Four years ago, attorney Clifford R. Roth from Kansas thought he could make money off investors in Southeast Texas. Instead, his get-rich-quick scheme will cost him more than $2 million and almost four years of his life.
U.S. Attorney John M. Bales of the Eastern District of Texas announced Monday that Roth has been sentenced to federal prison for investment fraud. The 62-year-old attorney from Leawood, Kan., was sentenced to 46 months in prison and ordered to pay $2,270,802 in restitution.
According to information presented in court, in November 2007, Roth traveled to Beaumont and solicited investors to participate in the purchase of bank holding company stock he said would be used to purchase Oklahoma-based Bank of Quapaw, which would then open a branch office in Beaumont.
From November 2007 to April 2008, Roth told potential investors that their stocks would be held in an escrow account until the bank was purchased. If the purchase fell through, Roth claimed, the funds would be returned to investors with accrued interest.
Based on Roth's representations, around 21 investors from Beaumont, Port Arthur, Houston and other areas in Southeast Texas made numerous wire transfers of funds totaling almost $2.5 million to TriCentury Corp., a holding company in Kansas City, Kan., which was controlled by Roth.
However the acquisition of the Oklahoma bank never occurred. An investigation by FBI offices in Beaumont and Kansas City discovered Roth's plan was really a Ponzi scheme and that the funds were actually being used for Roth's personal expenses and to repay investors in a previous scheme.
At least one Beaumont investor filed a lawsuit against Roth and others over the phony bank purchase. As the Southeast Texas Record previously reported, plaintiff Susan Hyman filed suit on Aug. 5, 2009. According to her attorney Jason Cansler, the suit is pending in state court.
Apparently, this is not Roth's first dubious plan, according to media reports in the Kansas City area.
In the late 1980s, Roth controlled CCDC Financial Corp. in Overland Park, Kan. He took several companies he was running and rolled them into CCDC in 1991. CCDC Ã¯Â¿Â½ and its combined debt of $30 million Ã¯Â¿Â½ then went into bankruptcy.
It was discovered that Roth put CCDC into bankruptcy to avoid paying $1 million from a legal dispute involving real estate deals in Washington, D.C.
According to news reports, Roth was involved in another financial dispute related to The Elms Resort & Spa in Excelsior Springs, Kan. Investors in that case were concerned that Roth and others were diverting Elms-related bonds for other Roth debts.
He also was sued by Amerifax of Overland Park, Kan., in 1992. Amerifax contracted long-distance capacity from Sprint Communications Co. and claimed Roth misappropriated $3.5 million in company proceeds from a public stock offering, according to an article at the time in the Kansas City Star.
The case was dismissed by both parties later that year.
Roth pleaded guilty to the Texas scheme in March, and will report to the federal Bureau of Prisons on Aug. 23.