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.

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