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Tuesday, March 09, 2010
Vaughan Facing SEC Investigation
By Richard Metcalf
Copyright © 2010 Albuquerque Journal Journal Staff Writer
Albuquerque real estate executive Doug Vaughan has more to worry about than his recent bankruptcy filing and an investigation by state securities regulators into his investment practices.
The U.S. Securities and Exchange Commission has launched its own probe involving Vaughan, and he has hired a highly specialized criminal lawyer from Baltimore to represent him.
The Saul Ewing law firm and one of the firm's partners, Charles Curlett Jr., have been retained for $200,000 as Vaughan's personal legal counsel for the SEC investigation.
"Saul Ewing will advise you in connection with the investigation styled 'In the Matter of Integra Investment Group' ... currently being conducted by the Securities and Exchange Commission, and will defend you against any criminal charges brought by the Department of Justice ..." according to a letter from the Ewing firm to Vaughan in the bankruptcy court file.
Vaughan, who filed for bankruptcy Feb. 22, needs approval from the bankruptcy trustee to pay the Ewing firm. He also seeks permission to hire Albuquerque lawyer Robert Gorence for the state Securities Division investigation and to assist the Ewing firm in the SEC probe.
The lawyers would be paid from a $200,000 pre-bankruptcy retainer provided on Vaughan's behalf by an individual identified in a court document as "Bob Turner," a social friend and creditor.
Well-known Albuquerque businessman Bob Turner of Bob Turner's Ford Country told the Journal that he wasn't the person who put up the $200,000 retainer.
An objection filed Monday with the court by creditors Michael Menke and Philip Dugan complains of "exorbitant fees" from Vaughan's estate being used to pay attorneys in a criminal matter.
"I feel this is outrageous and would cause great harm for hundreds of creditors trying to recapture tens of millions of dollars in debt," the objection reads.
The objection goes on to note that "a third party, Bob Turner, has been identified as a creditor in this case, and a 'social' friend of Mr. Vaughan," and asks that "Mr. Turner and Mr. Vaughan be required to sign an affidavit stating the $200,000 retainer did not come from the Vaughan Estate through circuitous means."
Another creditor, Stephen Moffat, objected on the grounds that "the investigations were triggered by the very acts which have led to debtor's declaration of bankruptcy and which threaten the financial stability and solvency of hundreds of individuals and families .... "
Vaughan's personal bankruptcy attorney Shay Meagle said she couldn't comment on the identity of the Bob Turner in the March 2 application for court approval.
In a court filing, Meagle said a previous filing had incorrectly said Bob Turner had nothing but a social connection to Vaughan. "That was erroneous. Mr. Turner is a creditor of the debtor (Vaughan). However, debtor does not believe this creates any conflict of interest as the debt owed to Mr. Turner by the debtor is unrelated to the retainer."
The Baltimore law firm originally represented Vaughan Company Realtors, but makes clear in its letter that it is now representing only Vaughan personally.
As for the Integra Investment Group, the only company on file in New Mexico records was formed in 2008, but it does not seem to be in operation. Its Web site appears to have shut down and its telephone number is no longer in service.
Vaughan's March 2 application also seeks approval to pay the Albuquerque law firm of Gorence & Oliveras as counsel concerning the New Mexico Securities Division investigation into whether Vaughan's use of a series of promissory notes to raise money from investors was an illegal sale of securities. The notes involved deeds of trust and were guaranteed by Vaughan. They offered lucrative interest rates, some as high as 25 percent.
The Journal has learned the investigation includes the possibility the investment scheme took on a Ponzi aspect in which money from later investors was used to pay people who had invested earlier.
Vaughan, who told investors he launched the scheme in the 1990s because he had trouble getting bank financing, has not responded to requests for comment.
He was arrested Feb. 25 after state securities investigators went to his home to question him, but it was for driving on a license that had been revoked after a DWI arrest. He faces no other charges.
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