Idaho Man Accused of Ponzi Scheme
JANUARY 17, 2009, 2:00 A.M. ET
By WILLIAM M. BULKELEY and STEVE STECKLOW
online.wsj.com
Idaho securities regulators are investigating allegations that a money manager in the state operated a long-running Ponzi scheme that cost investors as much as $100 million.
Marilyn Chastain, securities bureau chief for the state's Department of Finance, said a formal investigation of Daren Palmer of Idaho Falls has been opened following a meeting with about 30 investors there.
Mr. Palmer couldn't be reached for comment.
It was the latest of a number of cases, the most prominent of which focuses on New York's Bernard Madoff, that involve alleged Ponzi schemes in which money raised from new investors pays off earlier investors.
The case has rattled the business community in Idaho Falls, an agricultural center where many residents work for the federal government's nuclear-reactor test facility. "We think there is a pretty significant amount of money involved -- tens of millions maybe," Ms. Chastain said.
Kevin Taggart, a local real-estate agent who claims he lost $600,000, said that after talking with other people who fear they were victimized, "as near as we can tell, we lost $100 million," in total. Mr. Taggart is one of the investors who met with state regulators.
The complaints involve Mr. Palmer, 40 years old, and Trigon Group Inc., a company with an office in Idaho Falls that investors say was owned by him. Neither Mr. Palmer nor the firm are registered as investment advisers with state securities regulators.
An Idaho Falls couple, Mark and Penny Peterson, earlier this month filed a civil suit in Bonneville County, Idaho, district court accusing Mr. Palmer and his wife of owing them $500,000 that they said he put into a hedge fund he managed. The couple alleges that the Palmers promised in July to deposit the money -- payment for a tract of land they said they sold him -- in the hedge fund. But they say when they tried to collect money from the account -- in Trigon Group -- the Palmers failed to pay them or return the property.
Mr. Taggart said he started investing with Mr. Palmer about seven years ago after hearing from other investors that the money manager was "doing very well" for them. Mr. Taggart said he was promised 25% to 40% annual dividends on his investment. He said he began by investing $100,000 and, when returns matched the promises, he continued to invest more each year.
"He just seemed so legit," Mr. Taggart said. "He grew up in the area."
Investors didn't become alarmed until July, when Mr. Palmer began telling some of them he needed a few more weeks to pay their quarterly dividends. By October, a group of investors demanded a meeting with Mr. Palmer. He told them that in the bad market, "he was getting lots of margin calls and couldn't get out," Mr. Taggart recalled.
Even then, most investors decided to trust him. But on Jan. 2, a group met with him and was told by Mr. Palmer, "It's all gone," Mr. Taggart said.
Write to William M. Bulkeley at bill.bulkeley@wsj.com and Steve Stecklow at steve.stecklow@wsj.com
Printed in The Wall Street Journal, page B4
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