In October of 2008, Polly Prestwood, an elderly resident of Flynn, a city in Leon County, made a phone call that set Reginald Lee Clark on the path to prison. Frustrated by Clark’s refusal to provide her information about investments she had made with him, Prestwood contacted the Texas State Securities Board (TSSB) to determine whether Clark was registered with the state to sell investments.
Clark held himself out as a successful financial adviser and a true Christian man who only wanted to help his elderly clients invest safely and securely. But he was not registered with the TSSB as a securities dealer or agent to sell investments, as required by the Texas Securities Act. After learning Clark was unregistered, Prestwood filed a complaint against him with the TSSB Enforcement Division and provided copies of her checks made payable to Clark’s company, Clark Investment Advisers, which did business in and around Limestone County.
The Enforcement Division began a joint investigation of Clark’s activities with the Limestone County Sheriff’s Office and County and District Attorney Roy DeFriend. Members of the Enforcement Division interviewed Clark at his home in Woodway, near Waco, where he stated he sold only insurance products and there would be no need for a client to write a check directly to him or his company to make an investment. Clark further stated that any funds invested by a client would be paid directly to the company issuing the product.
Prestwood’s records flatly contradicted Clark. Each check she wrote to Clark Investment Advisers had Clark’s endorsement on the back. He was first indicted in June 2009 for theft of property and misapplication of fiduciary property, and the indictment named Prestwood as his victim.
The scheme and
Clark represented himself as a born-again Christian, and his victims bought into his charm and ability to quote Scripture. He ended emails to one investor with suggested prayers; to another he wrote, “God bless what we are trying to do.” Prestwood told TSSB attorneys that Clark would bring passages from the Bible to their discussions about investments.
Clark gained his victims’ trust by initially placing them in legitimate investments such as annuities or brokerage accounts. After some time, Clark would convince them to move their money to another investment he touted, one that would provide higher returns. The type of investment he offered varied with each investor.
When Polly Prestwood first met Clark, he represented himself as a registered broker who successfully handled investments for a number of people and offered to help manage her money. Clark first placed some of Prestwood’s money in annuities in 1999, and she received timely reports and statements regarding the status of her investment. In 2004, Clark approached her with a new investment opportunity that promised a higher yield. Best of all, he guaranteed Prestwood that her principle would never be at risk.
Clark told Prestwood her funds would be placed with an investment management company that accepted investments only in large blocs. That meant Prestwood’s funds would need to be combined with the funds of several of his other investors to make an investment large enough for the management company to accept. Clark told Prestwood to make her checks payable to Clark Investment Advisers and he would see to it that her funds would be placed with the management company along with the funds from his other investors. Based upon Clark’s representations, Prestwood wrote three checks payable to Clark Investment Advisers in the following amounts and on the following dates: (1) $28,497.97 on January 29, 2004; (2) $70,703.48 on March 23, 2004; and (3) $151,966.32 on July 7, 2004.
Prestwood had no reason not to trust Clark. He had previously placed her funds in legitimate investments, and she was pleased with the returns. From 2004 to 2008, Clark sent Prestwood periodic account statements from her three investments. The statements purported to show that the investments Clark was making on behalf of Prestwood were earning about 13 percent—impressive returns at a time when interest rates were heading toward historic lows.
However, the financial analysis of bank records told another story: Clark used Prestwood’s money to pay his personal expenses and to pay other investors. Approximately $87,000 of her money went to an individual in Houston who had previously invested his money with Clark.
Clark ensnared Lafon Denney by cold-calling him to offer an investment in annuities. Denney invested in an annuity, but in 2005, Clark convinced him to move his money from the annuity into a Scottrade account over which Clark would have trading authority. In 2006, Clark convinced Denney to purchase a government bond. Because Scottrade did not sell that particular bond, Clark said he needed to purchase the bond himself. At Clark’s direction, Denney wired $45,000 from his Scottrade account into Clark Investment Advisers. With Denney’s money, Clark continued to illegally move money between clients: He used Denney’s $45,000 to pay Prestwood a partial distribution of $35,000 on her investments.
