All posts by Chris Majernik

Security

Red Flags for Landowners

Before we delve into the risks that landowners face, let’s define the phrase “security risks for landowners.” I define security risks for landowners as anything that will adversely impact the productivity, profitability, or aesthetics of the land. This broad definition includes risks like dumping, drug production, trespassing, fire, timber theft, and other resource theft. Each of these risks brings with it different challenges to the landowner, but luckily for us, a watchful eye for red flags can alert us to areas where we have exposure to these risks.

Here are some areas where landowners specifically should be attentive:

  • Illegal dumping – To bypass landfill fees some will bypass the waste disposal system and dump material in the most convenient, out of the way place…your land. In years past one of the ways to combat this was to actually dig through the trash looking for a clue to who dumped it. Today, some dumps are created by drug production and the by-products are lethal. Be especially diligent if you see plastic pots, fertilizer bags, propane tanks, starter fluid cans and cold relief packages. Instead of digging through the dump, report fresh dumps to local law enforcement that are properly trained in identifying the trash. 
  • Unlocked gates – These are not only an indicator that there may have been trespassers on the property but could also be a precursor to someone’s intention to use the property illegally in the future. In either case it can also result in an open invitation for future visitors to enter. 
  • Heavy traffic patterns across property – Heavy traffic may be a precursor to illegal property use and trespass. This is especially a problem if there is high activity of unidentified cars coming to the property at strange hours. Thieves and drug dealers oftentimes check out the property first before making their move. Normally you can recognize the local traffic. When you don’t, there is a red flag to pay attention to other indicators and potential problems.
  • Signs of Trespassers – Trespassing comes in many forms from people fishing your pond to the use of your property for the manufacture of illegal drugs. Signs that someone else is using your property are new paths into the property, paths around your gates, strange vehicles parked on your property, trash dumps, marking tape you didn’t put there, and maybe even fishing line hung in the bushes around your pond that you didn’t put there. 
  • Adjacent landowners, especially those who are also in the forest industry who you don’t know very well or who don’t know you — Neighbors with adjoining properties can have easy access to your property without your even knowing it. Timber theft is one of the chief concerns of many landowners. Timber theft can include the theft of individual “high grade” logs, the theft of hardwood pulpwood for firewood, theft of unmarked trees, or the theft of entire tracts. Absentee landowners are most at risk here.
  • Tracts located a long distance from your residence, office or working operations – Be especially diligent about checking orphan tracts that are geographically remote where your access is difficult, and you seldom visit. These can be ideal locations for drug activities that seek remote locations to hide their work or timber theft.
  • Theft of other resources – Other resources found on the land are also at risk of theft if the product found on your land has value in the marketplace. Keep in mind the marketplace doesn’t have to be in your surrounding geographical area. Resources at risk for theft include clay, field stone, decorative rocks, gravel, sand, topsoil, exotics (e.g., Paulownia trees), roots, mushrooms, and pine straw.
  • Posted signs or no trespassing signs that shouldn’t be posted or which you didn’t post could be an indicator someone has “taken over” your property.
  • Travel trailers, tents or small mobile homes in out of the way locations – These could be adventurers seeking the wild and wonderful natural experience or a drug manufacturer that has been brewing his “potion” all day and is now high and usually armed to the teeth.
  • Distinctive, obnoxious odors – STAY AWAY.

RECOMMENDATIONS

A landowner’s primary goal is to make the best use of the land to yield the highest return for his/her effort and investment. Keeping a watchful eye out for red flags can provide alerts to activities that undermine that goal. 

