Colorado Fraud Victims Cheated a Second Time

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More than a third of a billion dollars has been stolen in Colorado’s biggest fraud schemes, but many of the victims have never recovered a penny of the money they lost.

We now know where a lot of their hard earned investments have gone.

Dolcefino Consulting has reviewed a mountain of court records from the nine biggest fraud cases investigated by the Division of Securities in Colorado over the last twelve years.  Of the $341 million dollars stolen in those schemes, court receivers and the lawyers they hired to help them recover the money returned only $28 million to the victims.  That is roughly 8% of all of the money swindled.

Those same court filings show that $11.7 million was paid out instead to firms appointed by Colorado judges to get victims their money back.

In the midst of our investigation, Colorado Judge Martin Foster Egelhoff approved a second mountain of invoices in the massive civil fraud suit involving Gary Dragul and a real estate company called GDA Services. A review of those invoices show that the court receiver and his fellow lawyers and the accountants he hired to help him recover the money have been paid more than $2 million dollars. Receiver Harvey Sender, of the law firm of Sender and Smiley, has filed at least two new lawsuits adding several new defendants, increasing the likelihood of protracted legal fights and the astronomical legal fees associated with those fights.

The case of Colorado fraudster Richard Roop is a prime example of the problem being exposed by this widening Dolcefino Consulting investigation that first began three years ago.

A Colorado judge appointed attorney Randall Lewis as the receiver to recover the funds lost in Roop’s mortgage scam. Those bills totaled $261,000.  Only $36,000 was ever returned to Roop’s victims.

“The State of Colorado has allowed a cottage industry of lawyers to feast on money that should be going back to the victims in these fraud cases,” says Wayne Dolcefino, President of Dolcefino Consulting, a Houston based investigative media consulting firm. “This looks more like vultures feeding on a carcass, leaving crumbs for the people that actually got ripped off in the first place.”

The Denver Post noted Dolcefino Consulting’s investigation in Colorado when reporting on the resignation of Colorado Securities Commissioner Gerald Rome in November of 2018.  Rome’s office had routinely bragged in press releases about big court judgments, but a review of payments to the victims then proved those judgments were “paper victories.”

Of $127 million dollars lost in certain securities and Ponzi schemes in Colorado, we documented then that the Securities Division had recovered only $3 million – far less than their budget for that same time period

“We tried to warn Colorado legislators two years ago there was something terribly wrong in the way these securities cases are being handled”, says Dolcefino. “Mission number one should be returning as much money to victims as quickly as humanly possible. The State of Colorado could save millions if they handled these cases in house.  Someone needs to actually make sure the lawyers appointed by these judges aren’t taking advantage of the system as it currently stands.”

Three law firms representing court receivers have received the lions share of the money.  The Denver law firm of Lindquist and Vennum LLP billed more than $1.5 million representing court appointed receivers in just three cases.

The law firm of Allen Vellone made almost $5 million in similar cases. 

While reviewing court records, Dolcefino Consulting learned Colorado courts have had warnings about these receivers going back 16 years.

In 2004, receiver Harvey Sender was appointed to recover $128,000 lost in a mortgage scam.   Sender recovered only $11,000 and then tried to charge almost the same amount,  $10,000, in attorney’s fees. A judge ruled Sender’s bill was unreasonable. 

None of the receivers nor their law firms would comment on this investigation.

“No one is reviewing these bills to make sure we spend as little as possible to get folks their money back. Every dollar the lawyers make is one less dollar you can return to fraud victims,” says Dolcefino. “ We have talked to investors in the GDA case in recent weeks who are not happy to see so much of their money going to lawyers.”

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