In 2008, Clark executed a wire transfer that moved $15,000 from Denney’s Scottrade account into Clark’s personal bank account. Examination of the wire instruction revealed that Clark forged it. Clark took the 2006 wire instruction—the one Denney knew about—and forged it to show the date as 2008. Adding insult to injury, Scottrade received only one wire instruction for $15,000 but had mistakenly processed the transaction twice. Again, Clark misappropriated the money. He used the entire $30,000 to pay his personal expenses and to make payments to Prestwood.
Jean Carson considered Clark to be a close family friend, but she became another of his victims. Clark originally placed her money in a brokerage account, but he later convinced her to invest in a horse-breeding operation. She, too, sent her money to Clark Investment Advisers and then eventually, upon Clark’s instructions, made payments directly to him. Clark sent her pictures of mares and spreadsheets that purported to show the status of her investment. Carson wrote three checks to Clark for investments in the purported breeding operation: (1) $69,390.90 written on April 3, 2003; (2) $10,000 written on May 6, 2005; and (3) $10,000 written on June 17, 2005. The checks were included in the superseding indictment against Clark.
Further financial analysis of Clark’s bank records, however, revealed Carson wrote additional checks to Clark for the breeding operation, but they were not alleged in the superseding indictment of Clark per an agreement between the State and the defense (they were not admitted until the punishment stage of the trial). Analysis of Clark’s bank records revealed that he spent all of Carson’s money on personal expenses and toward additional payments to Prestwood. Carson, like the others, was impressed by Clark’s charm and ability to quote the Bible. To this day she simply refuses to believe Clark stole her money.
The Groesbeck Band Booster Club
Clark even incorporated the local band booster club into his scheme. In 2008, the treasurer of the booster club, Liz Beard, gave Clark a blank check from the club’s bank account. Beard told TSSB attorneys it wasn’t uncommon to provide Clark a blank check so he could buy supplies for the club; after all, he was club president. In early 2008, Clark made out the check to his firm, Clark Investment Advisers, in the amount of $3,000. Once again, someone else’s money went to pay Clark’s personal expenses, including payment of a fine to the City of Allen Municipal Court.
But Beard noticed that the blank check was written to Clark’s firm. She confronted Clark, who told her he had purchased bonds with the funds on behalf of the booster club. Beard demanded that Clark return the money. Five months went by before Clark complied, in May 2008. Clark paid the booster club $3,636.00, a total he said was the return of the original check plus interest earned on the purported bonds.
There were no bonds, of course. The money with which Clark repaid the booster club came from the forged wire transfer from the Scottrade account of Lafon Denney.
The “real Reggie”
It became clear that Prestwood—and other investors discovered later in the investigation—didn’t know the real “Reggie,” as Clark called himself. The evidence soon showed him to be a typical confidence man who gained a person’s trust and ultimately betrayed that trust—a true wolf in sheep’s clothing.
Three months after the first indictment, DeFriend, the Limestone district attorney, appointed Dale Barron and Alexis Goldate, enforcement division attorneys at the TSSB, as special prosecutors to handle the cases against Clark. On April 8, 2010, we offered Clark a plea through his defense attorney, David Deaconson. If Clark, having no prior criminal history, would plead guilty to the theft charge, we would dismiss the charge of misapplication of fiduciary property and recommend a sentence of 10 years in state prison, probated for 10 years. Clark would also pay $150,000 upfront partial restitution to Prestwood on or before April 30, 2010. The intent of our plea was to make Prestwood as financially whole as possible, and to do it as soon as possible. Clark balked at the plea offer, we withdrew it, and the cases were then set for trial.