  • Clearly mark and maintain your property lines. It avoids real or claimed misunderstandings and can be valuable documentation in case of litigation. Post your boundaries to communicate your property line and that you don’t welcome trespassers.
  • Limit access to your property. Install good, sturdy gates on roads or rights of way entering your property. Make the gate highly visible. 
  • Conduct periodic, unscheduled, and unannounced tract inspections. 
  • Pay attention to “out of the ordinary” things. Hidden logs in the woods, unusual traffic patterns on tract, pockets of uncut timber…any signs of trespass.
  • Know your neighbors and make a note of any who are living beyond their means. Consider leasing access to your property to hunter, farmers, recreational users, beekeepers, etc. This is an excellent way to expand your eyes and ears on the property and to add additional income. Create a specifically written contract.
  • Clean up old dump sites now. A small dump invariably becomes a large one. If you catch someone dumping be willing to prosecute. Nothing says “stay clear” to others as well as a notice in the local paper of an individual charged with cleaning up a dump. 
  • Utilize a theft and fraud hotline.
  • Contact authorities if you suspect drug traffickers. 
  • Review your risks with your land in mind or hire someone to help you review your risks. Each situation is different.
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Fraud

And the Beat Goes On

Between 2010 and 2018, Lamar Adams continued his fraud scheme by tapping the Ole Miss network.

In March 2019, Receiver Alysson Mills sued Ole Miss quarterback Stewart Patridge, his mother Gee Gee Patridge, Jason Cowgill, Martin Murphree, Mutual of Omaha, and Bankplus, in an effort to recover funds for victims of Lamar Adams’ newest fraud scheme using his company Madison Timber. The scheme case amounted to $164 million from phony timber investments. Commissions from the scheme amounted to not less than $9,674,615.

Here’s how the players worked together:

Gee Gee Patridge was Bankplus CFO. Although Gee Gee Patridge only invested in Madison Timber until 2014 and received payments until 2015, she continued to provide advice about potential investors to her son who continued the fraud, sometimes even working with Baker Donelson to share potential clients.

Stewart Patridge (Gee Gee’s son) and Wayne Kelly were childhood friends and college roommates. Stewart was a starting quarterback for the Ole Miss Rebels football team. Kelly and Kelly Management utilized Stewart to recruit for him. Stewart received net “commissions” of $8,217,804. Kelly Management settled the case for an estimated $2 million.

In an effort to get additional clients, Kelly left Bankplus at the end of 2011 and joined Mutual of Omaha. Stewart and former Bankplus employee Martin Murphree opened a Mutual of Omaha office in Desoto County. Stewart and Murphree used the office of their friend, Jason Cowgill, the Bankplus branch manager to meet with Madison Timber victims even though they no longer worked for the bank. Kelly in turn paid them commissions.

Bankplus and Bankplus employees were charged with substantially assisting by recruiting new investors, lending their influence, serving as a reference to potential investors, lending their resources (e.g., office space, facilitating transactions, and facilitating transfers or “loans.” All of that masked Madison Timber’s insolvency – a similar pattern to the law firm’s involvement.

Bankplus was also accused of looking the other way when it was warned about suspicious behavior by Lamar Adams and his forest of fraudsters. Although Bankplus denied any wrongdoing, Receiver Mills cited several emails to support her accusations.

Mutual of Omaha was held responsible for the lax supervision of Murphree and Patridge as they sold the phony investments.

The SEC Receiver Alysson Mills has made the following charges:

Civil Conspiracy: All defendants.

Aiding and Abetting: All defendants.

Recklessness, Gross Negligence and Minimum Negligence: All defendants.

Violations of Mississippi’s Fraudulent Transfer Act: Stewart Patridge, Jason Cowgill, Martin Murphree

RICO Violations: Bankplus

Negligent Retention and Supervision: Bankplus, Bankplus Wealth Management, Mutual of Omaha.

So How Did It All End?

It will take several years in the court system to work things out, and it is unlikely that the investors will get more than a fraction of their losses when all the smoke clears.

I did further research, to try to find out progress on the investigation and court proceedings. There has not been much written since 2018, but here goes:

I found an Associated Press article published on April 27, 2023, Brent Alexander of Jackson, MS, pleaded guilty to a federal charge of conspiracy to commit wire fraud for participating in a fake timber investment scheme that caused investors to lose tens of millions of dollars. The Judge declared no release from prison for the $100M Ponzi scheme mastermind due to the pandemic. Alexander and Attorney Jon Darrell Seawright of Mississippi had been indicted on multiple charges in an investment scheme that affected hundreds of victims across multiple states over a number of years.

