SALT LAKE CITY — Nearly 100 investors believed they were helping to get Park City’s newest brewery off the ground, but federal prosecutors now say a businessman in the slope-side resort town pocketed most of the $2.7 million he raised.
A federal grand jury returned a five-count indictment Wednesday against 60-year-old Timothy Andrew Nemeckay, the founder of Mine Shaft Brewing.
He’s accused of defrauding the investors from across the country in a scheme beginning in early 2013 and continuing until last month.
Nemeckay pitched them on an initial restaurant and brewery in Park City and another in mountainside Santa Clarita, California, the indictment says. But in reality, he spent $1.7 million for himself and used about $312,000 to repay investors in an earlier scheme, the court filing says. Less than $550,000 went toward developing the brewpubs.
The businessman now faces federal charges of securities fraud, making false statements to the Security Exchange Commission, wire fraud and money laundering.
Nemeckay did not return messages left Thursday. His attorney, Patricia Geary Glenn, declined comment.
Federal prosecutors say Nemeckay offered investors preferred stock to the tune of a total $9.4 million, boasting that he had already secured much of the funding he sought. He set minimum investment at $20,000, promising 8% annual interest in the brewery that would also distribute the alcohol and serve as an event center, the indictment says.
Nemeckay is accused of sending his backers newsletters saying the investments were succeeding. In fact, the few interest payments he sent them came from new investor money, the indictment alleges.
U.S. Attorney for Utah John Huber suggested the case presents a teaching moment. He urged investors to “do their due diligence before handing over their life savings to someone who doesn’t have their interests at heart.”
“Far too many Utah headlines report homegrown fraud schemes,” Huber said in a statement. “There are a disproportionate number of wolves in sheep’s clothing in our state.”
Huber said Nemeckay was under the thumb of regulators when he persuaded investors to pay into his scheme.
The businessman told investors that the federal Securities and Exchange Commission had no concerns with his fundraising, the indictment says, when in fact the regulatory agency had barred him from any such endeavor as a penalty for selling unregistered securities.
The Utah Division of Securities sanctioned him in 2014, fining him $350,000 and ordering him to pay $313,710 to investors. Huber’s office says Nemeckay used the new Mine Shaft investment to repay all but about $1,400.
Convictions on the charges he faces carry a range of prison time, from 10 years to up to 25 years.
Nemeckay faces a series of similar allegations in state court, where the Utah Attorney General’s Office has filed a civil case against him on behalf of the Utah securities regulators.
His initial appearance in federal court in Salt Lake City is set for Sept. 24.