 million in Ponzi payments.
The case is being prosecuted by the U.S. Attorney’s Office in Utah and investigated by the FBI.