Arthur Lamar Adams received nearly a 20-year federal prison sentence in May 2018 after pleading guilty to running the timber scheme in which investors lost $85 million. He admitted that between 2011 and 2018, he took part in a scheme to defraud investors by soliciting millions of dollars under false pretenses and failing to use the money as promised.

On August 22, 2019, the SEC filed a complaint in federal court in Jackson, Mississippi, alleging that Terry Wayne Kelly, Jr. of Madison, Mississippi, through his wholly owned entity, Kelly Management, LLC, provided false information to investors by telling them that their money would be used by Madison Timber to secure and harvest timber and promising annual returns of 12 to 15 percent. In truth, Madison Timber never obtained any harvesting rights; instead, Madison Timber’s principal, Arthur Lamar Adams, forged deeds and cutting agreements and used investors’ money for personal expenses and to develop an unrelated real estate project. Kelly continued to provide false information to investors, even after a financial institution confronted Kelly and Adam with questions about Madison Timber’s business practices. Madison Timber has been dissolved. 

According to the Clarion Ledger, in August 2019, three Texas religious organizations agreed to return more than $300,000 as part of a federal court’s effort to recoup money from Kelly Management. Berachah Church and R.B. Thieme Jr. Bible Ministries of Houston, Texas, agreed to return $280,530.50, which reflected 100% of the contributions they received from Adams and 95% of the contributions they received from Kelly. Rick Hughes Evangelistic Ministries Inc. returned cash contributions made by Adams and Kelly in the amount of $43,657.95, and Philippi Freedom Ministries returned $16,125. None of these churches were aware this was a Ponzi scheme.

There are other cases of individuals who were recruited as “promoters” who received commissions from the Ponzi scheme.

Some are indicted for fraud. Others were asked to return the money they earned in order to pay back at least a small portion of what the investors lost. Clearly, anyone can be targeted. 

Friend or Fraud: Looking for Signals of Ponzi Schemes 

All of these red flags were in this scheme: 

Abnormally high investment returns – How can some investment promoters guarantee a high return when mainstream financial companies don’t? They can’t. There can be high returns but not without risk. 

Guaranteed returns – Nothing is guaranteed. In a scam, a high return is pitched as low risk. The higher the return, the higher the risk. It’s just that simple.

Consistently high performance – The world changes, sometimes quite unexpectedly. There are no guarantees. 

Vague business model – If you aren’t permitted or are discouraged from verifying the details of a deal, it’s probably a scam. Investment agreements might prohibit signers from contacting any parties related to the settlement without written consent. Even so, check public records and confirm anyway. Call your state securities regulator (find them at www.nasaa.org. Make sure the person selling the security is licensed in your state. 

The investment is being promoted by people you trust – Con artists are masterful in gaining the trust of unsuspecting investors, sometimes even getting on their knees and praying with their targets to win them over. 

You are offered a bonus to sign up friends. If recruiting other investors is key, you could unwittingly become part of a scam.

Testimonials about big payouts. Scammers love it when early investors brag about their returns. It adds legitimacy to the swindle.

The promoter gets angry at too many questions – If they act angry or dismissive when investors ask questions that is a huge red flag. If you are ever made to feel stupid or are shut down from asking questions about an investment opportunity, you are most definitely about to be conned. 

Pressure to reinvest – If they are scammers, and you were caught once, they now know your profile and assume you can easily be caught again.

Pressure to act now – You should be allowed the time you need to make a decision.

Credibility through association – Just because your friend or family member recommended you for this opportunity, doesn’t mean that you are both being swindled.
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Forest Industry Fraud, Forest product theft, Fraud

A Tale of Timber Schemes (Part 2)

Last month we started the conversation about what could be called the largest Ponzi scheme in Mississippi history. The scheme promised investors a 13% rate of return on their investment and were given 12 signed checks that were post-dated over a period of 13 months to show the “guarantee” of results. There were even some who had gotten the promised amounts, which sealed the deal for new investors. Generally, the investments were sold by lawyers and other professionals that the investors knew and trusted. However, no one thought to even call the landowners whose signatures had been forged on the information documents.

