There was a fascinating story last week in the Asheville Citizen-Times describing the charges against an Asheville man who sounds like Asheville’s version of Ponzi-scheme operator Bernard Madoff. From the story:
Prosecutors charged a city businessman with running a Ponzi scheme that cheated investors out of $13 million over the last decade.
James W. “Bill” Bailey Jr. said nothing in U.S. District Court on Friday as he listened to Magistrate Judge Dennis Howell read the charges against him.
About 16 of his investors watched the proceeding.
He’s charged with securities fraud, mail fraud and filing false tax returns.
Bailey operated Southern Financial Services on Exchange Street. He took money from investors and paid returns with money from subsequent investors — not from actual profits, according to the government.
He dealt in asset management, IRAs, wills and trusts, federal prosecutors and investigators said in a bill of information laying out their case against him.
Bailey, through his attorney, agreed to proceed under the bill of information instead of a grand jury indictment. He could be in court again in about a week, though a date wasn’t immediately set on Friday.
Investors in court and outside the proceeding declined to comment.
I’m intrigued. What was Bailey’s pitch? How did he convince people to give him money? What’s his background?
And regarding the people who got taken – who were the investors? Big players in Asheville or regular folks? Have these people lost everything? I’m sure they’re embarrassed, but if you tell you’re story, you’ll help others (hopefully) avoid similar mistakes.
20 Comments
Dear CJD,
So sorry to hear of your troubles. I can imagine your disbelief.
Please contact Ashvegas by using the Email link on the top of the page, with your information, and legal council will contact you shortly.
Having worked in the 1031 industry for many years and being familiar with Mr. Bailey, please make it absolutely clear that the 1031 side of the business was probably the only one handled within somewhat legal bounds, and that is why only one transaction was affected. The losses and the Ponzi scheme were run on the IRA investment side, not on the 1031 side, and recent activities and requirements in that industry are probably why no one lost more than they did.
To the person questioning how he was able to get this much money – unfortunately, he WAS able to just walk into HomeTrust Bank and others and simply cash/deposit checks worth millions because he was well-known in the community and by the employees, so no one had ever thought to question him previously. That's part of why this is so incredible.
The 1031 industry has been hit hard enough over the past 6 years; it still is an excellent and viable tool for real estate investors to defer paying capital gains taxes or depreciation recapture when wishing to reinvest into more real estate. The onus lies with the client, unfortunately, to call and verify independently any person/company they deal with when it comes to their money. Today, even more so, is "caveat emptor." But there are still those of us who, despite almost having our own reputations flushed because of Bailey, are still honest operators with forthright character who do the best for our clients at the expense of our own time, and I hope we don't get drowned out because of one person.
I had a 1031 Exchange in process with Bailey. I just learned of this crime 10 days or so ago. There was apparently no record of my transaction. Could someone please post information about legal representation in the Ashville area, as mentioned above. I see there was a meeting recently, perhaps? Thanks very much, in advance. I am still in a state of disbelief.
Dear Dogontired and Other Victims,
If you are interested in a meeting, please consider attending the upcoming meeting on March 10th. This meeting is for the purpose of educating people about financial fraud and specifically about the Bailey/Southern Financial situation. Also will include attendance by several local attorneys involved in representing and assisting victims of this scam and looking at claims against third parties for the purpose of potentially recouping some of the monetary losses. In addition, there will be a CPA and financial advisor present as well to assist victims with their concerns. The details of this meeting are: March 10th at AB Tech's Enka Campus, Haynes Building, from 5:30 to 8pm. For more information, please pick up this month's issue of WNC Woman Magazine and see the article on the $13M fraud, at p. 55. As investors you have legal rights that may be pursued and are worth looking into because the stakes are high.
Dear Advocate,
Thank you SO very much. II'll be anxious to hear when folks are going to meet for organizing !
Hopefully you'll be able to post dates and locations early enough and someone else might can grab and go with spreading the word at other locations,,,newspapers, radios, websites.
Your acts thru this posting of kindness with information and words of encouragement are appreciated.
