WSJ Article on Select Capital
Small-Business Financier Williams Doesn't Let Convictions Slow Him
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
MIAMI -- From his posh 10th-floor office overlooking Biscayne Bay,
Ronald Williams operates as a financier of last resort for cash-strapped
small businesses.
He offers to raise money for hard-pressed businesses through loans,
mergers or private placements of stock. His newspaper ads cite hundreds
of millions of dollars raised in the past. His company, Select Capital
Advisors Inc., is doing more business than ever, he says.
Never mind that Mr. Williams has been convicted
three times of securities or tax fraud, most recently
this April, when he drew a one-year sentence plus
10 years' probation and was ordered to pay $2.6
million in fines and restitution.
The sentence didn't stop him. Despite the
conviction, which followed seven years of pursuit
by a dogged state investigator, Mr. Williams kept
right on driving his red Jaguar convertible to work
each day, serving his sentence at night in a halfway
house.
The sentence, negotiated with state prosecutors, deprives Mr. Williams of
important time with his pregnant fourth wife, he says. Less seriously, he
adds: "You can't go out and play golf." His lawyer, Richard Marx,
concedes that his client's new nighttime quarters are more like an
apartment complex than a prison. He says the plea agreement was "a
cakewalk."
But to George Amandola, the state investigator who has dogged Mr.
Williams since 1991, "it's bulls." For Mr. Amandola, it has been just the
latest frustration in a long effort to put the financier behind bars, where the
investigator thinks he belongs. "Ron Williams is a bad guy," Mr. Amandola
says.
The seven-year-long stock-market boom brought about a surge in
small-stock fraud, and federal and state authorities are devoting more
resources to fighting it. But the cases are complex and time-consuming,
and many targets are savvy pros skilled at holding off investigators year
after year. The story of Ronald Williams and George Amandola shows
how maddening the pursuit can be for the authorities.
Mr. Williams, the son of an accountant from
Victoria, Texas, graduated near the top of his
1975 law-school class at Southern Methodist
University and took just a year to make partner at
a Dallas law firm. He built a successful practice
specializing in tax and securities law.
But in March 1988, he pleaded guilty in federal
court in Dallas to conspiracy to defraud the
Internal Revenue Service in connection with 59
partnership tax returns.
The same month, Mr. Williams pleaded guilty in
New York to a charge of conspiring to bilk the federal government in an
oil tax-shelter scheme.
Seeking leniency in the Texas case, he cited a drinking problem. In both
cases, he provided information that helped convict partners. He drew
four-year probations for both convictions.
Disbarred in Texas, Mr. Williams moved to Miami and formed an
investment-banking boutique. Dapper and engaging, he found it easy to
persuade small-business people to turn to him. "He's charismatic and one
of the smartest people I know," says Tony Sandelier, an Orlando stock
promoter who claims Mr. Williams has refused to pay him $680,000 in
commissions for finding deals. "You still can't help but like the guy." Mr.
Williams denies owing the money.
Mr. Williams worked with a shifting network of stock promoters and
financiers who sent him prospects-entrepreneurs in dire need of funding.
But within a year, complaints about him started to reach Florida
authorities. By 1991 there were dozens, and Mr. Amandola, a special
agent for the Florida Department of Law Enforcement, was assigned to
look into them.
A trim former New York detective, Mr. Amandola pursued the case with
bulldog tenacity, tracking down scores of Williams clients. Their stories
were often similar: Mr. Williams had promised to try to arrange capital, for
an upfront fee of $10,000 to as high as $60,000, but once the fee was
paid, little or nothing happened.
Alex Major, owner of Major Exports in Miami, says he paid Mr. Williams
$10,000 in 1991 to take his company public. Mr. Williams was to merge
it with a shell company, one that was public but no longer had significant
operations. It never happened. The export company eventually folded. "It
still makes me angry after all these years," Mr. Major says.
Convinced Mr. Williams was running a scam, Mr. Amandola and state
authorities raided his firm's penthouse offices one morning in May 1992.
