CR lawyer faces sanctions over ‘foreign scheme’ in which investors lost $700,000
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A prominent Cedar Rapids attorney could be facing a second suspension of his law license for his role in an alleged high-risk foreign investment scheme that skirted federal regulations and resulted in investors losing $700,000.
The Grievance Commission of the Supreme Court of Iowa is recommending the court suspend the law license of Bruce Willey for 30 days. The commission says the evidence indicates Willey personally used money from his investors to pay off credit card debt, and didn’t inform his clients of conflicts of interest. Willey declined to comment Thursday on the commission’s findings.
Court records indicate that from 2006 to 2014, Willey was the attorney for a Linn County entrepreneur, David A. Wild. In a 2017 deposition, Wild testified he was a 1975 graduate of Anamosa High School and the “school of hard knocks.” He said said he was a self-employed project developer, and when asked what that entailed, he described the job as “project development, as far as developing projects.” He testified he also was involved in the timber business and biofuels industry and ran an enterprise called Wisdom International, adding that none of those endeavors had generated any revenue for him during the past decade.
As Wild’s attorney, Willey had created 20 or more business entities for Wild and, according to the commission, had performed somewhere between $20,000 and $100,000 worth of legal work for Wild. Rather than pay Willey for those services, Wild agreed to give Willey a financial stake in some of those businesses, which would then provide loans to Willey.
Together, Wild and Willey formed Catalyst Resource Group to solicit financing for projects Wild was interested in exploring. Catalyst then entered into an agreement with a company called Ramis Limited, based in London, England. Court records indicate the plan called for Catalyst to give money to Ramis in return for Ramis pledging high-value assets, such as U.S. Treasury bills, to Catalyst, which could then use them as collateral for loans worth millions of dollars.
According to the commission, this method of raising venture capital is used in Europe, but is prohibited in the United States.
Under the agreement with Ramis, Catalyst claimed it had unrestricted cash in hand and that Wild and Willey were accredited investors, as defined and required by federal regulations. The Grievance Commission would later conclude that “the evidence is clear that neither Wild nor Willey met that requirement.”
The deal appeared to call for Catalyst to invest up to $700,000 with Ramis, which would then return $100 million to $500 million to Catalyst, the commission stated, calling the arrangement a “high-risk foreign scheme.”
Neither Wild nor Willey was “experienced or knowledgeable about the details of the scheme,” the commission found. “Neither could explain how the planned investment would work in a manner understandable to the members of the panel. It was evident that neither of them truly understood what they were doing nor appreciated the risk involved.”
To raise the necessary money, Willey allegedly contacted Laurus Technologies of Illinois, which agreed to loan Catalyst $500,000, and a client of his, Midwest SN Investors, which agreed to loan Catalyst $200,000. Willey, according to the commission, failed to inform Midwest he owned a one-half interest in Catalyst.
Court records indicate Catalyst sent $500,000 to Ramis, which never repaid the money or delivered the additional millions anticipated as part of the deal.
Reportedly, Willey then withdrew $100,000 still in the Catalyst account, giving half to Wild and using the other half to pay off credit cards so he could finance a trip to London with Willey to meet with Ramis.
According to the commission, neither Wild nor Willey claimed the $100,000 distribution as income or treated it as loan from Catalyst.
The commission would later say it appeared Willey borrowed an additional $67,000 from the Catalyst checking account, leaving more than $30,000 that was never accounted for.
Neither Laurus nor Midwest was repaid any of the money loaned to Catalyst. Court records show Laurus filed suit against Wild and eventually obtained a judgment against him for approximately $700,000 for the principal amount of the loan, interest, and attorney fees. Midwest filed no claims against Catalyst, Wild or Willey, according to the commission.
Wild eventually sued Willey, alleging malpractice by conflict of interest, breach of fiduciary duty and fraudulent misrepresentation. The case was dismissed by the district court, a decision that was later upheld by the Iowa Court of Appeals.
Court records show that in a deposition, Wild testified he had earned no income for 10 years though his various companies, which included an entity called Wisdom International. While claiming to be a developer and the author of many business plans and projects, he was unable to offer specifics on any of those, the commission said, and couldn’t identify the projects he intended to pursue if the London financing scheme had proven successful. According to the commission, the attorney who took Wild’s deposition reported that while Wild “was a great storyteller,” he could not provide any details of his business operations.
As for Willey, the commission found that he had “several” credibility issues, noting that he could not remember borrowing the $67,000 from Catalyst, which coincided with a judgment against him sought by American Express.
The commission found that Willey had a conflict of interest in his dealings with Midwest and that he was “not only untruthful” in what he disclosed to the company, he failed to inform Midwest he would receive directly, and almost immediately, $50,000 of the total money being borrowed by Catalyst, or that he would borrow an additional $67,000 at a later date.
In 2017, Willey’s license was suspended for 60 days due to other alleged ethical violations tied to his representation of Wild. In that matter, Willey had allegedly arranged for a client to loan money to another of his clients, Synergy Projects. The client who loaned the money said Willey never told him Synergy and its principal owner, Wild, were clients of his.
The Iowa Supreme Court has yet to rule on the commission’s current recommendation that Willey’s license be suspended for 30 days.
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