BAY CITY, MI -- A former employee of The Diversified Group Advisory Firm LLC took to the witness stand in Joel I. Wilson's trial, testifying to unscrupulous practices she performed while with the company.
Mary Faher testified Friday, Feb. 27, during Wilson's trial before Bay County Circuit Judge Joseph K. Sheeran. Faher in July appeared in Berrien County District Court and pleaded no contest to four counts of securities fraud and agreed to pay restitution to all the victims and aid in the prosecution against Wilson and others who may be involved.
Faher worked as a licensed investment advisor for The Diversified Group, which was owned by Wilson and was based around the business plan of buying and rehabilitating homes in the Saginaw and Bay City areas. Prior to that, she worked at Fifth-Third Bank. On Friday, she testified that she knowingly violated a non-compete clause in recruiting numerous Fifth-Third customers to invest in The Diversified Group.
Mary Faher
Asked by defense attorney Matthew S. Kolodziejski if she would have investors sign the last page of a document rather than allowing them to read the entire piece, she said such conduct never happened. By name, Kolodziejski went through various clients Faher recruited, referring to them as her "victims" and asking her if she guaranteed them a 10 percent return on their investments and promised them that their money would be safe. She said she did those things.
"You did a lot of bad things to a lot of people didn't you?" Kolodziejski asked.
"Not intentionally," she replied.
"So it wasn't your fault?"
"It was my fault that I didn't do my due diligence, but I believed in the product I was selling," she said.
Pressed further by Kolodziejski, Faher said she hasn't yet repaid the people she defrauded by liquidating her assets or selling her home or vehicle.
Questioned by Assistant Michigan Attorney General Norm Donker, Faher said she planned on putting her house on the market after her sentencing, slated for Monday, March 9.
"I need to find ways of paying back my clients, my family, and my friends," Faher said as to why.
Donker also asked Faher why she violated the non-compete clause by bringing clients to Diversified.
"Michigan doesn't honor that particular stipulation and I did it because everyone in our business does it," she said. "I don't know anyone who leaves one brokerage firm for another and doesn't bring their clients with them."
Faher also explained her job was to do research on potential investors' behalf to advise them accurately. Donker asked why she didn't do that in the case of Diversified.
"I thought I had in Googling the properties that were originally in the limited partnerships, I felt very comfortable with Mr. Wilson ... and (his) explanation of the product," she said.
The documents investors signed contained language stating that no investment was guaranteed, Faher said.
Questioning Faher again, Kolodziejski asked if she expected to get probation rather than incarceration for her testimony. She said she and her attorney did not discuss this.
Kolodziejski asked Faher if she expects the jury to believe the testimony of a convicted felon, who admittedly defrauded investors and is testifying for her own benefit come sentencing.
"I hope that the jury understands that I came here to give you honest testimony so you can make a decision for yourself," she replied.
"Have you ever heard the phrase, 'Don't bite the hand that feeds you?'" Kolodziejski asked.
"Yes, I have a dog," Faher answered.
After Faher, Scott Bartlett, who worked for The Diversified Group from April 2011 through November 2012, handling technical duties and paperwork, took the witness stand.
He testified that frequently, Diversified would not have enough funds to pay bills and payroll and that he was told by Wilson to hold off on making certain payments.
"He was very good at making me feel good about what we were doing," Bartlett said of how he kept his faith in Wilson. "It felt like I was becoming more important in the company."
At times, investments and letters of indemnity came to Bartlett to enter into their system without investors' signatures. When that happened, he would tell the salesperson to go back and get a signature, he said.
Investors testified earlier in the trial that what they believed to be copies of their signatures appeared on documents they didn't recall signing.
In October 2012, Bartlett became president of Diversified. A letter was sent to investors, penned by Wilson, bearing this news, he said. This was done as Wilson "theoretically" left the company, though he still factually ran it, Bartlett said. Bartlett theorized the reason for Wilson's ostensible stepping down was due to the Financial Industry Regulatory Authority telling him he could no longer operate the business.
Kolodziejski objected to this speculation on Bartlett's part. Sheeran instructed the jury to disregard it.
Questioned by Kolodziejski, Bartlett said he told investigators the company did not maintain good bookkeeping and record keeping practices. Though he thought some things were suspicious, he said Wilson had a way of talking him and others into thinking everything was on the up and up.
Wilson is charged with two counts each of fraudulent sale of securities and sale of unregistered securities, both punishable by up to 10 years in prison, and single counts of continuing a criminal enterprise or racketeering and larceny by conversion $20,000 or more. The racketeering count is the most serious, punishable by up to 20 years' imprisonment.
Ann Tushaus, an accountant with the U.S. Securities and Exchange Commission's Chicago offices, testified Thursday that she conducted a forensic investigation of The Diversified Group in the fall of 2012, reviewing documents, bank statements, wire transfers, transactions, and the like. There were approximately 25 bank accounts related to Wilson, The Diversified Group, American Realty, and 1 Stop Realty with about 15,000 transactions over a three-year period, Tushaus said.
In all, there were about 125 investors, who invested $6.4 million, Tushaus said.
Donker has alleged those investors lost their money, that Wilson put it to personal use, and did not advise clients of the risks of investing.
Wilson's trial is to resume Tuesday, March 3.