Soon, Dogontired
Dear Dogontired and Other Victims,
My heart breaks for you all. Please know you are not alone.
Stay tuned to Ashvegas, as soon we will be posting a meeting date, for victims and contact information. There is a lawyer in town, who specializes in this type of fraud, who is willing to take the case on contingency . We have been told we have a very good case. We have strength in numbers. We need to connect with one another and have our voices heard. Mr. Bailey is not the only one who failed our trust. . There are other aspects of this case that bare scrutiny and a possible revenue stream for reimbursement because of this.
Dogontired, I know you are frightened but trust that there are people out here, that are praying for you, that feel as you do and are looking to help you regain what is rightfully yours. Take care of your self, and know we want to help ease your burden. Stay strong brother.
I am a victim of JW Bailey, Southern Financial Services Asheville North Carolina
Like many others, I did due diligence. As a victim, I can’t take this lightly, for the seriousness of what has happened and stolen from me wasn’t anything I could afford to gamble or loose.
Having the misfortune of multiple health issues it’s all I can do to keep a massive heart attack at bay.
What was taken from me (every penny) was my only definite ways and means of surviving into the future, not a style of life, but for living simply. He knew this.
I had given my full trust to his reputable business and professional persona.
The un-invited realities of being destitute and a homeless statistic is right up and center in my face. Due not, to my actions of poor judgement or irresponsibility’s, but that of others.
There’s no cushion of comfort in just knowing others are effected also. My trusted hopes for staying alive and living, are gone. I am left with NOTHING to help carry all the weight on my shoulders.
It's a shame all the way around for everyone. The trickle down effects of this and it's ramifications are going to impact more than just a few, everyone, everywhere are going to suffer..
Adding to all this sadness and disappointment, JW Bill Bailey always seemed to be a likeable and caring man whom was well respected by so many. God help us all.
What has Mr. Bailey done to Hometrust Bank and WHY IS WLOS NOT RUNNING THIS ALL THE TIME LIKE THEY DO EVERYTHING ELSE???? Why are they not interested in these poor folks that have lost everything?? Have all his assets been ceased?
Jason,
I would rather not mention my name. However, I am the person who turned in Mr. Bailey. I am a financial planner in another city and I uncovered Mr. Bailey's Ponzi Scheme. I discovered his scheme while analyzing the "so called" investments he had made on behalf of two people that were referred to me.
I had spoken to him several times, but I spoke to his assistant even more. She was very polite and tried to have an answer for everything. But time and time again, I tried to warn her that something wasn't right and that I thought he was in charge of a Ponzi Scheme.
While there is no need to go into all that I uncovered, most of it has been mentioned in the article above. Some of the most serious charges may actually come from the false tax returns he filed on belhalf of his clients. Regardless, I expect that Mr. Bailey will spend the rest of his life in prison by the time all is said in done. I found it interesting that Mr. Bailey had no pending investigations with the State Securities Board prior to my complaint.
My Broker-Dealer and I formally requested the investigation and told them of my findings in July, 2010. It appears as though it took them 6 months to make their case. On behalf of Financial Planners all accross the country, I am truly sorry for anyone that lost their money with this man.
Hopefully, the state will be able to sell off his properties and get enough money to reimburse everyone. Again, I am truly sorry for everyone's loss.
Concerned Victim:
I have a mighty oak, some car tire chains and a gallon of kerosene. Perhaps we should burn an effigy of Mr. Bailey, to purge ourselves of the toxins that are in our hearts. We will do more time then him because of it.
He will get all lawyer up with our money and probably just go to some country club prison, where all criminals with a briefcase go.
I beg to differ that 2% of 13 million is just a small portion, as just maybe it is 100% of someone's everything.
Thoughts and prayers to the victims. Stay strong, you are not alone.
But don't IRA funds have to be deposited somewhere? Generally a check would be written……I'm skeptical that he'd go down to the "investors" bank and just cash it.
