You Can't Cheat an Honest Man - James Walsh [47]
Beginning in the summer of 1988, Johnson had created enough of a track record for his bogus peso operation that he was able to recruit a network of shady seminar leaders and investment brokers to raise millions of dollars from hundreds of investors in Dallas, Houston, Oklahoma City and other cities throughout the Southwest. At his peak, he was operating in California, Nevada, Tennessee and Florida.
Johnson and his main partner, Dallas native William Wayne Gray, started living flashy lifestyles. In the course of the scheme, Johnson would take in something like $50 million. In January 1989, he bought a new Mercedes for $92,000. A few weeks later, he wrote a check for $112,000 to pay off his mortgage.
But the peso pyramid was about to collapse. According to the IRS, to circumvent tax laws the men had established several phony companies. Income from the Ponzi scheme went to those corporations rather than directly to Johnson, Gray or their brokers. “The network of companies wasn’t especially creative. It was just complicated,” said one investigator who tracked Johnson’s operations. “They figured if they moved the money around enough we wouldn’t be able to find it.”
In February 1989, Johnson and Gray were charged with violating Texas state securities law. Federal agents cooperating with Texas Rangers in Dallas seized about $3.2 million from a bank account one of Johnson’s brokers had set up for the peso operation. The broker’s account, which belonged to a shell corporation called FHL Group Inc. (FHL stood for “Faith, Hope and Love”), funneled money to Gray’s WWG Investments Inc., which in turn passed it to Johnson.
State and federal investigators also confiscated more than $820,000 in cash in a search of Gray’s home. They found 11 promissory notes, ranging from $1 million to $20 million, from Gray to Johnson. Nearly $2.4 million was seized from bank accounts held by Gray’s firm and FHL.
Gray, who’d been arrested, was eventually free on $15,000 bond. Johnson was arrested a month later, during an extended gambling trip to Las Vegas. Federal agents seized more than $250,000 in cash and property from Johnson’s accounts in Tulsa and confiscated more than $1.2 million in cash and gold coins when they arrested him.
Incredibly, Johnson was also allowed to post a bond at his arraignment. He was free on $100,000 bond pending trial on securities charges. Even with all of the money seized during the arrests, millions of dollars channeled through the pyramid scheme had not been located. And, within a few weeks, Johnson and Gray couldn’t be located. Both jumped bail.
Johnson’s flight didn’t last long. In September, he was arrested near Anaheim, California. (Once again showing that Ponzi perps don’t usually flee to exotic locations.)
In October 1989, he was charged in a 63-count indictment with laundering more than $216,000 in investor funds. The indictment also charged that Johnson engaged in a series of illegal financial transactions with proceeds from the investment scheme.
In a related move, federal officials also filed a civil lawsuit seeking forfeiture of Johnson’s home in Tulsa and a $43,000 certificate of deposit and a $25,000 annuity purchased in his name. They contended that all had been purchased with proceeds from the fraudulent investment scheme.
Eventually, the IRS decided to drop the civil suit against Johnson. But the criminal cases proceeded slowly.
Burned investors were frustrated by delays in the federal investigation. The delays kept seized money...seized. Hundreds of people nationwide contacted the FBI to lay claim to the money. The Feds said investors had little hope of recovering their losses. So, the smartest investors took matters into their own hands.
Fort Worth-based H&O Marketing and Landmark Financial Network filed suit against Gray, Johnson and WWG Investments in February 1989 to recoup about $17 million in lost investments and proceeds. Two Fort Worth investors, Richard Sims and Mark Pace, joined in the suit in July 1989. Sims and Pace bought