IOWA CITY (AP) — An Indiana businessman has pleaded guilty to ripping off an Iowa company whose board he led and duping investors in a Colorado firm in separate fraud schemes totaling $2.3 million, federal prosecutors announced Monday.
Lowell G. Hancher of Sheridan, Ind., pleaded guilty Friday to one count of wire fraud and one count of securities fraud during a hearing in federal court, the U.S. Attorney’s Office in Cedar Rapids announced.
Hancher, who is nicknamed “Bob,” has been released from custody pending sentencing, which hasn’t been scheduled. He faces a maximum prison term of 45 years.
Hancher founded Commerce Street Venture Firm, Inc., which described itself as a private equity firm that invested in small companies in the process of going public. The company abruptly ceased operations in 2010 as Hancher came under federal scrutiny.
In January 2011, Hancher agreed to pay $3 million to settle a civil complaint filed by the U.S. Securities and Exchange Commission without admitting wrongdoing. That settlement covered the two fraud schemes to which he pleaded guilty last week and a third alleging that he manipulated the stock price of a classic car company he founded in Michigan.
In the plea agreement made public last week, Hancher acknowledged that he defrauded investors in Scott Contracting, Inc., a Henderson, Colo.-based asphalt and general contracting company, out of $1.8 million between 2005 and 2010.
Hancher told dozens of investors, including some from Iowa and some who worked for Scott, that he was raising money for a public stock offering but actually used their funds to operate Commerce Street and his other businesses, the document states. After investors raised concerns, he sent them fraudulent email messages promising to return their money to give “a false sense of security and prevent and delay inquiries that might reveal the true nature” of the scheme, it says.
Separately, Hancher acknowledged that he abused his position as board chairman and head of the audit committee to misappropriate more than $500,000 from Cycle Country Accessories Corp., a Spencer, Iowa-based manufacturer of equipment for all-terrain vehicles and golf carts.
Between 2009 and his resignation in 2010, Hancher convinced the company to give him control of more than $507,000 after promising he would use it for a plan to take Cycle Country private through a stock buyback. In reality, Hancher used the money to pay “various personal expenses,” including credit card bills and mortgage payments on one of his two homes, the plea agreement states.
To cover up the scheme, Sheridan lied to the board and the company’s auditor and created phony bank and brokerage account statements, the plea agreement states. He also signed a false statement filed with the SEC.