We should all confirm our facts. Virtually all of the losses incurred here are from his IRA clients, and only a small portion (about 2%) from his 1031 clients. That said, he pulled the wool over many eyes, for a very long time. I think it safe to say that everything he said, to everyone, over the past decade or so was a lie.
I am not trying to minimize the heinous nature of what he did to so many of us. Ponzi schemes almost always have multiple parties involved. I am waiting to hear who they are, and where they are. Was it a local bank employee? A family member?
I say we find a tall oak tree, and a short length of rope…
A Poem: I shall call it Ode to the Indicted
A Bank President, charged with money laundering? For shame you say!
Never trust a man name Buddy, he is a Bubba with a MBA.
Never trust a man with game show host hair. John Edwards, Buddy Greenwood, Tom Delay.
Never trust anyone who sits on ethic committees, is on the board of a church or only uses community banks any day. Because while he looks reputable, and you go to church with him, he was on the golf course with his banker who helped him clean your stolen money away.
Never doubt that the good ole boy network is alive and well, and covering their backsides at the expense of you and I everyday.
Tar Heel, My heart breaks for your family and all the victims. Undoubtedly, you too are another victim, as the onus of caring for your In Laws will now be on you and your wife. This is so heartbreaking for so many.
The downstream effect of 13 million of lost economy will be felt in many arenas. I believe it will be more when this all shakes out.
Myself and other victims are curious, as to how this man was able to move such large amounts of money. For example, in my personal banking account, If I try to rent a car in a foreign country ( and the bank finds this curious) or someone is fishing in my account for small amounts, my bank will freeze my debit card, to protect me. This again begs the question WHO was accommodating the accommodator. ( accommodator is industry parlance for a 1030 exchange custodian).
Did no one find it at all suspect that a man who made a decent living yes, but had great sums of cash at his disposal? Probably equivalent to what an area money manager would make a year? Why were the banks not asking for more disclosure? Was it perhaps they were more concerned about writing profitable new loans, and having more liquidity in their coffers?
Mr. Baileys operation was not glossy. His invoices were very rudimentary. I can not believe that he was SO slick to pull the wool over the eyes of ALL bankers in this town. There is accountability for this on so many levels.
Tarheel, again I feel for your troubles. I would be interested to hear your thoughts.
I've been following this story pretty closely and am stunned by the magnitude and the scope of the alleged fraud – not to mention the allegation that this has been going on for more than a decade. Mr. (using that term loosely) Bailey was a well known businessman in the Asheville community. He conned hundreds of investors over the last decade. My inlaws invested their IRAs with him and are now destitute. It's dispicable.
The comments here by people who got taken are profoundly sad. Yet I read and see this thing often. Having had first hand experience in inadvertently taking a secretarial job in one of these ponzi companies in Atlanta back in the late '60s, when my husband was in VietNam. I understand how it works.
http://www.google.com/search?sourceid=chrome&ie=UTF-8&q=%22preferred+land+Corporation%22+Fred+Tallant
This company "Preferred Land" had a team of salesman who scoured the county using "leads" provided by previous "investors." The salesmen were slick & attractive looking men, some were former Atlanta Falcon football players. When an individual bought stock in Preferred Land Corporation (they had printed up a slick brochure showing all the phony development they were involved in) the buyer had had to provide three leads. The salesmen would then call on the leads and attempt to sell more phony stock.
I was young (24) and very naive about investing, but instinctively something felt very wrong to me. One of my jobs was to neatly file the leads for future scavaging under each Georgia county. Which I never did,….for some gut level, unconscious reason I always dumped the leads in a trash can. I only worked there for a few months, but hopefully I made a dent in potential victims.
Lesson learned for me, was be very careful that the company is what it says it is. It's even easier today to print up phony brochures, spread sheets and financial statements. Had some of the investors simply followed through and ask to see the actual developments, the scheme would have been apparent. I believe it's safer to park IRA funds in a national or international company like Fiedlity…..where you can still do a self directed IRA. But the company has years of squeaky clean records.