The targets were primarily the well-to-do of Mississippi. The scheme started with Larmar Adams, owner of Madison Timber Company, Inc., who claimed to have investments in timber-related activities. He used other individuals, whom he called promoters, who sold the investments for a commission. However, the SEC got involved and accused Lamar Adams of operating a Ponzi scheme that defrauded 150 investors out of more than $85 million. Attorney Alysson Mills was appointed receiver in the case. Her job was to recover assets, distribute them among the victims, and provide progress reports to the court.

Mills sued two prestigious law firms (Butler Snow and Baker Donelson) to recover the commissions paid to the lawyers in their firm and two others who had recently left the firm, and were serving as promoters. Mills took them to court, charging them as unauthorized and unlicensed brokers in violation of federal and state law. They cashed checks while doing little to earn them. They did not have their investors’ best interests in mind. No one performed even a cursory inspection or vetting of Madison Timber Company which supposedly was providing the “investors”. Such an investigation would have quickly shown the company’s claims were bogus.

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Forest Industry Fraud, Forest product theft, Fraud

A Complicated Tale of Timber Schemes

Greetings!

I have gotten several questions over the past few years about the “big fraud case in MS”. And I’ve followed the case in the newspapers but they didn’t really spell out the case very well. So I asked a reader who lives in MS about the case and he and his spouse pointed me to a series of blogposts written by Jackson Jambalaya (also known as Kingfish) that followed the events of what could end up being the largest Ponzi scheme in Mississippi history.

The story proved to be so intriguing as the blogger gives pretty much step-by-step commentary on the events. Many thanks to my MS reader!

It will take a couple of newsletters to explore the intricate and complicated details of this massive Ponzi scheme that promised double-digit returns from timber investments in Mississippi. I’ll share the first part of this series this month. Stay tuned as there are many twists and turns here.

So, hang on. Here we go with what seems to be the start of everything. I say that with hesitation as I do wonder if this hadn’t been going on long before.

As always, Aaron

The Story Starts in 2018

Lamar Adams operated companies claiming to invest in timber-related activities. He operated a variety of Timber investment companies in the area. These are not companies that own, harvest or process timber. They are investors who seek opportunities to make money off timber companies who need funds to operate and pay interest for the use of the funds. Theoretically, the gains would be relatively short-term since the timber companies would know the timber that was available and how long it would take to harvest. It should be a pretty safe bet.

The victims were promised a 13% rate of return on their investment. They were issued twelve signed checks that were post-dated over a period of thirteen months. Each check had a stated amount and a total yielding 113% of their initial investment. The investment company had been in business for seven years, so it seemed reliable. Furthermore, some victims knew people who had actually received the interest payments as promised. Sounded like a good deal.

Adams used several individuals, referred to as “promoters” to sell the “investments.” The well-to-do of Mississippi were the main targets. Many of the members at the top of Jackson society were hurt. One alleged victim lost $2 million. Another lost $350,000. A family of investors said in total they had several million dollars invested in these funds. One particular law firm was hit hard as many of the lawyers fell for this scheme.

On October 1, 2020, the SEC receiver sued to recover over $16 million in commissions from several of these “Promoters.” Lord Snow is prominently mentioned in the complaint although there were others. The SEC accused Lamar Adams of operating a Ponzi scheme that defrauded 150 investors out of more than $85 million since 2005. Adams pleaded guilty to one count of wire fraud. Adams’ sentencing was postponed since he was cooperating with the government.

Attorney Alysson Mills was appointed receiver in the case. As receiver, she was charged with recovering assets, distributing them among the victims, and providing progress reports to the court.

Mills gave each defendant a chance to reach a settlement with the SEC. Although McHenry and Kelly agreed to a settlement; Mike Billings did not. Billings was the star recruiter for the Ponzi scheme. His former employer was Butler Snow Business Advisory Services, LLC. When Billings left Butler Snow in December 2013, he began working for Madison Timber full time. With Billings’ help, the Ponzi scheme ballooned. Billings personally “booked” more than $80 million in investments in 2017 alone.

