A Layton man pleaded guilty Thursday to charges of trading in unregistered securities, in an operation that prosecutors say cost $2.5 million for 100 investors in Utah, Idaho and Kentucky.
Milton R. Bloomquist entered not guilty pleas in November, but changed his mind in exchange for a pledge by the U.S. attorney's office not to file additional charges on the basis of the investments. He promised to repay the money "based on ability to pay."However, that might not be a great deal. An affidavit filed in a civil suit arising from Bloomquist's investments says the attorney for a former investor "looked into Bloomquist's present financial picture" and reported that "things look bleak."
U.S. District Judge J. Thomas Greene said the 62-year-old Bloomquist will be sentenced on Feb. 15 at 8:45 a.m. He faces a possible maximum sentence of five years in prison and a $250,000 fine on each of the two counts.
Bloomquist agreed with Assistant U.S. Attorney William Ryan that the following facts are accurate: Between 1981 and April 1987, Bloomquist solicited and received about $3.6 million in loans from the investors. He told them he was trading in futures and could guarantee interest from 24 to 36 percent yearly, payable every month. He gave investors promissory notes, which are securities.
He also acknowledged that he deposited the proceeds of the investments "into a personal checking account" in Ogden, mingling this money with that from other sources. He lost $1.2 million in the Chicago futures market, but "continued to represent that his trading was profitable."
He used another $1.5 million from later investors to pay off "interest" and other expenses. He used $100,000 personally and repaid $1.5 million over the years. He still owes more than $2 million.
The felony complaint accused him of trading in unregistered securities in two specified cases. In one count, he promised 25 percent interest on a $20,000 loan. In the other, Bloomquist promised 36 percent interest on the $85,000 loan.
Several affidavits in a civil suit by the Securities and Exchange Commission contend Bloomquist contacted some of his investors through church activities. The SEC suit has been settled, with Bloomquist accepting a permanent injunction against fraudulent deals.
Greene asked him to explain one deal in which he was charged.
"Well, I presented to him (the investor) a short trading history, and it was favorable to him." The investor seemed knowledgeable about trading activities, Bloomquist said.
"I thought I had arrived sufficiently to perform (in the market) to our mutual benefit, and he was agreeable to give it a try," he added. "Needless to say, it didn't happen."
Bloomquist said he was so sure he'd make money on that deal that he gave the investor a check on anticipated profits. But "the (financial) demands upon me were so great that I had to stop payment on the check."
At one point in the questioning, he said he has "since learned" that securities above a certain value must be registered.
"The fact that I may or may not have known it, I suppose, had no bearing," he said. "What I know is I received the money. I made an effort to make money with it. I was unsuccessful. I owe these people."