EDITOR’S NOTE: Lynn Packer, who freelances for City Weekly, is a trial consultant and has worked on several Utah cases, among them Caldera v. Microsoft and Jensen v. KTVX. Packer specialized in white-collar fraud stories, broke the Afco fraud story in 1981, and wrote an award-winning series on the Bonneville Pacific fraud for City Weekly. This story is the last of three parts. While Packer is not yet engaged as a consultant to any parties involved in Attorneys’ Title Guaranty Fund (ATGF)-related litigation, he may be at some point. If that occurs, he will cease reporting on this story for City Weekly.
Minuteman. Constitutionalist. Freeman. Terms that warm the cockles of ultra-conservatives’ hearts. But terms sullied by violence at Ruby Ridge and Waco. And expressions that may be further tarnished by alleged securities fraud in Utah.
In Utah, some anti-government adherents are increasingly swindling fellow far-right activists using a variety of financial frauds that appeal to their victims’ right-wing beliefs. Others who invested with suspected constitutionalist con men had no clue they were dealing with extremists. Court documents connected with civil and criminal actions involving a program promoted by Calvin Paul Stewart, Alvin Anderson and Karl and Mark Taylor Miller (not connected with the Mark Miller car dealer), show a side many alleged victims never saw when investing millions in deals that involved secret monetary trades and offshore bank accounts.
“He’s a wing nut,” a Salt Lake City attorney said of Taylor Karl Miller, a Utah constitutionalist he’s suing for civil fraud in connection with a home sale in Wasatch County. Attorney Shawn Turner said Miller filed “all sorts of stuff” in connection with the suit, including the legal argument that he is not a citizen of Utah, thus exempt from its laws.
Karl Miller, 65, in written pleadings he prepared as his own attorney, alleges the courts and opposing counsel are making unauthorized use of his name by using it against him. He claims he is due $500,000 each time his name is used without permission.
“I got these invoices for millions of dollars for copyright violations,” said attorney Steven Dougherty, who was also involved in a suit against the Millers. “These bozos think they have copyrighted their personal names. So every time you file a pleading that has their name in it, they hit you with a $500,000 invoice for the use of their name. … It’s a bogus way to try to scare people off.”
“They come across as just really solid, professional, businesslike people,” said attorney Turner. “That’s why the pleadings have been a bit of a shock. Karl was always in his suit. Mark was not always in a suit, but dressed nice enough.”
Karl Miller, in the court papers, defends himself against allegations he defrauded a Las Vegas Russian soccer coach in connection with the house sale and related investment. “They’re just wackos,” Doughtery said. “We were figuring this is some sort of weird, polygamous, you know, freeman-type, constitutionalist type group”
Karl Miller, who took out bankruptcy twice in 1993, lives at a $1.35 million-dollar, eight-acre estate in South Jordan. Duane Fluckiger, who owned the property and sold it to Miller, claims Miller cheated him out of $400,000 on a second mortgage Fluckiger provided with the sale. Fluckiger said Miller approached him, saying he was a real-estate agent and was buying the house for his daughter and son-in-law, Marquette and William Mansell.
Fluckiger considers the Mansells to be straw buyers—people pretending to buy for themselves when they are really buying for someone else. Fluckiger’s attorney used the even less-flattering term “shill.”
Fluckiger said he loaned Miller an additional $400,000 that Miller would hold in escrow for six months and then return. “They said it would be a way to double my money,” Fluckiger said.
That $400,000 was to be placed in an account at Attorneys’ Title, remain there and merely be used, according to what Fluckiger was told, to show that William Mansell had financial backing for his “pots and pans” marketing business.
Fluckiger said he received only a couple of partial payments on the second mortgage before it went into default. Miller, according to Fluckiger, kept making excuses for not making house payments, said the cookware business fizzled, then went into a business with his son, Matthias, using four or five computers. “They sit there and play with the stock market all day long,” Fluckinger said. “I’ve been in the room when they were doing it.”
Fluckiger said the Millers also run a foreign-language training business that involves “UPS trucks coming and going all day.”
