Good Times Go Bust.

Investment Pitchman Going to Trial on Stock Fraud Charges

A former machine shop repairman is scheduled to stand trial this month on charges that he orchestrated a stock fraud scam that defrauded 400 investors, most of them from Los Angeles and Ventura counties, out of $18.5 million, which he used to buy houses, luxury cars, jewelry and to hail out an online pornography business.

A revised set of charges were filed Jan. 26 against Jerry A. Womack, 51, of Las Vegas, who now faces 17 felony counts of wire and mail fraud, as well as money laundering. He could end up in federal prison for up to 160 years with a $20 million fine if convicted on all charges, said Thorn Mrozek, spokesman for the U.S. Attorney's Office, which is prosecuting the case.

Prosecutors are alleging that Womack held meetings in which he told investors ranging from widows to professional money managers that his so-called "Womack Dow Principal" could pinpoint stock trends that would pay high returns, court documents show.

He claimed to have as many as four traders working exclusively for him on the New York Stock Exchange floor, investing in the Dow Jones Industrial Index's 30 stocks, according to an October 1999 criminal complaint filed by Brent Robbins, a special agent for the FBI's Ventura office.

According to court records, prosecutors are charging that Womack, who is not a licensed securities broker, really ran a Ponzi scheme from August 1997 through June 1999, using money from later investors to make payments to earlier ones under the guise of Wall Street profits.

He paid out $2 million to $3 million to investors from February through April 1999 alone, enticing beneficiaries to bring relatives and friends to the scam, according to a 1999 affidavit written by Robbins for a search warrant of Womack's Las Vegas home.

"Some of the victims will lose their life's savings," said Mrozek, of the risk associated with the kind of scheme that Womack is charged with orchestrating. "Obviously, that would have an extremely significant and detrimental impact on those victims. When they are elderly and lost their life's savings, it's particularly tragic because these victims are essentially at a dead end. They're not working. They don't have the opportunity to generate income."

The trial in U.S. District Court in Los Angeles is set to begin Feb. 27, unless Womack's attorney, Patrick Maginnis, is granted a delay to study the new charges just filed by the U.S. Attorney's Office. The original charges were filed more than a year ago.

Using investors' money, according to Robbins' affidavit, Womack bought homes in Las Vegas, several luxury cars, a boat and expensive jewelry. He also allegedly spent $214,000 to salvage an online pornography business owned by the ex-husband of his third wife, according to the affidavit.

"(The Ponzi scheme) is only as good as the person perpetrating it," said Robbins. "If the suspect has an incredible ability with words to entice people and make them a believer, then it's a very deadly con. Womack is alleged in the indictment to have received (almost) $19 million from 400 investors. I think that says something."

Womack was arrested by the FBI at his home in October 1999 and originally held without bail in Los Angeles. But he was later freed after U.S. District Court Judge Carlos Moreno set bail at $50,000.

Recovery and loss

Maginnis denied that his client has done anything wrong, adding that other investors spearheaded the scheme and made Womack an unwitting participant.

"I still believe in his innocence," said Maginnis. "This whole criminal indictment doesn't make any sense to me."

Iris Limited Partnership, which along with Jerry Womack LLC was one of two companies that Womack established, has since been taken over by investors to hold cash and assets that the FBI and private attorneys have seized from Womack. Womack LLC has since been folded.

Through the efforts of the FBI and the current board of directors for Iris, about $1.5 million in cash and assets had been seized or recovered, said Robbins.

Assets include a $128,000 painting that Womack commissioned from the renowned marine-life artist known as Wyland, according to Brian Unsworth, who is now managing director of the Iris board. Since then, investors working with private attorneys have located another $2 million to $2.5 million, he said.

But just as things looked like they were picking up for Iris investors, news came that then-board member George Frangie acknowledged signing over $900,000 of the seized cash and $100,000 of his own money to a gambler who promised to return with a profit after a spree in New Orleans. Instead, Frangie claimed the gambler lost $700,000.

Maginnis said the prosecution spotlight should be on Frangie, the former owner of a BMW dealership.

The FBI and U.S. Attorney's Office "fell asleep at the switch," Maginnis said. "If they've indicted Jerry, (Frangie) should likewise be indicted. I think (he) has a lot of answers to the investors for any losses that were sustained."

The Securities and Exchange Commission filed a civil complaint in U.S. District Court in Los Angeles last November seeking an injunction against Womack to prohibit further securities violations. No trial date has been set for that case.

Nick Morgan, senior trial counsel for the SEC, refuted assertions in Maginnis' response to the complaint that third-party investors had served as ring leaders of the scam.

"The implicit message is that Womack is innocent," said Morgan. "But we stand by the allegations in our complaint. Mr. Womack does exemplify the need for people to investigate those they rely on in receiving financial advice and investing their money."