Brian Jared Smart
Brian J. Smart is an American accused of securities fraud. He is a resident of Lehi, Utah, and together with his wife, Kelli Rae, heads the investment company Smart Assets, LLC.
SEC charges
On March 11, 2009, in the Utah Federal Courts, Judge Bruce S. Jenkins granted, for the Security Exchange Commission (SEC) an injunction temporarily freezing the assets of Brian J. Smart and Smart Assets, LLC, (SALLC) furthermore ceasing them from continuing to engage in the fraudulent offer and sale of securities. The District of Utah froze the defendants' assets in what the complaint describes as a "3 phase" six-year operation that Smart had used to facilitate his Ponzi scheme. A permanent injunction hearing requesting a permanent asset freeze was, once again reset on May 26 to a later date, in the Utah District Court.
Smart supposedly promised returns of 8.5 to 18 percent, but SEC lawyer Thomas Melton, in radio InterViews on March 12 and 13th 2009, said that Smart never invested the money. "What he did instead was spent a large amount of the money on his own personal uses," Melton said. "He invested on some risky real estate deals. He also paid out some investors' money to earlier investors." According to the complaint, Smart misappropriated some investor funds for his personal use including purchasing a home and paying for his living expenses to support his wife and seven children. Melton said that Smart went to great lengths to convince investors he was a sophisticated investment professional, when the money was really being diverted to Smart's own personal use and Business operations.
The commission's complaint alleges that Smart and Smart Assets, LLC, engaged in a Ponzi scheme in the offer and sale of promissory notes and other securities over a period extending back at least six years. According to the complaint, the defendants fraudulently raised approximately $1.68 million from investors. The complaint isolates three phases of Smart's alledged Ponzi scheme.
In the first phase he is said to have converted money invested with his father in law's company, AIM, in Anaheim, California by way of forgery. It is alleged that he forged the signature of a client to gain control of and then liquidate the life savings of an Alzheimer's victim and his wife, after his death. In the first stage of the fraud, Smart solicited investors, most of them elderly, from acquaintances and clients he had at the AIM Association, a financial planning and insurance firm in Anaheim, California. Smart was affiliated with AIM, but was terminated in 2004. Despite being terminated, he continued to represent orally and in e-mails that he was still associated with the company. He told one investor in August 2007 that he was helping to set up an AIM office in Utah with the assistance of his supervisors when, in fact, he had not been associated with the company for over three years.
Smart represented to these investors that, through the various entities with which he was affiliated, he was providing a conservative, sound investment opportunity for them to receive regular monthly income.
The commission's complaint goes on to allege that Smart went to great lengths to convince the investors that he was a sophisticated investment professional operating a legitimate investment planning service, when in fact he was misappropriating funds for his own personal use and investing the remaining funds entrusted to him in illiquid and ill-fated real estate ventures.
The complaint describes how in the second stage of the fraud, having invested the money in a failed real estate transaction instead of in conservative investments as promised, defendants began soliciting additional investors and providing these new investors with promissory notes and certificates to memorialize the monies invested. Smart provided at least one investor with a "Membership Certificate" for Smart Assets, LLC (SALLC) purportedly representing 200,000 units of membership in SALLC. The certificate, which resembles a STOCK certificate, was signed by Smart, and appears to memorialize an investment of $200,000. Smart provided the investors with promissory notes issued by SALLC and in his capacity as an individual. These promissory notes were for annual rates of return of 8.5% to 18%
In the third stage of the fraud, Smart represented to a group of investors that he was using the money invested with him to lend out at higher rates through a "hard money loans" program. Smart issued promissory notes to these investors and told them that he would in tum lend out the money invested at higher interest rates. Some of the money he obtained was lent to a start-up company with which Smart was affiliated and the remainder was used to pay off earlier investors.
The Complaint alleges that Smart and his "Smart Assets" violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the US Securities Exchange Act of 1934 as well as Rule 10b-5 thereunder. The SEC requested both emergency and preliminary relief, the Commission's Complaint is also seeking permanent injunctions, disgorgement & civil penalties.'''
Subsequent actions
Brian J. Smart retained, thus far only for interviews and contact with the SEC, noted Salt Lake City attorney Paul T. Moxley, with the law offices of Parsons, Kinghorn and Harris. The website for Mr. Moxley states that he is an expert in "Security Violation and White Collar Crime". A request for more time to reply to the complaint was filed on March 30 3:42pm. The next hearing on the Utah action is May 26, 2009. Any and all of Mr. Smarts assets are frozen until at least the May 26th hearing.