Billings stood out as one of Adams’s promoters. He told investors the investments were secured by the timber company. The “landowner’s signatures” on all the deeds looked the same as they were forged by Adams. A call to any of the landowners would have shown the fraud. There were no contracts with any mills. The investors had to agree not to record the deed at the courthouse unless the company failed to make a payment. The interest rate was 300-400% above comparable investments.

Adams and Butler Snow worked together from 2011 to 2018. Butler Snow personnel allegedly pitched timber investments to its clients. At the same time, Baker Donelson, lawyer and lobbyist, pitched investments to Baker Donelson clients as unlicensed brokers. Essentially, he was using his firm to promote their private business to clients. Butler Snow’s lawyers were charged with violating the Mississippi RICO Acct. Snow shifted the blame from himself by suing the lawyers with attorney malpractice.

Eventually, Alysson Mills sued the two prestigious law firms (Butler Snow and Baker Donelson) to recover commissions paid to the lawyers in the Lamar Adams timber fraud. Although none of the players were ever officially registered as brokers nor did they register with the SEC, pitching investments to investors is exactly what brokers do. In Ms. Mills case, the Receiver said Thornton, Billings and Butler Snow “acted as unlicensed brokers, in violation of federal and state law.” She goes on. The team cashed the checks while doing little to earn them. No one at the law firm even performed a “cursory inspection” of Madison Timber. Such an inspection would have unearthed that the company was bogus.

Billings was making so much money off of the timber scheme that he left Lord Snow in December 2013 and began working directly for Lamar Adams. Adams stopped paying the $3,500 monthly retainer fee to Lord Snow, yet he still engaged Snow to assist him in other projects. Snow continued to bill Adams for services rendered after he was caught. He finally terminated the relationship on May 11, two days after he pleaded guilty and 11 days after he was indicted.

As for Baker Donelson, his team specifically targeted individuals who had recently sold assets because they knew those individuals had money to invest. Ms. Mills claims victims “reasonably believed” their investments in Madison Timber were backed and promoted by and had been vetted by Baker Donelson. Donelson bragged about the company’s investment expertise on its website.

Meanwhile, between 2011 and 2018, the promoters withdrew $980,000 from the fund representing their “shares of investors’ returns. In addition, Adams separately paid them over $600,000 representing undisclosed “bird-dog fees.” That’s not counting the cash bonuses they received. They acted as unlicensed brokers, a violation of state and federal law.

Two of the main players at Baker Donelson, Alexander and Seawright, were doing so well they decided to step it up a notch. They started their own company and developed a five-year model instead of a ten-year model. They started pitching to accountants, investors, and financial advisors. They implemented a non-disclosure agreement to ensure their new clients didn’t catch on to their scheme and try cutting them out of the middle.

They had trouble finding investors who quickly realized they had no “skin in the game.” They finally attracted a Baker Donelson client who had just sold a major asset. The “key investor placed $6 million in the fund.

Just days before Alexander and Seawright would have deployed their “key investor” and client’s money, Adams turned himself in. Their key investor sought more information about the indictment. Even though they tried to distract the client from their own role in this scam by claiming they were victims as well, the investor backed out.

The counts in the case included:

  • Conspiracy to help Lamar Adams sell phone timber investments: All defendants
  • Aiding and Abetting: All defendants
  • Gross Negligence: All defendants
  • Violation of Mississippi Fraudulent Transfer Act: Butler Snow Advisory, Thornton, Alexander. Seawright
  • Violation of Mississippi RICO Acct: Butler Snow Advisory, Thornton, Alexander Seawright, Alexander, Seawright
  • Joint Venture Liability: Alexander Seawright, Alexander, Seawright
  • Attorney Malpractice: Butler Snow
  • Negligent Retention and Supervision: Butler Snow, Baker Donelson

The complaint also charges Butler Snow is liable for the acts of Butler Snow Advisory. It asks the Judge to declare Lord Snow liable for all damages caused by Butler Snow Advisory. The same is asked for Brent Alexander and Jon Seawright concerning Alexander Seawright.

The Receiver closes with a request to declare Baker Donelson vicariously liable for all damages awarded against Seawright and Alexander.

Stay Tuned!

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