Not saying the folks scammed here didn't do due diligence…just that it's easier now than ever to pull a scam off. Since the SCC has gotten very lax in their oversight job. People were screaming to the SCC over Maddoff for years.
http://www.msnbc.msn.com/id/28310980/ns/business-us_business/
This man abused his fiduciary responsibilities as a custodian, or accommodator. Which raises the following concerns?? Is this somehow tied into a certain bank president, who was recently indicated on money laundering? Not that big of a leap, if you know that certain federal marshals, secret service agents, and FDIC bank regulators have been sniffing around Asheville's financial industries since November.
While I am not trying to intimate that these institutions were complicit in this "alleged" criminals acts of fraud, I am merely curious, as to whom 'accommodated' the accommodators nefarious activities on money exchanges and real estate holdings.
It begs the question, SOMEONE , somewhere gave him the get away car, and whether they knew it or not, at the very least it is their responsibility to vet fellow custodians. There has to be someone else in this misfortunate chain of events, that was full of abject negligence. Perhaps those are the "big players" you are curious about.
Southern Financial ( one of Baileys companies) was one of the few companies licensed or supposedly licensed in NC to hold self directed IRA's. A self directed IRA is an IRA in which you are allowed by the government to purchase investment property with money you have saved in your IRA, the titles of the properties must be held by a licensed custodian, such as Southern Financial. These victims were paying Southern Financial a fee to hold money and/or titles to investment property. He instead never actually set up legitimate IRA's ( he wasn't licensed to do so), instead he commingled funds and used them for himself. He sent out fake statements to these victims. These people simply used him to safely and legally hold funds. He was not promising big returns on the cash, just typical money market rates.
The 13 million he stole was probably going to be used to buy real estate in Asheville. The trickle down effect will hurt lots of people, not just the direct victims.
Mr. Bailey ran three company's. On the asset management side he offered no special interest rates that are typical in most ponzi schemes. I was holding my money in a money market account until I could decide what to do with it, I was making the current going rate which is around 1%. I simply went with Mr. Bailey because he seemed like a nice man that went to my church. I don't have a lot of money and this really hurts, it was my life savings. Thank you so much Jason for starting this dialogue.
Jason, once again, the WLOSERS got it wrong. A small 20 second blurb on the biggest financial fraud to hit Asheville, and a good 4 minuets on Grove Park and their stupid light show. What a joke.
The ramifications of this "alleged" criminals actions are going to be felt in our already downtrodden real estate market and compromised lending institutions.
I get the distinct impression more charges are forthcoming. Or perhaps people are not forthcoming, as this service was used by many real estate speculators, and was referred to by reputable banking institutions. It is my personal opinion that 13 million is just the preverbal tip.
Mr. Baily, was on a national ethics committee no less. In business for 30 years. The people he duped are business savvy. The crux of his business was a 1031 exchange , in which he acted as a custodian of monies deposited for a like or greater exchange. This vehicle is used to defer capitol gains when you sell a property, as you can use those profits to buy a like or greater value property. Because the money is gone, this will create a further log jam of real estate. There is a trend in 1031 exchange fraud. A case in Nevada paralyzed an entire town's real estate economy. .
He also ran a financial service company, that specialized in self directed IRAs. Peoples portfolios were made up of cash and real estate assets. He commingled both accounts, using peoples liquidity and real estate assets to foster his own fortunes. He paid very little returns. People used him as a safeguard, not as a profit center. He was also the custodian of irrevocable trusts, which ironically he revoked all trust, by bleeding them dry.
I have read some of the posts on ACT in the comments section about this story. Per usual, there are gleeful undertones of the greedy rich getting what they deserve, or bi-partisn bickering. I think people should be aware, that not only are the victims of this fraud hurt, but the unintended downstream consequences of what he has done will be felt by many. The money he took, is less money that will be in our tax coffers to pay for services, such as teachers and police. The integrity of our banks are now in question. Monies that would have been used to lend, donate to charity, buy and sell real estate, create businesses, pay property and federal tax are now gone. Everyone suffers.
I hope this story gets the attention it deserves. Once again, thank you Jason for starting a dialogue.