When Mr. Williams tried to take control by telling his nervous employees
the raid was nothing more than a minor distraction, Mr. Amandola told him
to shut up and sit with the others. Investigators stayed for hours, carting
away computers, printers and files in a U-Haul truck. But halfway through
the day, Mr. Williams, who wasn't under arrest, slipped out and flew to
Europe on business as if nothing happened, says his former bookkeeper,
Ruth Reedy.
Ms. Reedy adds that Mr. Williams didn't pay himself a salary but told her
in 1992 to always pay his expenses first, including a $5,000 monthly rent
on his oceanfront townhouse, alimony and boarding-school tuition for his
children. She also says that when too many unhappy clients sued, Mr.
Williams would reincorporate under a new name -- there have been five in
all -- and relocate the office. His attorney, Mr. Marx, confirms that moves
and name changes were done, to "avoid the stigma of the litigation."
By 1993, Mr. Williams's business involved "Regulation S," a Securities
and Exchange Commission rule -- widely considered a loophole --
allowing companies to sell stock to foreign investors at a discount and get
the money quickly. Under the just-closed loophole, investors could sell the
stock in 40 days, and usually did. A lot of companies that desperately
needed money jumped at "Reg S" deals, even though they knew their
stock might soon get killed and present an opportunity for short-sellers.
Mr. Williams "was the king of Reg S," says Marc Berens, a former
partner.
Mr. Williams takes credit for developing a new twist on the Reg S, in
which foreigners were sold not stock but debentures convertible into stock
that could be quickly sold. In the business, they became known as "death
spiral" convertibles or "toxic" convertibles.
By November 1993, Mr. Amandola felt he had the evidence to convict his
man, and with a TV crew in tow, he barged into Mr. Williams's offices and
led him and two associates away in handcuffs. He was charged in state
court in Dade County with 33 counts of racketeering, illegally accepting
upfront fees, and securities fraud.
Now, "I had a choice," Mr. Williams says. "I could either go back to work
or I could fold the shop up." He made $200,000 bail and was back at his
desk the next business day soliciting clients.
Timely Delays
He proved proficient in winning delays. Once, when prosecutors sought to
remove Mr. Marx as an attorney for another Select Capital Advisors
defendant because he was also the firm's outside lawyer, Mr. Williams's
lawyers kept appealing until the Supreme Court declined the case,
consuming over two years.
Frustrated by such delays, Mr. Amandola began building a new case,
relating to a Williams client called Akal International Corp., a real-estate
company in Toronto.
Akal had hired Mr. Williams to merge it with a shell company. But
according to state charges filed against Mr. Williams, he first bought up
much of the shell-company stock cheaply, and then, after its merger with
Akal, persuaded 60 investors to buy the postmerger stock at about $14 a
share. The investors were principals of Akal and their relatives, whom Mr.
Williams guided to a particular broker in Denver. According to the state,
the investors were told the stock would at least double after Mr. Williams
arranged a secondary stock offering to raise capital.
The secondary never happened, the state later charged, adding that the
stock -- which it said was bought in a roundabout way from Mr. Williams
himself -- became worthless. The state accused Mr. Williams of bilking
investors out of a total of $1.5 million.
On April 13, 1995, Mr. Amandola again arrested Mr. Williams, again
hauling him downtown in handcuffs.
Once again, Mr. Williams was back working in his office the next day.
The cases languished as Mr. Williams's lawyers peppered the court with
motions, including requests to sanction Mr. Amandola for overzealous
prosecution. The defense also gave prosecutors names of more than 240
Williams character witnesses, whom Mr. Amandola felt obligated to check
out, at a cost of several months. Many of them barely knew the defendant.
"We did what we set out to do," says Mr. Williams's lawyer, Mr. Marx.
"We delayed the case for five years."
And Mr. Williams's firm kept doing business, running "tombstone" ads in
papers, including The Wall Street Journal, claiming it had raised $453
million for clients in 1996 and $262 million in 1997.