As the investigation into Clark’s activities continued, Eliza Cardiel, a TSSB financial examiner, found two additional victims, Lafon Denney and Jean Carson, both of Nueces County. The DA’s Office in May 2010 obtained superseding indictments against Clark for aggregated theft of property over $200,000 in value and for misapplication of fiduciary property of the value of $200,000 or more. Both of these indictments included Denney and Carson.
A significant portion of these three investors’ funds were deposited into Clark’s bank accounts in Limestone County, which gave the county venue to prosecute the cases as an aggregated theft and an aggregated misapplication pursuant to §§31.09 and 32.03 of the Texas Penal Code. Under these provisions, amounts can be aggregated pursuant to one scheme or a continuing course of conduct and may therefore be treated as one offense for purposes of jurisdiction, limitations and venue.1
Once it was clear the case was going to trial, we had to prepare a strategy that wouldn’t confuse jurors or make the case overly complicated. We decided to try the theft charge and dismiss the pending misapplication charge. Basically, both cases would require presenting the same evidence but proving different elements. Even if we were successful in convicting Clark in both cases, the sentences in each would run concurrently because they both arose out of the same criminal episode. We felt that by trying both cases together, the jury might get lost in trying to connect the evidence to the different elements of each of the two charges. We also felt that based upon our evidence, if we could not convict Clark of the single charge of aggregated theft, we had no business bringing the case to trial in the first place.
Trying a case of investment fraud is not as daunting a task as it would seem to prosecutors who don’t have experience in these cases. After all, an average case of theft will always involve a thief who takes property belonging to another without that owner’s effective consent and with the intent to deprive the owner of the property. A case of investment fraud charged as a theft is no different, except that in almost every case involving the theft of investment funds, the thief will usually gain possession of those funds by means of deception. To prove that the victim was deceived, it is generally necessary for the victim to testify at trial. Jurors need to hear what misrepresentations the defendant made to convince his victims to invest.
To prove the deception we needed the trial testimony of Prestwood, Denney, and Carson. Both Denney, 79 years of age, and Carson, 77, lived in Corpus Christi, 350 miles from the county courthouse in Groesbeck. A flight from Corpus Christi to Austin, then a 90-minute drive to Groesbeck is an unpleasant journey for people near 80 years of age. Fortunately, the Texas Legislature in 2005 had the wisdom to expand Chapter 39 of the Code of Criminal Procedure, which deals with taking witness depositions. It now allows the State as well as the defense to depose some witnesses. State lawmakers added to Chapter 39 in 2009 by including language that requires judges to grant an application to take a witness deposition if the deponent is 65 or older.
Based upon these provisions in the law, the State made application to the court to take both Denney’s and Carson’s depositions in Corpus Christi at the TSSB branch office there. The application was granted, Denney and Carson gave videotaped depositions, and these were presented to the jury. Portions of the testimony of Denney and Carson regarding extraneous offenses and transactions were withheld from the jury by agreement for later presentation by the State during punishment, if necessary.
Because Prestwood lived close by in Flynn and had lost the most money, we decided to have her testify in person. We felt it was necessary to have at least one of the victims testify at trial so that victim could bond with the jury. She told jurors how Clark sent her bogus statements over a four-year period that reportedly showed her investments earning stellar returns. Later, Clark consistently refused to tell her the status of her investments. Prestwood provided handwritten notes by Clark that encouraged her not to take any distributions. In fact, when she told Clark she wanted to withdraw money to buy a boat for her and her husband, Clark told her, “No,” and she didn’t buy the boat.
In addition to the testimony of the victims, the next most important thing the State must present to the jury in an investment fraud case is how the investors’ funds were misappropriated. Generally, the State must take voluminous amounts of bank records and prepare a summary that the jury can easily understand, such as a chart, graph, or spreadsheet. It would be impractical to introduce all of the bank records in a financial crime case and expect a jury of laymen to be able to tell exactly how the victim’s funds were misappropriated.
