ALBUQUERQUE, N.M.—A trustee appointed in the bankruptcy case of a New Mexico real estate executive who swindled some 600 investors out of $75 million is seeking to recover $26 million from people who profited in the collapsed Ponzi scheme.
Trustee Judith Wagner said she doesn’t expect to recover that much money, according to an Albuquerque Journal report (). But she said any money she does recover through 148 so-called clawback lawsuits will help repay people who lost money to Doug Vaughan and his Vaughan Company Realtors, after legal and other expenses.
Investors from around the country thought they were loaning Vaughan money for real estate, but he was using it to pay promised profits to earlier investors and support his lavish lifestyle.
The scheme collapsed in February 2010. The once high-flying Vaughan pleaded guilty to two fraud counts in December and faces 10 to 12 years in prison.
Investors targeted with clawback civil lawsuit cases allegedly should have known they could not have received the kind of interest rates they were being paid, or were promised, in a legal enterprise. Some of the suits target insiders, generally a handful of business associates and people who were paid commissions for luring people to invest with Vaughan or who served as a reference for him.
“Doug Vaughan wove this fiction for 17 years, and the investors are woven into that tapestry with him,” Wagner said. “Now we have to unravel the situation.”
Some of the victims being targeted by the clawback suits claim they are being victimized twice and have banded together to retain a noted New York attorney and victim of infamous Ponzi schemer Bernie Madoff to help fight the lawsuits. Helen Davis Chaitman confirms she has been retained but has declined to say how many Vaughan victims have signed on.
The potential for a multi-million-dollar recovery is a brighter picture than 18 months ago, when it became clear that most Vaughan’s wealth was an illusion—little more than a grab bag of rental properties and his heavily mortgaged personal mansion.
When Vaughan and his company filed parallel petitions for bankruptcy court, the investors, almost all of them individuals, families or family trusts, stood to lose $75 million. The bankruptcy filings were quickly followed by the revelation that Vaughn had been running a Ponzi scheme using promissory notes.
Clawback settlements have thus far generated about $760,000 for the bankruptcy estate, with another $120,000 in settlements pending, said James Askew, who is Wagner’s lawyer.
“There’s plenty of discussions going on that will lead to further settlements,” he said.
But clawbacks have essentially divided Vaughan’s investors into two camps, the majority who lost money and those who profited from the scheme or who helped Vaughan perpetuate it in some way, knowingly or unknowingly. The average loss was $125,000 per investor.
While many of his victims were from New Mexico, court records indicate he also had victims in a number of other states, including Arizona, Washington, Oregon, New Jersey, Texas, Virginia and Colorado.
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Information from: Albuquerque Journal,
