WALL STREET JOURNAL, September 3, 1998 POST 1 OF 2
CAPITAL GAME
Convictions for Fraud Don't Slow A Financier For Small Business
Ron Wiliams Accepted Fees But Raised Little Money For Many of His Clients
Detective's Dogged Pursuit
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 business 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 and 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 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 make 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 with 32 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.
SECOND POST TO FOLLOW
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