“They’re in a language package that they’re working with the [LDS] church on, shipping language cassettes, with some kind of missionary connection, shipping them all over the world.” (The language company is at www.bigredgarage.com. The site is registered to Miller’s son, Matthias, and his company, Master Investments, Inc.)
Fluckiger did get the second $400,000 from the Attorneys’ Title trust account after the money had been there six months. His attorney, Dan Hunter, said “he was one of the very few who got out.” (It turns out Fluckiger may have been paid with money raised by Al Anderson and Stewart, as we shall see later in the story.)
After two years of being in default, Karl Miller and his family still live at the estate at 2522 Horseshoe Circle, fighting foreclosure with a myriad of court filings. An attorney for the bank foreclosing on the first mortgage called the filings “bogus paperwork.” The bank has successfully foreclosed, but the family refuses to leave. A court hearing on the matter is scheduled next week. An eviction could be imminent if a judge does not buy the family’s legal theory.
But Miller’s troubles may not end with an eviction. Fluckiger has provided documents and testimony for an investigator with the Utah Securities Division, the same agency that has brought criminal charges against the suspected principals of the so-called “Attorneys’ Title Fraud.”
Karl Miller and the Mansells had no comment. They declined returning phone calls. City Weekly, like plaintiff’s counsel in the lawsuit, was unable to contact Mark Taylor Miller. Unlike his older brother, he has not filed an answer in the suit against him.
L. Dale McAllister was the escrow agent who controlled the monies invested in “The Program,” which was run out of the trust accounts of Attorneys’ Title Guarantee Fund. He was the one who accounted for the investment dollars that the Miller brothers brought in, and he wrote the checks that dispersed the funds.
“Of the Miller Brothers,” McAllister said, “Mark was the more avid constitutionalist.”
Karl, he said, is the accountant, and was more involved in crunching numbers for investments the Millers and Stewart made jointly. (See “In Search of Mr. Big,” Oct. 8, City Weekly.) McAllister said those insiders went up to Washington state to form corporations and attend seminars, all arranged by constitutionalist David Carroll Stephenson before Stephenson was imprisoned for intimidating a judge. But the “Stewart group” and “Miller group” dealt with Stephenson separately, according to McAllister, who himself has been charged criminally.
Constitutionalists like Stephenson believe the federal government has created a corrupt system of land ownership wherein the federal government actually owns property and “landowners” rent the property through payment of property taxes. Like the Millers, Stewart and Alvin Anderson used those legal theories to stave off eviction from their million-dollar homes in Draper and North Salt Lake. Anderson believed the house was his, even though he was in default on the mortgages, because he had recorded a document constitutionalists use to claim property: a “land patent” declaration. Davis County Recorder Sheryl White said such patents were issued by the federal government in the 1800s in connection with homesteading the American West.
The constitutionalist argument goes something like this: Property that is titled or deeded the conventional way is actually owned by the government and rented by property “owners” through the payment of property taxes.
“The United States government corporation has quit-claimed all the property in the United States of America to the foreign principles/creditors as collateral against the un-payable debt,” according to Johnny Liberty’s Global Sovereign’s Handbook, a sort of right-wing Bible for those filing land patents.
To get actual ownership of your property, according to the handbook, you need to file an “allodial” title rather than a deed.
“Without an allodial title held in your sovereign capacity, banks loaning you so-called ‘money’ can attach a lien on your property until it’s ‘discharged’ in full. If you fail to pay the mortgage, the bank will foreclose on the property.”
But the move didn’t work. Anderson stayed in the house on Eaglewood’s Fairway Drive until a sheriff’s deputy showed up with eviction papers. Anderson then simply moved to another home two blocks away, on Eaglewood’s Ironwood Drive, yet another home involved in the alleged fraud, another in the process of foreclosure, and another on which Anderson asserted squatter’s rights by filing a land patent.
“I could be evicted from this one, too,” Anderson told City Weekly. “Through this whole deal, I’ve lost everything I’ve built up. I don’t have a penny to my name right now.” He’s biding time, he said, until he can afford to rent an apartment and move.
