Oregon ex-con Jack Phillips was ordered to pay a $417,750 fine by the Utah Division of Securities in what could be described as the case of “Romancing the Worthless Stones,” since Phillips was charged with luring four Utahns into investing in a scheme to ultimately worthless emeralds from Brazil.---

It was just one scheme employed by Phillips, who, according to the Utah Division of Securities, conned $330,000 from two Utah couples in 2007. The victims also purchased travel cards that were sold as discount passes for resorts around the globe but also turned out to be worthless.

Regulators say Phillips developed a decades-long relationship of trust with his victims through the multilevel-marketing company Guardian International Travel, whose Utah investors he also tapped for some very exclusive and very bogus side ventures.

The Utah Division of Securities began an administrative action against Phillips in 2012, and on May 29, 2014, the Utah Securities Commission ordered Phillips to pay the $417,750 fine (which includes restitution for victims) and cease all securities-related activities in the state. He would also be barred from being licensed as a securities broker in the state forever.

But attorney Mark Pugsley, who represents Phillips, says that the victims were also involved in the travel-card MLM, so it seems capricious for regulators to have singled out his client, and that Phillips himself was a victim of the emerald deal.

Beyond Phillips’ MLM pitches, regulators say, his activities extended to a bizarre plan to work with a reverend who had an inside line on a supply of uncut Brazilian emeralds that could be bought cheaply and sold for significant profit.

And the emerald scheme wasn’t total crap, according to Keith Woodwell, director of the Utah Division of Securities. There was in fact a female reverend who bought emeralds from Brazil and roped Phillips into the scheme, who in turn roped in the Utah victims.
Woodwell suspects it’s likely that the reverend—who operated a small strip-mall church in Atlanta—was herself duped by the gem sellers in Brazil.

Those exotic gems turned out to be worth less than Brazil nuts. Woodwell says Phillips can’t be considered a victim given the fact that he repeatedly told the Utah investors how safe the investment was.

According to Woodwell, Phillips and his partner, Elliott James, had assured the investors that the reverend had 15 years of experience in the gem trade, that there was already a buyer lined up, and that the investors would triple their investment in a matter of 90 days—all untrue.

“They were never able to sell the emeralds they brought back from Brazil; instead Elliott James and Jack Phillips basically stole the money from these people and left them holding the bag,” Woodwell says.

The junk emeralds went unsold for more than a year, exasperating the Utah investors who were constantly told by Phillips and James that they were still waiting for a buyer. By a chance turn of events, one of the Utah victims made contact with James’ ex-girlfriend or ex-wife, who said the deal was bunk and gave the investor a key to a storage shed that held barrels full of the emeralds.

When the investor retrieved the barrels, he discovered how worthless the investment was and began looking for anyone to bring charges against Phillips. But at this point, the investors pretty much felt like they were a day late and hundreds of thousands of dollars short.

The investors unsuccessfully sought assistance from the FBI, the Securities & Exchange Commission and even the Secret Service in prosecuting Phillips for investment fraud. They even had a criminal complaint with the Salt Lake District Attorney’s Office crap out after the statute of limitations expired on the charges.

Pugsley takes issue with his client being labeled as some kind of schemer, pointing out that Phillips himself invested $225,000 into the gems. He also says that while Phillips encouraged others to invest, the money went to James and not his client.

“It is troubling that the division chose to sue one of the victims and was able to obtain a large fine even though our client never received any financial benefit from that transaction and lost $225,000,” Pugsley says.

Pugsley adds that while the state got a default judgment against James, he never retained counsel or showed up for the hearing and that his whereabouts are currently unknown.

Regardless, Woodwell says, Phillips still violated the law by buttering up investors with misinformation and failing to disclose his own criminal past, including a 2002 unlawful gambling conviction in Oregon.

Woodwell says investors need to be wary of falling for similar schemes that might include some factual details obscuring the major red flags, as was the case with the incidental factual details of the emeralds venture.

Phillips also made himself a family friend of some of the victims, Woodwell says, and acted like a “surrogate grandfather,” leveraging that position of trust to pitch his “exclusive” deal to his victims.

“The bottom line is that the claims being made of ‘triple your money in 90 days’ are just too good to be believed,” Woodwell says. “And anything that gets pitched as an ‘exclusive’ deal, available only to a ‘select few,’ almost always is a scam.”

Utah investors who want to report a fishy deal or find out if someone selling an investment is licensed or has a record should contact the Utah Division of Securities at 801-530-6600, toll-free at 1-800-721-7233 or at Securities.Utah.gov.