Don Johnson, the
former Duneland real estate agent whose broker’s license was permanently
revoked by the state in 2012, has been charged with 14 felony counts,
following an investigation by the Chesterton Police Department and the
Indiana Secretary of State’s Securities Division.
allegation: that Johnson sold securities related to a Tennessee real-estate
venture which were not registered; and that he was not himself registered to
allegation: that Johnson committed securities fraud.
that Johnson’s alleged victims--six of
them are listed in the charging information but the Secretary of State’s
Office indicated today that there may be more--lost tens of thousands of
dollars, which investigators say Johnson withdrew from his business in cash
or used to pay personal bills.
specifically charged with six counts of securities registration violation,
alleging that he sold unregistered securities; six counts of broker-dealer
registration violation, alleging that he sold or offered to sell securities
without being registered to do so; and two counts of securities fraud,
alleging that he “employed a device, scheme, or artifice to defraud”; or
“made an untrue statement of material fact”; or engaged in business
practices which “would operate as a fraud or deceit upon another person.”
Each count is a
Class C felony punishable by a term of two to eight years.
Johnson, 49, of 222
Mineral Springs Road in Porter, was booked into the Porter County Jail at
11:30 a.m. Sunday, after being taken into custody by Chesterton Police while
leaving his martial arts studio on Broadway.
Court Judge Roger Bradford set bond at $50,000 surety or $10,000 cash.
In January 2012, a
man who would later be named in the charging information as one of Johnson’s
alleged victims, filed a complaint against Johnson with the Chesterton
Police Department. Shortly thereafter, Charles Williams, an investigator
with the Secretary of State’s Securities Division, became involved. Williams
and CPD Sgt. Chuck Rinker would eventually interview six persons who
invested varying sums of money in Johnson’s business, Private Lending LLC.
Williams, in his
probable cause affidavit, summarizes the complaint against Johnson this way:
* Johnson solicited
moneys from persons “by guaranteeing a certain
high-interest return on their money,” typically in a real-estate development
venture in Tennessee.
investors would then roll over their IRA accounts to Equity Trust Company,
an independent IRA custodian, which in turn would transfer those moneys to
Johnson’s company, Private Lending LLC.
“Investors received promissory notes showing the guaranteed
interest rate return” and signed by Johnson.
* In some cases,
investors did receive interest payments as promised by Johnson,
“for a period of time.”
* But then the
interest payments would stop, and when investors
“requested their investment back, Johnson told them it was unavailable.”
“were unaware that their money was missing” in the first
place because the IRA custodian, Equity Trust Company, “would continue to
send statements showing the money was in their accounts” and would continue
to “bill them for custodial fees.”
Johnson himself was
interviewed by Williams and Rinker in September 2012, at which time Johnson
admitted that he was never registered to sell securities, that he had never
registered his company to sell securities, and that the securities which he
sold were themselves not registered, Williams stated in his affidavit.
that the money he collected (from investors) would come into his company,
Private Lending LLC, and he would take expenses from that account,” Williams
stated. “Johnson is the only owner of said company and states that he did
not keep an accounting for the business and doesn’t have any of the
checkbooks for the Private Lending LLC account.”
A review of the
bank records, however, showed the following, Williams stated: “money
transferred to Johnson was then used to pay, what appeared to be, a few
interest payments to other investors, was transferred to other bank
accounts, was taken out in cash, and was used to pay personal bills of
Two of the alleged
victims originally met Johnson when they hired him to buy or sell a house,
Williams stated; two of them met him at their church, where “Johnson was an
elder”; one was a part-time realtor at Johnson’s realty company in 2007; and
one was the husband of a woman who had worked for Johnson.
* To one alleged
victim Johnson promised 10-percent interest on a $300,000 investment on a
seven-year promissory note. The investor received $2,500 monthly interest
payments for around two years, after which time they became
“less-than-full amounts” and then stopped completely.
“Johnson refused to make any more payments or return the $300,000
principal,” Williams stated.
* To another
alleged victim, Johnson promised a 100-percent profit
“in one year,” if the man invested his $101,463.55 401K retirement fund into
the Tennessee project. The man received only $35,000 to $36,000 from
Johnson, Williams stated. And the moneys invested with Johnson accounted for
80 percent of all of his retirement funds.
* To a third
alleged victim, Johnson promised a 15-percent return, in two years, on a
$100,000 investment. The man advised investigators
“that when inquiring about his investment, Johnson relayed to him that the
downturn in the economy caused the Tennessee project to be put on hold,”
* To a fourth
alleged victim--who belonged to Johnson’s
church--Johnson promised a 30-percent return on a $60,000 investment, from
the woman’s National Steel retirement account. Five
years after signing the promissory note, in February 2013, Johnson told the
woman that “the downturn in the economy had halted the real estate project.”
Still, the woman kept receiving statements from Equity Trust Company showing
a balance of $59,000 or more, Williams stated, and did not realize that
she’d “lost all the money” until she talked to her son about the situation.
From the Secretary
of State’s Office
of State Connie Lawson released the following statement today: “Real estate
schemes are some of the most common forms of investment fraud that come
across my desk. I hope this case serves as a reminder to check with my
office to ensure the investment is registered before investing. I would also
like to thank (Porter County Prosecuting Attorney Brian Gensel) for his
work. This arrest would not be possible without him.”
Although the 14
charges filed against Johnson are in connection with six alleged victims,
“investigators believe there may be other victims in the Porter County
area,” the statement said.