Mark Taylor Miller’s son, Brian Glen Miller, was the alleged straw buyer of another house at 3224 Westview Circle in Salt Lake City. Like Anderson, he filed a “land patent” on the property. He argued he could not be evicted by the Utah court because it had no jurisdiction over land patents. He sued Chase Manhattan Mortgage to block eviction, making this argument:
Based upon the ‘Security Agreement’ between BRIAN GLEN MILLER, Debtor, and Brian Glen Miller, Secured Party, Brian Glen Miller owns the name BRIAN GLEN MILLER or any/all derivatives thereof. Brian Glen Miller is not only the Secured Party but also owns ‘title’ to the name BRIAN GLEN MILLER, and is therefore the “Holder-in-due-Course” of said name; consequently “CHASE” and “CHASE” Attorneys’ have no legal basis in this case, and in fact have no foundational basis (claim) upon which to proceed, due to their inability and ‘failure’ to state a claim upon which relief can be granted.’
Brian Miller’s constitutional view of the law did not persuade the court and, like Anderson, he was evicted.
Investor Michelle Jacobsen of Centerville, Utah, who is now being evicted from the condo she used to invest in “The Program,” caught just an inkling of Stewart’s anti-government philosophy. (She was among those who thought their money was safe, yet claimed they were told nothing about how money in an escrow account could be generating huge returns. “If I told you, then everybody would be doing it,” she said she was told by Stewart. Jacobsen took out a second mortgage on her home and put in $80,000. Stewart and Anderson would make the mortgage payments, pay 2 percent interest a month, plus pay her house off in full, including what was left on her original mortgage, in three or four years. When they failed to do that, the bank closed in.)
More than two years ago, when the FBI contacted Jacobsen with questions about her investment, she called Stewart. She said a defiant Stewart came to her house with a copy of the Constitution, explaining how the law could not touch him. “The government can’t get anything on me,” he reportedly said. The government was merely trying to thwart his method of making money on the international monetary market.
Even though the FBI probe fizzled before any criminal charges were filed against Stewart or anyone else, the Utah Securities Division meted out a good wrist-slapping with a cease and desist order. The March 2000 order found that Stewart’s Carson International—one of many company names Stewart has used, primarily to establish bank accounts—had not been legally registered in the state. The order also found that Stewart was not a properly licensed broker dealer and that his investment scheme amounted to selling an unregistered security. Stewart was fined $1,500 and ordered to quit selling unregistered securities.
Now, two-and-a-half years later, Stewart has been criminally charged with securities fraud. Among the accusations against him: Violation of a 2000 cease and desist order. But that may have been predictable based on Stewart’s written response to the order. That evidence suggests he never took the order to heart.
On March 17, 2000, just before the final order was handed down, Stewart responded to the state’s proposed finding with a 14-page, constitutionalist-inspired repudiation. Stewart’s answer was written by David Carroll Stephenson’s associate, Kenneth Wayne Leaming. (The pair, on their website at www.crtf.org, claim to be “recognized international lawyers.”)
Leaming, who refers to himself as Kenneth Wayne, created a 14-page answer spewing constitutionalist rhetoric. He wrote that the cease and desist had not been issued “under the authority nor in the name of the body politic of the organic republic of The State of Utah as required by the constitution of said body politic.” His document wondered under what authority the Utah Securities Division could restrain Stewart’s liberty. He inferred that the state of Utah is actually a subdivision of Washington, D.C.
Stewart, according to Leaming’s paper, is entitled to $30 million dollars for injuries the Securities Division caused through its enforcement proceeding. Plus, he claimed the state owed him an additional $1,000 a day for each day it restrained his liberty.
Leaming, in the meantime, is also busy fighting government corruption in Washington state. He has sent papers to government leaders informing them that the Washington state constitution is a fraud perpetrated in 1899, when the genuine document was replaced with a phony one. Leaming also filed a $380 billion lawsuit against the state for alleged misconduct surrounding his arrest just after the time he penned Stewart’s defense to the cease and desist order.
The Miller Brothers and
The Program: A Ponzi?