During his preliminary March 10 2009 testimony to the SEC Brian J Smart invoked his rights under the Fifth Amendment to the United States Constitution; court papers state that he and his lawyer were unable to isolate the provision he was relying upon. All questions to him were answered with the same reply.
An investigator with the Grantham Law Firm has posted an E Mail, that an associate of Smart's (Todd Smith) sent to the Investigator via e mail and explained that he was loaned 150k by Smart and he paid Smart back $700k
On March 30 2009, 3:42pm upon the eve of the due date for the Answer to the Complaint, and on the actual day that the answers to the first set of Interroatories were due to the court, Brian J Smart filed a request Pro Se requesting more time to answer the SEC complaint. In his motion he states that Attorney Paul Moxley's office has had "conversation with him" regarding this matter but that he is not able to afford his services and needs more time.
April 1, 2009 the SEC filed Partial Opposition to the Motion of Brian Smart and Smart Assets LLC for the Extention of Time. The SEC argues that Mr. Smart has had enough time to produce records and documents yet he has not produced any financial records or account statements to date. This motion allows the extention of time to file answer's to the complaint but objects to extentions of time for production of documents. It requests that production take place within 7 days and agrees to extend time for his reply to April 22, 2009 The April 1 SEC filing also notes that although Smart has pointed out the problem that he can not afford an attorney, as a result of the court ordered freeze and requested more time, in its moving papers the SEC claims that Mr. Smart has not offered a solution as to how he plans to finance his legal expenses.
On April 17th 2009, Judge Dale A. Kimball issued an order and set a deadline of April 22, 2009 for the filing of a answer to the complaint. Judge Kimball also issued an order providing a deadline of 12:NOON April 24, 2009 for the production of all discovery.
Furthermore Judge Kimball places on notice, Brian J Smart, to the effect that the court can not allow a non attorney to represent a corporation in a court matter, “As a general matter, a corporation or other business entity can only appear in court through an attorney and not through a non-attorney corporate officer appearing pro se.” and continues by noticing Smart that he must obtain counsel or risk having a default entered upon his company: Smart Assets LLC.
April 22, 2009 Smart Assets LLC's new attornies filed an answer to the SEC complaint on SALLC's behalf. His answer was to deny SEC's charges upon him in what is considered "a general denial" to the charges alleged in the SEC complaint. Brian J Smart also filed a answer In Pro Se again in what is considered "a general denial" to the charges alleged in the SEC complaint. Also filed on 4/24/2009 was a The service document was filed by attorneys Gordon W. Duval and J. Grant Moody, of Duval & Moody P.C. 937 South 500 East, Suite 200 (no city or state was listed on any this firms court filings)
Federal Case Index
1 SMART, BRIAN J. cacdce 5:2009mc00007 03/13/2009
2 SMART, BRIAN J. caedce 2:2009mc00018 03/13/2009
3 SMART, BRIAN J. hidce 1:2009mc00054 03/13/2009
4 SMART, BRIAN J. utdce 2:2009cv00224 03/11/2009
5 SMART, BRIAN J. casdce 3:2009mc00225 03/13/2009
6 SMART, BRIAN J. candce 3:2009mc80047 03/19/2009
References
- SEC Complaint. Civil Action No. 2:09-cv-00224-DAK filed March 11, 2009
- Fields Moseley, KUTV Channel 2 (13 Mar. 2009): SEC alleges Utah man ran "Ponzi-like scheme", accessed 1 Apr. 2009
- Tom Harvey, Salt Lake Tribune (15 Mar. 2009): LDS members targeted in California scheme, accessed 1 Apr. 2009.
- Partial Opposition to the Motion: 1 accessed April 1, 2009
- Declaration of Brian T Fitzsimmons, attorney for the Securities and Exchange Commission HERE
- Court Order on Pro Se request for more time. accessed April 17th, 2009
- Smart Assets LLC's answer to complaint 2 filed by the law offices of Duvall & Moody, a law firm in American Fork, Utah accessed April 22, 2009
- Certificate Of Service on behalf of Smart Assets LLC, responses to Plaintiff's First Set Of Interrogatories, Request for Admissions, and Request for Production of Documents accessed April 26, 2009