U.S. Attorney’s Office for the District of Utah Collects More than $10 Million in Civil and Criminal Actions in Fiscal Year 2022
SALT LAKE CITY - Armand R. Franquelin, age 57, of Liberty, Utah, who pleaded guilty in May to securities fraud and money laundering in connection with an investment fraud scheme related to a real estate project in Vernal, Utah, will serve 57 months in federal prison. U.S. District Judge Dale Kimball imposed the sentence Wednesday afternoon in U.S. District Court in Salt Lake City.
Judge Kimball also ordered Franquelin to pay restitution of $6,566.596.85 to victims of the fraud and to be on supervised release for three years when he finishes serving his prison sentence.
Franquelin and a co-defendant, Martin A. Pool, age 44, of Atlanta, Georgia, were charged in a three-count felony information filed in April. Both pled guilty in May to securities fraud and money laundering in connection with the scheme. Pool was sentenced to 78 months in federal prison in September.
As a part of a plea agreement reached with federal prosecutors, Pool and Franquelin admitted that from 2006 to 2010, they participated in persuading investors to convert their traditional IRAs to self-directed IRA accounts and invest their funds in a residential real estate project known as Haven Estates in Vernal, Utah. This was accomplished by inducing the investors to direct their funds to their company, The Elva Group, in return for notes promising monthly interest payments at annual rates between 8 percent and 20 percent. Pool and Franquelin admitted telling investors that their funds would be used to develop Haven Estates and promised to secure their loans with first lien positions in property at Haven Estates. In fact, no investors ever received any collateral or any interest in real property in Haven Estates or anywhere else.
In reality, the plea agreement says, investors’ funds were used for purposes other than the development of Haven Estates. Investors were not told of encumbrances already in place on Haven Estates. When Elva began defaulting on the mortgage loan for Haven Estates, investors were not immediately informed. Eventually, Haven Estates was foreclosed.
According to the plea agreement, investors’ funds were used by Pool and Franquelin and their associates for their personal benefit and to pay interest to earlier investors as Ponzi payments. The Ponzi payments had the effect of lulling the earlier investors, persuading them to leave their funds in the company and inducing them to renew their promissory notes from time to time. The payments also enticed new investors to invest.
The case was a multi-jurisdictional investigation by special agents of the FBI and IRS-Criminal Investigation; the Utah Department of Commerce, Division of Securities; and the Alabama Securities Commission with assistance from the office of Baldwin County, Alabama, District Attorney Hallie S. Dixon (28th Judicial Circuit). Alabama victims of the scheme invested more than $500,000.
Alabama Securities Commission Director Joseph Borg, said, "This Commission is proud to have joined the collaborative efforts of the federal and state law enforcement agencies and their professional staff members to see that justice is served for the victims in this important case. The outcome resulted from a team approach between the U.S. Attorney's Office in Utah, the Utah Department of Commerce's Division of Securities, the FBI, the IRS, and the ASC Enforcement and Legal Divisions to send a message that this financial crime, and others like it, will not be tolerated and will be prosecuted to the fullest extent of the law."
“The sentencing today demonstrates that taking money from investors under false pretenses and using it for your own personal benefit as Pool did won’t be tolerated. IRS Criminal Investigation is proud to bring our forensic accounting skills to this investigation and, working side-by-side with our law enforcement partners and prosecutors, help put a stop to this and other types of white collar crime,” said John Collins, IRS Criminal Investigation Special Agent in Charge of Utah.