The State of Utah has already charged six Utahns (the Millers not among them) in connection with an alleged real-estate investment scam known as “The Program.”
“Program” funds were funneled through escrow accounts, like some at Attorneys’ Title, before they were lost in so-called high-yield investments. Two of those charged, Stewart and Alvin Anderson, like the Millers, lived in and then were evicted from luxury homes when “The Program” fell apart.
Early in 1999, the brothers Karl and Mark Taylor Miller had allied themselves with Stewart in pooling funds for the prime-bank, high-yield investments. Stewart’s group and the Millers’ group worked together through a California man named Hans Tschebaum to place money with international money traders, at least one in Texas and two in California.
L. Dale McAllister, the escrow officer at Attorneys’ Title, would pool the investment dollars in escrow accounts, then direct funds to out-of-state investments under Stewart’s direction. McAllister, for example, said 30 percent of the $1 million sent to a shadowy money trading company called Trade Direct in California came through Miller investors.
McAllister said the Miller group and Stewart group were both doing separate deals that involved extracting large amounts of home equity to be used for the investments. Under the arrangement, the promoters, through the so-called “Program,” would make payments on the mortgages until a certain time when each deal would be paid off with a balloon payment. McAllister would then send the pooled funds to the out-of-state prime-bank traders.
But, said McAllister, there was a big difference between the Miller and Stewart programs. The Miller balloon payments came due after six months, while the Stewart payoffs were due after two or three years.
The groups’ first three major investments—with Sterling Enhancement, Trade Direct and the CRP Group—all failed to produce a single cent of returns, according to McAllister. So investor money, not profits, was being used to make mortgage payments. Then, after six months, it was the Millers’ balloon payments that first came due. The Miller investors, among them Duane Fluckiger, who sold the house where Karl Miller lives, demanded cash. Hundreds of thousands in cash.
“The Millers, they set up their deals with people so that everything came due after six months, whereas Paul’s deals were all set up so everything would come due after a year or two years,” McAllister said. “When we sent off all the money and it didn’t come through, it was the Millers’ deals that came due first. And so we had to pull a lot of the money that we had raised afterwards to bail out the Millers on their deals.”
That’s when the Ponzi scheme began, said McAllister, where new investor money started paying off old investors. “The Millers had no way to pay out,” McAllister said. “We were worried if Millers’ group went under, they would drag Paul Stewart’s group under. That’s when it turned into a Ponzi; we had to do new deals to pay people.”
Using Stewart group investor funds to pay off the Miller group helped lead to a breakup. The Millers ceased their Stewart alliance in about the beginning of 2000, after the California investments collapsed. A former employee of Main Street Mortgage said the split occurred in about December 1999. “Paul came to us and said he had to buy out the Millers because they wanted to get out of it,” she said.
Mortgage broker Jim Bjork recalled the split-up: “I do know, that after Paul went to Europe in September ’99, when he came back, he was fighting with him [Mark Taylor Miller] in a professional manner.” He said the dispute was over money.
“The Program,” funded with money raised by Stewart, Al Anderson, the Millers and others, recovered only a few hundred thousand dollars of principal from its multimillion dollar investments with prime-bank traders. It earned no interest or profit.
L. Dale McAllister said the California traders did not do what they promised to do. “That’s when the panic started setting in,” he said. “Basically, for all of 2000 and half of 2001, we continued waiting for them to pay off. We continued trying to do whatever business we could to make sure the bills were paid.”
New investors recruited by Stewart gave the alleged fraud fresh funds during this time of panic. This meant “The Program” could make payments to those who invested before them. And like investors before them, these new investors also thought their money sat securely in an Attorneys’ Title account.
In June 2001, investors were informed—falsely, according to prosecutors—that the U.S. Federal Reserve had seized the money and a new investment program had replaced the old. Some investors, believing the assets had been frozen, placed more money in the new deals that would pay off big and make up for earlier losses.
Behind the scenes, McAllister was writing checks to angry investors when he did not have money to cover the checks. That’s when some bank accounts set up in connection with new corporations formed by company insiders came in handy.
