Securities scam burns 20 investors in Hawaii
Three Florida men face criminal charges in the alleged scheme
Three Florida men bilked about 20 Hawaii investors out of more than $1 million in a securities fraud case, according to an indictment handed down by an Oahu grand jury.
Robert Byrch, Richard Morris and Robert Michutka were indicted on May 25 and arrested in Florida this week.
Byrch was president of 21st Century Satellite Communications, Inc., while Morris and Michutka were agents selling promissory notes and purchase-leaseback agreements to about 20 investors in Hawaii for a total of $1.2 million, according to officials from the state attorney general's office.
Although 21st Century sales agents claimed the investments were secured by the value of the equipment that was allegedly being purchased, the investments were not secured and in fact $6.1 million was used to pay sales agents' commissions, according to the U.S. Securities and Exchange Commission.
"The investments here ranged from about $10,000 to $100,000 each," said Deputy Attorney General Dwight Nadamoto.
"For some it was their life savings which they depended on for retirement, IRAs, stuff like that."
According to the SEC, the 21st Century Satellite sales pitch was nationwide and from 1997 to 2000 more than 700 investors bought approximately $23 million in promissory notes.
Sales agents told investors that the money from the notes sold would go toward purchasing satellite television equipment that the company would use to install, maintain, and service private satellite television stations for closed communities throughout northern and central Florida, according to the SEC.
That investment money was lost when 21st Century defaulted on its notes and filed for Chapter 11 Bankruptcy reorganization in September 2000. The SEC filed a civil complaint against 21st Century in 2001 and other states have filed civil lawsuits, according to Nadamoto.
Nadamoto said that as far as he knows, his office is the only one that has gone after the company heads criminally.
"I don't think they were expecting a criminal investigation," he said. "Our penalties are strong, because if someone loses $100,000 or more because of securities fraud it's 20 years in jail, no probation."
Each of the three men are charged with one count of sale of unregistered securities, one count of sales of unregistered securities by an unregistered person, one count of prohibited securities practices, one count of securities fraud and one count of first-degree theft.
Byrch had been wanted on a $1 million warrant, Morris on a $500,000 warrant, and Michutka on a $100,000 warrant. All three await extradition.
Nadamoto said the local sales agent in Hawaii was certified public accountant Douglas T. Nonaka, who was indicted in 2003 on four counts of sale of unregistered securities, sale of securities by an unregistered person and prohibited securities practices.
The state attorney general's office said Nonaka had prepared taxes for many of the investors. Nadamoto said Nonaka is cooperating with their investigation.