On April 1, 2016, Davis County resident, Dwight Shane Baldwin, who previously ran a string of Salt Lake City venture-capital, private-equity and real estate companies, pleaded guilty to four counts of securities fraud, one count of theft, and one count of engaging in a pattern of unlawful activity. Each of the counts is a second-degree felony, punishable by one to 15 years in prison. As part of the plea bargain with Baldwin, the State agreed to drop other charges in light of his guilty plea.
Baldwin Bilked Investors Money and Used it for Unrelated/Personal Expenses
According to the charging documents filed against Baldwin, from 2010 to 2013, Baldwin solicited funds from persons for purported real estate-based ventures for Baldwin’s company. Specifically, the charging documents allege that Baldwin swindled investors by promising huge returns and making other bogus statements that persuaded them to pour $200,000 into a California toy company. However, instead, more than half of that $200,000 was used for unrelated expenses that went to other Baldwin companies and for personal expenses.
Keith Woodwell, director of the Utah Division of Securities said of Baldwin, “I think this case boils down to not being honest with investors. If you tell investors that their money is going to be used for one purpose and you use it for something else, you’ve committed securities fraud.”
The Utah Attorney General’s Office described Baldwin’s scheme this way:
Typically, Baldwin promised investors large returns within short periods of time with little to no risk. In connection with the offer and sale of these investments, Baldwin made numerous material misrepresentations and omissions including the risks associated with the investment, how the investment funds would be spent, and Baldwin’s ability to close the promised real estate transactions.
Baldwin Takes Investors for a Ride
More specifically, during a three month period in December 2007, the State said Baldwin urged Nicole Lindley and Matthew Lee to put money in Silver Leaf Capital Partners 1, or SLCP1, (a company owned by Baldwin). Court documents said the Lindleys wanted to invest in toy maker GarageCo, which SLCP1 was to won 80 percent of.
As part of the investment pitch, Baldwin proposed to invest $1 million into SLCP1, a California-based company. According to court documents, if Lindley and Lee each invested $100,000, each would own 10 percent of SLCP1, a shell company, and Silver Leaf would fund the remaining $800,000.
Baldwin told Lindley her money would be invested for three to five months, at most. Afterward, she would receive her investment, plus about $300,000 in profit, according to the documents.
Lee claims he was told his $100,000 would be repaid in four months and that he and Lindley each would be allowed to own about 17 percent of SLCP1.
Lindley became worried when Baldwin and an employee failed to provide her with weekly updates. She said Lee told her he had been to the company’s office to look at its books and found that half of their investments had been used to pay expenses incurred by some of Baldwin’s other Silver Leaf companies.
Court documents show money was spent for personal expenses, restaurants, advertising and insurance for Silver Leaf Development. About $37,500 paid for a party in Park City during the 2008 Sundance Film Festival. Another $6,600 was taken out in cash.
Baldwin, Long the Subject of Investigation
Baldwin has long been a subject of investigation by regulators. At the same time he was soliciting Lindley and Lee, Baldwin was also trying to persuade the securities division to approve his company’s application for an investment adviser license.
The application was denied. Securities division investigators determined the request contained false and misleading information. Baldwin incorrectly represented himself and the company as being licensed before and during the application process, division officials said.
Lindley and Lee Were Not Baldwin’s Only Victims
Lindley and Lee were just some of Baldwin’s victims. Other victims of Baldwin include:
- Multiple civil lawsuits Baldwin is facing as a result of the “chaos” he created with his alleged frauds.
- A criminal case filed in early April alleging he offered “essentially worthless” notes as collateral for a $500,000 loan he solicited in March. That came after he had entered into a plea in abeyance in 2010 and promised to make restitution of $200,000 to investors.
- He provided a $10,000 check to 1st Out Bail Bonds to cover his fee on a $100,000 bail from an account he allegedly knew did not have sufficient funds.
- A second case in late April charged him with two other counts of communications fraud and theft stemming from the bounced bail check.
- Upheaval in his personal life, which was followed by his seeking mental-health treatment, according to charging documents.
Baldwin will be sentenced on May 26, 2016, but what Baldwin owes the bilked investors in terms of restitution will be determined after sentencing.
* Photo Cred.: silverleafutah.blogspot.com