In late 1999 and early 2000, members of both groups had used David Carroll Stephenson to help them set up Washington state corporations to handle the fortunes they expected to amass. (The Millers also reportedly used Stephenson. Attorney Hunter said Master Investments, Inc., the company owning the language tape website, is a Washington corporation with Karl Miller as president and David Carroll Stephenson as chairman.)
While in Washington state attending seminars and establishing corporations, some members of the group opened Bank One checking accounts for their newly formed companies. Those accounts were going to be used to manage millions the two groups expected to reap by investing with so-called prime-bank traders in Texas and California. Instead they would end up being used to move money around from account to account, to bide time.
“Through the course of that year-and-a-half when money would come in, it would be given out on an as-needed, putting-out-the-fires basis,” McAllister said. “Sometimes Al needed some money to put out his fires. Sometimes I needed money to put out my fires. And same with Paul.”
Moving money around the various accounts may have created the illusion, for investigators, that more money was involved in the alleged fraud than was actually the case. Between January and June 2000, some $32 million went through one Attorneys’ Title account at Brighton Bank. Part of that may have been legitimate real-estate escrow accounts. Part may have been the same money flowing in and out.
One source told City Weekly that money would move among several accounts, to pay bills, in anticipation of revenue coming in. “If we knew a check was coming in this coming Friday and today was only Monday, then we could write checks out of other accounts to deposit into either that account or other accounts that needed it. Then the next day, we would write other checks out of other accounts to cover those. The day after that we would write other checks out of other accounts to cover those. And we could kind of buy that week of time until real money came in to cover it. Then it basically all evened out in all of the accounts all the way around.”
Harrison and McAllister set up a joint Zions Bank account late in the collapse period, between September 2000 and July 2001. Some $10 million went through it. “It looks like all 10 accounts had $10 million going through them, when in all actuality, there was a small fraction of that amount that really existed,” said a source familiar with the account.
The source estimated perhaps $2 million, flowing in and out and among accounts, added up to the $10 million. “Paul had his Washington accounts and Al Anderson had his Washington accounts and we had a Key Bank account and we were able to use a combination of all those different accounts—if we knew a deal was closing and money coming in two or three or four days down the road—to pay someone who was screaming at the moment.”
One of the bank accounts was taken out in the name of a company called Harmony. The name of that company will turn out to be a “blast from the past,” connected to an early-’80s alleged swindle in Southern California. (See sidebar: “Targeting a Mormon Affinity Group.”)
Patriots and Mormons
The Securities and Exchange Commission defines Affinity Fraud as “investment scams that prey upon members of identifiable groups, including religious, elderly, ethnic and professional groups.”
“The fraudsters who promote affinity scams are group members, claim to be members of the group, or enlist respected leaders within a group to spread the word about an investment deal,” according to the SEC literature.
Utah’s top securities enforcement officer, Michael E. Hines, estimates that fully one-fifth of the fraud cases he sees “have a common affinity of victims who are constitutionalist or have a distrust for government and are looking for alternate ways of investing.”
“Somehow, perpetrators know how to target constitutionalists with the exact trust-gathering statements of common distrust of government,” Hines said.
Unlike “normal” victims, victims who are constitutionalists often won’t turn to government agencies for redress because of fear or hatred.
“In Utah, we have a disproportionate number of victims who are constitutionalists and, normally, they refuse to cooperate with the government,” Hines said. “They would rather eat their losses than work with us.”
Utah’s most significant affinity group is, of course, Mormons. As an example, Hines cites a recent case where LDS promoters William and Margarite Papple of New Zealand came to Utah to attend General Conference.
“They walked around promoting their investment [Lakeland Wealth Creators] to church members and got a certain number to put money in a prime-bank trading program out of New Zealand,” Hines said.
New Zealand authorities recently shut down Lakeland Wealth Creators and are pursing a criminal case against the couple.
