Mining Ponzi alleged
August 20, 2007
A Fallon attorney faces Securities and Exchange Commission charges that he helped organize a Ponzi scheme that defrauded investors of $20 million.
The lawyer, Rick Lawton, contends the SEC doesn’t understand the mining industry and fails to appreciate the value of the mining claims that are at the heart of the regulatory agency’s complaint.
The SEC filed charges against Earthly Mineral Solutions Inc. and Natural Minerals Processing Co., both of Henderson. Charges also were filed against Roy D. Higgs and Frank Schwartz, both of Henderson, as well as Lawton. The SEC said the three men were the principal officers of the companies.
Higgs, Schwarz and Earthly Mineral Solutions also face criminal charges filed by the U.S. Attorney for Missouri. Lawton is not named in those charges.
The SEC charged that the defendants pitched a plan in which investors would provide money to expand the processing and fertilizer production operations of Earthly Mineral Solutions and Natural Minerals Processing.
They promised investors a 7 to 9 percent annual return. But the SEC said neither company was operating as a functioning business, and early investors were paid from the money invested by later investors a Ponzi scheme.
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The investments were sold between 2003 and 2006, regulators said.
The program raised approximately $20 million from more than 100 investors nationwide, and the SEC said many of the investors used retirement savings or liquidated Individual Retirement Accounts to put money into the investment.
“This classic Ponzi scheme was particularly deplorable because, as our complaint alleges, the defendants specifically sought investments from individuals saving for retirement,” said Andrew G. Petillon, associate director of the SEC regional office in Los Angeles.
Lawton, meanwhile, said SEC attorneys have little knowledge of the mining industry.
“I have grown up in the heart of Nevada’s mining country near Tonopah, and it is very clear that the lawyers in Los Angeles have very little knowledge as to the great value of mining claims in Nevada, be it gold, silver or dolomite and dolomitic limestone,” he said.
Lawton said mining claims owned by Earthly Mineral Solutions have been appraised at $107.7 million.
He said the SEC also fails to appreciate the value of the property for uses other than mining.
“The mining claims in question are blocking the expansion of Las Vegas to the south where the anticipated new airport is to be built,” he said. “I wonder what the press release will say at the conclusion of the case.”
In court documents, the SEC said the two companies and their officers solicited investors through print and television advertising, then flew them to Las Vegas for once-a-week sales seminars at which Lawton, Higgs and Schwartz participated.
Earthly Mineral Solutions paid Higgs, Schwartz and Lawton each a salary of $20,000 a month and provided them each with a $3,000 monthly housing allowance and a company car, the SEC said.
The agency asked a federal court for a permanent injunction and civil penalties against the defendants and asked that they be ordered to disgorge their profits.