Sunday, July 22 , 2018, 1:01 am | Fair 67º

 
 
 
 

Local News

Sentence Suspended for Ex-Santa Barbaran Nikki Pomeroy, Indicted for Investment Fraud

She was convicted in a $94 million embezzlement scheme out of a Nevada firm

Clark County District Court has issued a suspended sentence to Nikki Pomeroy, a former officer for a failed Nevada financial firm with Santa Barbara ties, for acting as an unlawful intermediary in a tax-free exchange.

Pomeroy was sentenced to 12 months to 36 months in prison, but it was suspended Tuesday. She will serve up to three years of probation, complete 800 hours of community service and pay a $10,000 fine.

U.S. District Judge Philip Pro sentenced Pomeroy’s father, former Southwest Exchange chairman Donald McGhan, to 10 years in prison in 2009. Real estate investors used Southwest as a financial intermediary to delay federal income taxes on property sales. The company closed in 2007.

McGhan acquired Montecito-based Quality Exchange Services in 2006, which charged landowners to avoid taxes by temporarily placing their sales into escrow accounts, similar to Southwest. In other words, a person could sell an investment and reinvest that money in new, similar property within a 180-day period. Capital gains taxes on profits from the sale were deferred.

Lawsuits allege that McGhan cheated his clients out of money at these exchanges. A two-year investigation revealed that 119 of Southwest Exchange’s clients lost more than $94 million as a result of the alleged embezzlement, with at least $10 million coming from Santa Barbara residents, according to Robert Brace of Hollister & Brace in Santa Barbara.

Numerous unauthorized transfers of client funds were made to third-party accounts and companies, without notifying Southwest’s clients. Brace could not be reached for comment Thursday.

It is alleged there are 18 other companies controlled by McGhan that illegally misused these fees.

Noozhawk staff writer Alex Kacik can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Become a fan of Noozhawk on Facebook.

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made through Stripe below, or click here for information on recurring credit-card payments and a mailing address for checks.

Thank you for your vital support.

Become a Noozhawk Supporter

First name
Last name
Enter your email
Select your membership level
×

Payment Information

You are purchasing:

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover
One click only, please!

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.

Daily Noozhawk

Subscribe to Noozhawk's A.M. Report, our free e-Bulletin sent out every day at 4:15 a.m. with Noozhawk's top stories, hand-picked by the editors.

Sign Up Now >