A former officer of a failed Nevada financial firm with Santa Barbara ties has been indicted on 11 felony counts of embezzlement and 11 felony counts of serving as an unlawful intermediary in a tax-free exchange. Nevada officials call the alleged scheme, which they say cheated 119 individuals out of $97 million, “possibly the largest case of embezzlement in the history of the state.”

The indictment of Nikki Pomeroy, a former officer and director of Southwest Exchange Co. Inc. of Henderson, Nev., is the first in a class-action suit that also accuses her brother, James McGhan, and her father, Southwest Exchange chairman Donald McGhan, of mishandling funds. Pomeroy remains free pending an arraignment in Clark County District Court on April 9.

Donald McGhan, 74, was the founder and president of McGhan Medical Corp., a Santa Barbara maker of silicone breast implants that later became Inamed before merging with Allergan Inc. in 2006. McGhan left the company in 1998 and, in 2000, settled with the Securities & Exchange Commission, which had accused him of filing fraudulent quarterly reports for Inamed in 1997.

At that time McGhan had co-founded and was board chairman of MediCor Ltd. in North Las Vegas, another medical device supplier. MediCor filed for Chapter 11 bankruptcy protection in June 2007.

McGhan acquired Montecito-based Quality Exchange Services in October 2006, a business that, like Southwest Exchange, performed 1031 exchanges: For a fee, landowners temporarily place the proceeds of their sales into escrow accounts to avoid capital gains taxes. The 1031 refers to the Internal Revenue Service code number. QES has since gone out of business.

Lawsuits claim McGhan siphoned money from his clients at these exchanges, and another one he acquired — Arrow 1031 in Boise, Idaho — to fund ventures in his other companies, or to spend lavishly. For one thing, MediCor, at least one lawsuit alleges, received millions of dollars to acquire a French breast implant company. Up to 18 other McGhan-controlled companies are said to have been involved in this illegal flow of funds.

Robert Brace of Hollister & Brace in Santa Barbara has said several local residents fell victim to the operation, to the tune of $10 million. He filed a class-action suit on their behalf against QES and the McGhan family in February 2007. Brace could not be reached for comment Tuesday.

Donald McGhan is named but not charged in the Nevada indictment, and officials say the investigation is ongoing and that other indictments may be sought. Pomeroy faces the possibility of a combination of prison, fines and probation for her involvement. Her attorney, Mark Dzarnowski, declined immediate comment.

“This is quite possibly the largest case of embezzlement in the history of the state,” Secretary of State Ross Miller said in a statement Monday.

Miller, whose office conducted a two-year joint investigation with state Attorney General Catherine Cortez Masto’s office, said 119 of Southwest Exchange’s clients lost more than $94 million as a result of the alleged embezzlement and that the company was responsible for $97 million when the firm closed.

— Noozhawk staff writer Sonia Fernandez can be reached at sfernandez@noozhawk.com.