UPDATE: On November 3rd Marc Jenson was sentenced to back-to-back, zero-to-five-year prison terms for failing to pay restitution to investors pursuant to the restitution order in his first fraud conviction involving a bicycle company. Judge Reese had given him three years to pay $4.1 million in restitution, but according to prosecutors Jenson moved to California and used up all of the money to fund his lavish lifestyle. According to prosecutors from the attorney General’s Office, Jenson “went through $9 million, none directed to the victims in this case.”
According to the Salt Lake Tribune, Judge Reese said he based his sentencing decision on “Jenson’s failure to pay the men back on his conviction years earlier for failure to pay federal income tax and a ‘pattern of you raising money, making promises and not repaying [people].'” This City Weekly Article contains a lot of interesting detail about the hearing, and in particular how Mr. Jenson spent the $9 million he raised over the past few years, including “a sports car worth more than $150,000, an extended stay at a Laguna Beach residence costing $360,000 up front for the rental agreement, followed by a nine-month stay at the Pelican Hills Resort in California costing over $500,000.” he also spent some of his investor’s money on something (or someone) called “Russian Wow Girls.”
The case discussed below, involving the Mount Holly Club, is a separate case and has not been resolved yet. That case could well result in more prison time for Mr. Jenson.
Last week the Deseret News ran a detailed article on Marc Jenson and his brother, Stephen Jenson, who were recently charged with four counts of communications fraud, three counts of money laundering, and one count of pattern of unlawful activity, all second-degree felonies. The Salt Lake Tribune also wrote up the story here.
This appears to be a run-of-the-mill pitch where they solicited investors for a the Mount Holly Ski Resort development in Beaver County and other investments. The problem is that the brothers failed to disclose some key information to potential investors. If there is one thing you need to remember about investment pitches, it is that everything needs to be disclosed.
Specifically, the charging documents state that the Jensons failed to inform investors that there were serious problems with the resort development, including local community opposition, defaulted loans and ongoing litigation. These are certainly the kinds of things that most investors would like to know about before investing in a real estate project. But even if these things are not disclosed voluntarily they are things that a prudent investor would have discovered when they conducted their independent due diligence on the property at issue.
But more significantly, when he pitched the investment Marc Jenson failed to mention the fact that he had recently spent twelve months in federal prison after pleading guilty to charges of making false statements to a financial institution and failure to file federal income tax returns. He also failed to mention to the potential investors that he had been charged with fraud, money laundering and sale of unregistered securities in 2005 and hadn’t yet repaid the $4.1 million restitution ordered in that prior case. These are the kinds of things that investors like to know about before investing.
But here’s the point. Although Marc Jenson can be faulted (and charged criminally) for failing to tell investors that he had prior convictions for securities fraud, the information was almost certainly relatively easy to find. The victims who invested with the Jenson brothers in 2007 and 2008 could have discovered much of this criminal history, not to mention the problems with the development project, with a simple Google search before they invested. Moreover, had they hired an attorney to assist with their due diligence, a simple court docket search and call to the Division of Securities would have revealed many of these problems and they never would have invested. Isn’t it worth paying an attorney several hundred dollars to avoid losing hundreds of thousands?
Other than that, the indictment alleges that Marc Jenson allegedly behaved like a typical fraudster; living in homes worth millions of dollars, taking expensive vacations, and driving exotic cars — all paid for by unwitting investors.