A double affinity applies when a fraud targets Mormon constitutionalists. Indeed, one expert believes constitutionalist philosophy is partly derived from Mormonism. “Much of modern Constitutionalism comes from the writings and prophesies of Joseph Smith, the founder of the Church of Jesus Christ of the Latter-day Saints,” wrote Paul de Armond of the Public Good Project, an advocacy group against political extremism. “The origin of the Christian Patriot term ‘Freemen’ and the key to Constitutionalism can be found in The Book of Mormon, Alma 51: 5-6.”
Constitutionalists reject conventional legal theory and substitute a “simplified notion of a divinely inspired ‘organic’ Constitution,” Armond said.
One of the country’s best-known constitutionalists is ex-Mormon and former Green Beret James “Bo” Gritz. When Gritz ran for President 10 years ago, he garnered more votes in Utah than any other state.
The Salt Lake Tribune called former Salt Lake City police chief W. Cleon Skousen the patriarch of the constitutionalist movement in Utah. Skousen, a Mormon and close friend of former church president Ezra Taft Benson, founded The Freemen Institute, now called the National Center for Constitutional Studies—after Ruby Ridge, Skousen renamed his organization to avoid taint. “But I found some people becoming militarily minded and calling themselves Freemen. We had to change the name,” he told the Tribune, denouncing violence associated with some conservative groups.
But some of Utah’s constitutionalists are not armed with guns, but with novel legal weapons such as “land patents” and “birth certificate” copyrights, and an alleged willingness to rob Peter while paying Paul. Utah promoters who are also active Mormons have a bigger playing field. They can target run-of-the-mill Mormons, Mormon constitutionalists, non-Mormon constitutionalists and the assorted gullible and greedy.
Those who target constitutionalists also have some hedge against prosecution. Some constitutionalist victims would not blow the whistle because they hate government worse than their alleged victimizers.
There are other kinks in possible prosecution as well. Not the least of these is the very real possibility that many other victims may themselves have committed fraud to enter into Stewart’s, the Millers’, or anyone else’s “Program.” Specifically, they could have lied on their real-estate loan applications. Once a victim has committed fraud, his testimony against someone who may have pulled off an even bigger fraud is tainted.
“It’s fairly common where perpetrators are smart enough to try to get the victim entrenched in the fraud by making over-qualifying statements concerning their net worth or income,” said state regulator Michael Hines.
He recently interviewed a victim, a school teacher, who came to realize during the interview that she did not qualify for the loan she needed for the investment. “The salesman winked with her,” Heinz said. “‘If you’re willing to say on this application you sign that you are qualified, I am willing to ignore the fact you told me you don’t quality,’” Hines said the investor was told. “So she put her stuff in a position where she committed fraud to make herself qualified for a fraud.”
Hines said those who commit fraud to invest in a fraud limit the state’s ability to prosecute. “What we end up doing is not using that person as a victim. I don’t want to have someone on the stand that has to stand up and admit that they lied,” Hines said. “We have had fraud cases in which there has not been a single victim that we felt we could put on the stand that would be credible.”
Crime Pays: Utah’s Lax Sentencing Guidelines
Utah’s criminal fraud case against Calvin Paul Stewart will likely not go to trial. His attorney, Richard Mauro, and prosecutors are now working on a plea agreement. Under Utah’s sentencing guidelines, prosecutors may not be able to give Stewart any more jail time through a prolonged, expensive trial than they could get from a quick-and-dirty plea bargain.
Unlike federal judges, Utah judges can only sentence convicted swindlers to a time range—1 to 15 years—not to a term of, say, 10 years. The only control the judges have is to hand down consecutive, rather than concurrent, sentences for multiple counts. So three consecutive jail terms for three counts would yield a minimum sentence of three years. Or so it would seem.
The board of pardons, said Hines, can even trim a minimum sentence. And, he said, it has. He gives as an example convicted swindler Robert Michael Fain. Once a Mormon, Fain swindled members of his Texas ward with an affinity scam wherein he told investors God had directed him to share his wealth, thus, his investment plan, said Hines. After getting caught and excommunicated, he moved to Utah, joined an Assembly of God congregation in Ogden, and began peddling interests in inventions like the “Mess Free Bird Feeder.”
The state convicted Fain, and the judge sentenced him to three consecutive terms of 1 to 15 years. But he was out i