His clients included Richard Secord of Iran-contra fame, vice chairman of
a Portland, Ore., maker of diagnostic equipment called Computerized
Thermal Imaging Inc., or CTI. "I was impressed with him," Gen. Secord
says. "He doesn't look or act like a hustler. He talks like a Wall Street
guy."
'A Workout Situation'
In a suit in federal court in Miami, CTI says it paid Select $10,000 in
upfront fees in return for a promise to raise $206 million, with the first $6
million expected from a private placement by mid-1997. Mr. Williams's
failure to meet this timetable "forced us into a workout situation," says
CTI's chief executive, David Johnson. Mr. Williams denies promising to
raise $200 million. The CTI suit is one of dozens of civil suits Select
Capital faces.
By last fall, the criminal cases had gone through two prosecutors and three
judges. "A lot of people were getting hurt" by Mr. Williams, Mr.
Amandola says, "and no one could seem to stop him."
To get the case moving, he wrote to Florida's statewide prosecutor, who
assigned two veteran prosecutors to it. They eventually won a trial date of
April 13 this year. Having lined up testimony from 30 companies and
several former Williams employees, they offered Mr. Williams a plea
bargain that included one year of hard prison time. It was declined. Mr.
Williams's lawyers say Mr. Amandola trumped up the charges and has
pursued a vendetta. He "made it his mission to get Ron Williams," says one
Williams attorney, Jeffrey Weiner. "Amandola went over the line."
The case passed to its fourth judge and eventually its fifth, an 85-year-old
retired jurist. The prosecutors grew worried that the judge was too frail to
endure a lengthy trial. They also fretted that jurors would find the complex
case difficult to grasp or that Mr. Williams might be able to sway them
with his charisma. Finally, they struck the deal with Mr. Williams in which
he pleaded guilty to fraud -- including charges in the Akal case -- but was
left free to continue his business during the daytime. Mr. Amandola says he
wasn't told the deal would do that until after it was done.
Why make a deal that lets a man just convicted of conducting his business
fraudulently continue in business? "The important thing is for victims to
receive restitution, so it makes sense for Williams to continue working,"
says Jim Cobb, an assistant statewide prosecutor. The fine includes a
$500,000 payment to Dade County.
Of course, Mr. Williams has to conduct his business lawfully. One charge
to which he pleaded guilty was illegally accepting $600,000 in fees from
21 companies without delivering any promised financing. Prosecutors say
the fees violate a state law barring solicitation of upfront fees for arranging
loans. Mr. Williams's firm has continued to collect fees from clients. He
says they aren't upfront payments for financing, but payment for
due-diligence reports.
Disclosure Issues
The deal also requires Mr. Williams to inform all existing and potential
clients about his criminal and civil legal problems. Yet copies of two letters
sent to prospective clients after the plea agreement (but before the
sentencing) don't mention the recent guilty plea or past problems. Mr.
Williams says he is complying by making available to clients a three-page
disclosure letter. "Most companies already know about" the criminal
record, he says. "I spend half my day talking to clients about it."
He adds that he stepped down as chairman of the company in July, but the
firm will comply with the disclosure requirement, "at least for the time
being."
On Tuesday, he was arrested and jailed for missing most of a $250,000
payment due on his fine-and-restitution bill. The man who took him into
custody: George Amandola. "It's only my guess, but I think the judge will
probably let him out," Mr. Amandola says.
Meanwhile, a spokesman for Britain's Serious Fraud Office says it is
assisting the SEC in an inquiry by that agency. Mr. Williams says he isn't
aware of any investigation by the SEC.
Mr. Williams's attorney, Mr. Marx, couldn't be reached for comment
Wednesday about the jailing. Speaking earlier, he expressed doubt that
Mr. Williams could live up to all the terms of his plea bargain. "He's a
brilliant guy," Mr. Marx said, "but he's a little nuts and has a very strange
idea of right and wrong." |