All of the bank records in our case were authenticated by a business record affidavit signed by the custodian of the records and filed with the Limestone County District Clerk’s Office well before 14 days prior to Clark’s trial.2 Once these records were filed in an admissible form, Eliza Cardiel, our financial examiner, could summarize them. The summaries could then be presented to the jury to show the source and use of the investors’ funds, pursuant to Rule 1006 of the Texas Rules of Evidence.
The summaries of the bank records in this case were most telling. We decided that the clearest way to show the jury how Clark misappropriated the victims’ funds was to show portions of the spreadsheets Cardiel prepared. In almost all cases, Cardiel showed that soon after a deposit of investor funds was made into one of Clark’s bank accounts, he would quickly spend the money. He paid his family’s household expenses and paid back some money to investors. He also sent $20,000 of Prestwood’s money to a title company in Limestone County—part of his payment for a house he bought in Mexia.
The defense strenuously tried to exclude testimony on two fronts. First, Clark’s attorney tried to keep out testimony of how the defendant had used Prestwood’s money to pay back one of his previous investors. Second was the testimony regarding the misappropriation of the booster club’s funds. The defense argued that both pieces of testimony were extraneous offenses not alleged in the indictment and that their prejudicial effect against Clark would greatly outweigh their probative value to the jury. We argued that because Prestwood’s money was used to pay back Clark’s previous investor and Denney’s money was used to pay back the booster club, this evidence was actually not extraneous but in fact proved how those funds were misappropriated. The court agreed and the jury heard the evidence.
The trial spanned a mere four days: one day of jury selection, 11⁄2 days for us to present our evidence, and another day at punishment. The defense put on no evidence and called no witnesses in the guilt-innocence stage. The jury deliberated for less than an hour before returning a guilty verdict.
On the last day of trial, we presented the remainder of videotaped testimony that we agreed to withhold from the jury until the punishment stage. We presented the testimony of a former Texas Ranger regarding the circumstances surrounding Clark’s arrest, including the fact he was found hiding under a desk when authorities came for him. Prestwood testified how her ordeal with Clark had affected her life and the life of her husband, both financially and emotionally. The Prestwoods had to take out a reverse mortgage on their home so they could pay their bills and living expenses. They had always planned to travel when they retired, but now their camper-trailer rarely moves from their driveway. Simply put, they are not living the life they had expected after a lifetime of working and saving.
The defense called three character witnesses during punishment that included two of Clark’s ministers, both of whom testified how the defendant was a fine Christian man. Clark’s mother testified that “Reggie” had always been such a good boy all of his life. The jury deliberated on the matter of punishment for almost three hours and returned a verdict of 25 years in the Texas Department of Criminal Justice Institutional Division and a fine of $10,000. We both thought Clark deserved more time, but ultimately we were pleased with the outcome.
In the end, Clark didn’t take the stand to explain his actions. He showed no remorse and offered no apologies to his victims. Clark spent most of the time during trial reading his Bible. None of Clark’s family members or friends was in attendance until the last day. Ultimately, Clark was no different than any of the other con men that we as fraud prosecutors have come to know and loathe. They generally leave financial devastation in their wake, just as Clark did, and most of their victims are senior citizens, as was the case here.
Con men know where the money is: in the hands of seniors, who have spent a lifetime saving and investing. The worst of the worst con men are the ones that hide behind the Word of God to perpetrate their scams. It would behoove us all to remember Jesus’s words in the Gospel of Matthew 7:15: “Beware of false prophets, who come to you in sheep’s clothing, but inwardly they are ravenous wolves.”
1 See Graves v. State, 795 S.W.2d 185 (Tex. Crim. App. 1990); Vitiello v. State, 848 S.W.2d 885 (Tex. App.—Houston [14th Dist.] 1993); Weaver v. State, 982 S.W.2d 892 (Tex. Crim. App. 1998).
2 Therefore, they were properly authenticated pursuant to Rule 902(10) of the Texas Rules of Evidence and were admissible as an exception to the hearsay rule under Rule 803(6).