Investors in Shawn R. Merriman’s alleged Ponzi scheme are likely to receive pennies on the dollar for their money, officials said, but they may do better than victims of similar scams.
Merriman told investigators that 38 investors or investor groups put $17 million to $20 million into his scheme, according to court documents.
The Securities and Exchange Commission sued Merriman this week, and the Department of Justice moved to seize his assets.
Merriman told investigators that he used some of the money to buy fine works of art, by artists including Rembrandt and Peter Paul Rubens, and classic cars. He valued the collections and other assets at $7 million. Those and other seized items will be auctioned and the proceeds returned to investors.
“It’s hard right now to know how much is there, how much it will bring,” said Don Hoerl, director of the SEC’s regional office in Denver. “There will be an auction and it will bring the market price.”
Victims of financial scams typically recover less than 5 percent of their principal investment and sometimes get nothing, said Jeffrey Dorschner, spokesman for the U.S. attorney’s office in Colorado.
A notable exception was the Smitty’s Investments case in Denver, a $57 million Ponzi scheme that ended in 2007 with six convictions. Investors in Smitty’s and related companies recovered 51 percent of their money, Dorschner said.
As in the Merriman case, investigators seized hard assets with real value — in that case a private mansion near Carbondale and eight NASCAR race cars.
Investors who lost money in New Yorker Bernard Madoff’s massive Ponzi scheme will likely receive far less since authorities have recovered relatively few assets.
Ponzi victims have other legal recourse. In cases that go into bankruptcy, a receiver can pursue early investors who cashed out of the scheme and made profits, said Gerald Rome, deputy Colorado securities commissioner.
Victims also can sue those early investors, though identifying them, tracking them down and taking legal action can cost more than the potential recovery, Rome said.
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
