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Police arrest local man in alleged Ponzi fraud.

Byline: Jack Moran The Register-Guard

A Lane County man who allegedly collected millions of dollars from Oregon investors in a Ponzi scheme is now behind bars.

Eugene police on Monday arrested Dennis Reinhold Thaut, 65, of Marcola, on 17 counts of aggravated first-degree theft. He was lodged in the Lane County Jail and will be arraigned this afternoon on the felony charges in Lane County Circuit Court.

"He has been arrested, we plan on filing charges against him (today) and we are hoping for a quick resolution," Lane County deputy district attorney Bill Warnisher said.

The news of Thaut's arrest made Zelma Randles' day.

"It couldn't have happened to a more deserving person," said Randles, a 76-year-old Eugene resident who contacted state investigators last June to allege that she had been duped by Thaut, whom she had given $75,000 in 2004.

Eugene police announced in February that they were working with the state Division of Finance and Corporate Securities to investigate whether Thaut defrauded about 20 people - most of them elderly Oregonians - who gave him money to invest in individual retirement accounts, real estate investment trusts and certificates of deposit.

Thaut operated his business, First Security Financial, out of a restored Victorian house he owns at 588 E. 11th Ave. in Eugene, which is now being foreclosed on by a lender.

Police obtained a search warrant and seized business records from the building last October as part of their investigation, court records show.

Investigators determined that Thaut collected money from clients to invest, yet used the money for personal expenses as well as to make monthly interest payments to other clients, according to a search warrant affidavit filed by Eugene police Detective Mercy McDonald.

It's unclear how much money investigators believe Thaut stole from his clients.

However, court records show that one Eugene couple estimated they had invested more than $2 million with Thaut's company over a period of four or five years.

According to the search warrant affidavit, state investigator Ruth Johnson began probing Thaut's dealings last June, after Randles contacted her to report that Thaut had rejected her request to close her investment account and refund her money.

The affidavit states that Randles gave Thaut $75,000 in 2004, believing that the money would be used in a real estate investment with a two-year term that paid out an annual interest rate of 9.25 percent.

Thaut offered other alleged victims even higher rates on their investments, the affidavit states.

When Randles requested a cash-out payment in accordance with her agreement with Thaut, he told Randles the funds were not available, McDonald wrote. Thaut told Randles the money was with a mortgage company, but when Randles contacted that firm, she determined that Thaut had been lying to her, the affidavit states.

The realization that a man she trusted had allegedly stolen her money floored Randles.

"I couldn't believe that someone who lives here and has been a member of the business community for years could victimize older people like that," Randles said. "We were comfortable working with him. He had that beautiful house in town and all the trappings of a successful person."

Last month, a lender filed a foreclosure notice on Thaut's Eugene office building, saying Thaut and his wife, Cheryl Thaut, had failed to make monthly payments of $7,000 since last October. In the notice, the lender said the Thauts owed more than $717,700 on the mortgage.

A different mortgage company has launched foreclosure on Thaut's Marcola home, filing a default notice in February. The notice states that the Thauts had failed to make payments since last November and owe more than $407,800 on their mortgage.

Court records show that on the same day last October that Eugene police searched Thaut's business, they also searched his home.

There, detectives seized envelopes containing more than $15,000 in cash, passports belonging to Thaut and his wife, her birth certificate and social security card, and miscellaneous travel documents.

Two of Thaut's investors have sued him in Lane County Circuit Court, alleging fraud, theft and breach of contract. One of the plaintiffs claims that Thaut owes her nearly $375,000. The other claims to have deposited $100,000 with Thaut.

Randles, who said she attended a "heart wrenching" meeting earlier this month with Thaut's other alleged victims that was organized by investigators and prosecutors, knows that several people lost more money than she did after investing with Thaut.

"Some people were left without a penny," Randles said. "That ($75,000) would have helped us a lot, but I feel so sorry for those left in worse situations than we are."

State records show that the state in 2002 fined Thaut after an earlier investor filed a similar complaint against him.

In that case, a Eugene couple claimed that Thaut would not repay them $50,000 they had invested with him. A subsequent investigation showed that Thaut had used the funds to operate his business, according to a report written by state investigator Bill Hansen.

Thaut ultimately repaid the money and was fined $15,000, with $10,000 of that amount suspended provided that he did not violate state securities laws again.

Hansen said he thinks that Thaut likely paid back the couple with money he collected from subsequent investors.

"I'm not a mind reader, and I didn't know it would happen, but looking back, that must have been how he got his money," Hansen said.

The allegations against Thaut are similar - although on a much smaller scale - to the Bernard Madoff scandal in New York City.

Madoff faces 150 years in prison after he pleaded guilty last month to operating a Ponzi scheme in which he collected more than $60 billion from investors during a 20-year period. ?A Ponzi scheme is a fraudulent investment operation that pays returns to investors from money paid by subsequent investors, rather than from profits earned from legitimate investments.
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Title Annotation:City/Region; Dennis Thaut is suspected of taking millions of dollars from elderly Oregonians
Publication:The Register-Guard (Eugene, OR)
Date:Apr 21, 2009
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