By George Bao Sept. 8, 2016
SANTA ANA, California – Federal authorities have arrested a Utah man for his role in a real estate fraud scheme in which Southern California investors collectively suffered nearly $3.5 million in losses, the U.S. Attorney’s Office announced Thursday.
Shawn Patrick Watkins, 46, of Layton, Utah, was taken into custody on September 1 when he surrendered to FBI agents in Orange County.
Watkins had been charged with mail fraud, wire fraud and money laundering in a nine-count indictment returned on August 17 by a federal grand jury.
Watkins and others offered investments in a company known as The Equity Growth Group (TEGG) between approximately 2007 through 2014.
According to the indictment, the victims were solicited during seminars in Orange County hotels offered by Investor Workshops, Inc., in which Watkins presented himself as an expert in the field of real estate investment.
In order to lend credibility to the scheme, Watkins attempted to gain trust by telling investors that he was formerly employed as a law enforcement officer.
As part of the solicitations, Watkins made omissions and false promises to investors. For example, the indictment alleges that Watkins falsely told investors that TEGG controlled hundreds of properties that generated rental income and TEGG would continue its growth by acquiring new properties.
Watkins led investors to believe that they would receive substantial interest payments or that their money would be secured by collateral through the filing of deeds of trust on properties.
In reality, over the course of the several years, until the scheme collapsed in the spring of 2014, TEGG was not acquiring new properties and had a negative cash flow.
Investor money was not used to acquire new properties, nor was it secured by collateral, and many victims did not receive interest payments.
In fact, money that was paid to some victims as purported interest or a return on their investment came from investments made by other victims.
Over the course of the scheme, more than 50 investors lost approximately $3.4 million with TEGG, the indictment alleges.
“This defendant took great pains to lend legitimacy to his scheme, such as holding elaborate seminars and presenting himself as an expert investor,” said United States Attorney Eileen M. Decker.
“But, as we see all too often, the false claims were designed to support a Ponzi scheme that took money from unsuspecting victims for a number of years. We are committed to seeking justice in these cases and doing whatever we can to recover money lost by victims to such schemes.”
If convicted of the nine charges in the indictment – four counts of mail fraud, two counts of wire fraud and two counts of money laundering, Watkins would face a statutory maximum penalty of 180 years in federal prison.
Watkins was arraigned on the indictment on September 1 and entered not guilty pleas to the charges. He was ordered freed on a $35,000 bond and was ordered to stand trial on October 25 before United States District Judge Cormac J. Carney.