PROVO — On paper, Gary Brinton appears to be king of a Utah County real-estate empire.
Brinton is known as the owner of Trafalga and Seven Peaks amusement parks and numerous condominium and apartment complexes throughout Utah Valley. He also donated — and later rescinded — $1 million to Utah Valley State College to build a baseball stadium in his name.
But Brinton's empire may have been built of straw — that is, a complex "straw-buyer" scheme that one top state finance official says is one of Utah's biggest financial scandals.
As told in court records, the scheme, involving $47 million in allegedly misappropriated loans, involved Brinton and several insiders at First Security Bank who approved loan applications.
This incident could prove embarrassing for Wells Fargo, which inherited the problems swirling around the alleged federal loan violations and money mismanagement when it purchased First Security Corp. in October 2000.
Documents in U.S. District Court and 4th District Court say Brinton recruited friends, family and employees to secure more than $47 million in loans and pass the money to him. Brinton used the money to pay off his debts, a violation of federal lending regulations.
Federal court records allege Brinton and three loan officers at First Security executed the operation. From 1998 through 2000, Brinton recruited 30 people — including his parents — to take out loans on residential property in their names using their credit, according the records.
In exchange, each recruit signed an agreement with Brinton that promised them $30 a month for each loan they secured.
The property was then deeded to Brinton and the money was used to pay off high-interest loans he took out to pay for construction of rental complexes.
Recruits used their credit to secure between six and 15 loans each. Loans averaged $110,000, according to a 4th District Court suit filed against Brinton by Wells Fargo.
Flurry of suits
The operation was discovered shortly after First Security was acquired. Since then, a flurry of lawsuits have been filed on both sides. In its suit, Wells Fargo demands payment in full from Brinton and his recruits of $47 million in default loans.
The 30 people who secured loans for Brinton also have filed suit against Wells Fargo in U.S. District Court, claiming that the bank's representatives told them the method was legal.
Brinton also filed suit in federal court against Wells Fargo. He also claims he was misled by the bank.
He alleges Laurie Christiansen, a loan officer; James Camberlingo, a bank vice president; and Blaine Christensen, the regional director, opened doors for him to secure more loan money after he had reached his legal loan limit.
Brinton claims Christiansen and Christensen promised his recruits that what they were doing was legal and they would not be held responsible for paying the loans.
In all, according to Brinton's federal suit, Christiansen processed 499 residential loans for 30 people. Brinton took the loan money and used it to pay for real estate.
Loan payments were made for the 499 loans by using the income gained from renting each apartment.
Documents allege Christiansen would tell Brinton how much down-payment money each person needed to qualify for each loan. Brinton would then place the needed funds in the person's bank account. Both Brinton and his friends allege that Christiansen and others at First Security Bank tweaked income information on applications to guarantee loan qualification.
The borrowers claim in their federal suit that when they showed up to close the loans at the title company, all paperwork had been filled out by the bank and they were told by Christiansen the loans would not appear on their credit report — but would "improve" their credit ratings.
Also, Brinton says in his suit he was told by bank officials to put names of spouses of the people who were securing loans for him on his company's payroll in an attempt to show additional income on loan applications.
'Shams and shells'
A 4th District judge has ordered the seizure of Brinton's apartment complexes at Wells Fargo's request.
They have been placed with a third-party property manager until legal issues are settled.
The Wells Fargo lawsuit against Brinton and his wife, Monica, accuses Brinton of hiding his name behind limited liability companies for each property to prevent the scheme from being discovered. "(The LLCs) are mere shams and shells organized to manipulate and deceive their respective creditors," say bank attorneys in the district court suit.
Charles Hanna, Brinton's attorney, says Brinton was a trusting businessman who was duped by First Security loan officials who also took advantage of his family and friends.
It was Christiansen and Christensen who approached Brinton with the complex finance plan, Hanna told the Deseret News.
The Deseret News also requested an interview with Brinton but he refused an interview at his attorney's office "out of choice," according to Hanna.
"In talking with First Security Bank," Hanna said, "they basically recommended to him that he go find someone who would qualify to take out a loan and they would make the loan in this person's name, understanding in reality that they were making the loan to Mr. Brinton."
Among those recruited were Brinton's parents, Dr. Milton and Leah Brinton of Provo, who took out $58,257 for their son. Hanna said Gary Brinton also was a victim.
"To any sort of innocence the answer is, 'Yes,' " he said.
"Total innocence, you know, that is different," Hanna said. "Mr. Brinton is not a banker and so Mr. Brinton is not in a place where he is an expert on the banking laws, rules and regulations."
Brinton — a licensed real-estate broker who earned a master's degree in business administration from Santa Clara University and a law degree from Brigham Young University — relied on the "integrity and superior knowledge" of the bank, Hanna said.
Brinton also said in a news release when he pledged money to UVSC that he "practices law in commercial real estate, commercial lending, general business and commercial law."
Brinton knew enough to caution First Security Bank when it intended to sell his loans on the secondary market in April 2000. During such a sale, details of loan portfolios are required to be disclosed, including whether the loans conform to federal standards.
Hanna said a letter of caution Brinton wrote to the bank proves Brinton was trying to avoid fraud. Wells Fargo attorneys say it shows Brinton knew there were problems with the loans.
Loyal circle
Most of Brinton's inner circle remain loyal. Those contacted by the Deseret News said they do not blame Brinton.
They largely blame First Security/Wells Fargo — and that's why they filed the 288-page federal suit against the bank.
"Most of these people don't qualify for the loans they gave them," said Colorado attorney Crystal Sluyter, who filed the suit on behalf of Brinton's friends and family.
In the case of Richard Kozslowski, according to Brinton's suit against the bank, First Security issued the Provo man 36 loans totaling more than $3 million, even though Kozslowski lived off a fixed disability income of $1,200 a month.
"My clients, they are your basic Joe Q. Citizens. They are not wheelers and dealers," she said. "To them, this was simply helping a family member."
Hanna said Brinton is in "intense negotiations" with Wells Fargo to settle out of court. Brinton is attempting to find a bank that will refinance all loans and consolidate them into his name. Hanna claims Brinton can handle a $47 million burden.
Also, Hanna said, the suits have been put on hold while Brinton negotiates with Wells Fargo.
Attorneys involved in the suits said they are not aware of any criminal investigation, although federal and state investigators are aware of the allegations against Brinton.
"Our investigators are aware of an alleged purchase refinance scheme going on in Utah County," said Scott Thompson, spokesman for the Utah Department of Commerce. "It's still under investigation."
"The use of straw people in the business is so common that it's got its own name," Sluyter said.
"The use of straw-buyer people is illegal because it's inherently deceptive," said Ted Boyer, executive director for the Utah Department of Commerce, in response to Sluyter.
Boyer said Brinton's dealings with the bank have all the red flags of a textbook straw-buyer scheme. A case of this magnitude hasn't been seen in Utah before, he said.
"It's huge," he said. "For the state of Utah, it's huge."
E-mail: gfattah@desnews.com