James Stanley Ward, 65, faced 18 counts including conspiracy, mail fraud and wire fraud after he deceived investors through his Mountain View-based company Jim Ward & Associates, Inc., and its successor, JSW Financial, Inc.
According to separate civil charges brought by the U.S. Securities and Exchange Commission, Ward and his three co-defendants propped up their failing real estate development projects while concealing $17 million losses of investor money.
The men — Ward and co-defendants Richard F. Tipton, 62, of Palo Alto, Edward George Locker, 36, of Highland Heights, Ohio, and David Lin of Los Altos — told investors their money would be used to make loans secured by residential real estate. In reality, the men used most of the money to make unsecured and undocumented loans to entities that the defendants controlled. The investments they made in Silicon Valley real estate development projects were suffering mounting losses and protracted delays.
As the enterprise collapsed, investors continued receiving monthly statements showing steady growth in the value of their portfolios, according to the SEC.
The SEC also alleged that Ward and co-defendant Edward George Locker took $900,000 of investor money to purchase homes for themselves.
Last December, Ward pleaded guilty to one count of conspiracy to commit mail and wire fraud.
Prosecutors had asked the court to impose an eight-year, one-month sentence, but the court took the middle road. Ward will serve five years in prison and will be on supervised probation for three years, including one year of home detention.
A restitution hearing will take place within 90 days, according to Jack Gillund, a U.S. Department of Justice public affairs spokesman.
In his guilty plea Ward admitted that from September 2005 through October 2008, the men gave investors documents that purported the funds were invested in loans that were secured by deeds of trust on California real estate, but the men knew that those representations were false, according to the indictment. The companies did not secure investments in either the Blue Chip Realty Fund, LLC, or the Shoreline Investment Fund, LLC, according to the indictment.
In November 2008, Ward and the others informed investors through the company's bankruptcy attorney that the company was broke, the funds were unsecured and investors would not likely recover any money. Many of the investors were retirees, according to court documents.
One 74-year-old victim reported that she lost all of her life savings and was in jeopardy of losing her home. Her daughter had to return home to help out with expenses, according to prosecutors.
A retired journalist reported losing 25 percent of his net worth, and another retiree said she was "extremely traumatized" and "found (her)self crying constantly," prosecutors said.
Ward was not as active in the fraud as Locker, Tipton and Lin were, according to prosecutors. He sold JSW in 2006 to Locker, Tipton and Lin, but continued to participate in the business' operations in the same manner. He was responsible for investor relations, loan decisions, project management and property acquisitions. He also received $20,000 per month for his role at Columbiana Development, Inc., a general contractor business in the same building as JSW, according to court papers.
Although he was semi-retired and spent most of his time living in Ohio, he knew of the fraud that was mainly perpetrated by the other defendants. And although Ward's real estate license was revoked, he continued to tout the business to investors and did not disclose the frauds, prosecutors said.
But prosecutors said the government believes Ward and the other co-defendants did not set out to defraud investors or to enrich themselves with fraud proceeds.
"Ward, who has a long track record in the hard-money lending business and who was well known in the Peninsula community, held the subjective hope that he, Locker, Tipton and Lin could turn the business around, given more time for the market to improve and a hiatus from the crushing monthly interest payment obligations. Unfortunately for the investors (and ultimately for the defendants), Ward and his co-defendants chose criminal deception as the means to that end," prosecutors said in court documents for his sentencing. Up to the time of the crime, he has conducted his business affairs "in a completely blameless manner," they stated.
An Ohio businessman who has known Ward and who spoke on the condition of anonymity said Ward was an extremely successful businessman, and many locals invested with him over the years without problems.
"We are baffled by these events as he was a local icon and regarded highly by most. Our thoughts are with him and his family and we hope they make it through this in one piece," he said in an email to the Weekly.
Ward is a native of Columbiana, Ohio, who was a track star and went to Stanford University on track scholarship, according to the associate. He lived in Palo Alto most of his life and moved to Delaware, Ohio, a few years ago when he retired or was semi-retired. He frequently returned to Mountain View to conduct business.
Ward's attorney, Acting Federal Public Defender Geoffrey Hansen, could not be reached for comment.
Tipton, Lin and Locker are due to be sentenced on Sept. 10 in federal court in San Francisco.