Jackson Jambalaya

 Collection of all posts about Lamar Adams/Madison Timber case. 

UPDATE (4:30 PM): ACQUITTED! Jury acquitted McHenry on all three counts after two hours of deliberation.

Original Post: William McHenry, Jr. is on trial this week in U.S. District Court in the Madison Timber fraud case.  A grand jury indicted him earlier this year for securities and wire fraud.  The case is assigned to Judge Carlton Reeves.

Lamar Adams pleaded guilty in U.S. District Court to one count of wire fraud last year.  The Justice Department said in that case Adams defrauded 320 investors of more than $164 million in a ponzi scheme that sold phony timber investments.  The Court sentenced Adams to serve 235 months in prison.   The SEC accused Lamar Adams of operating a Ponzi scheme that defrauded 150 investors out of more than $85 million since 2005, in a lawsuit filed in U.S. District Court on April 20.   The SEC said Adams sold bogus timber rights, deeds, and promissory notes guaranteeing 13% interest rates.  The Justice Department stated in a March press release:

William B. McHenry, 71, of Canton, has been indicted by a federal grand jury for his role in a multi-million dollar Ponzi scheme that adversely affected hundreds of  victims across multiple states over a number of years, announced U.S. Attorney Mike Hurst and  Special Agent in Charge Christopher Freeze with the Federal Bureau of Investigation in Mississippi.

McHenry appeared before U.S. Magistrate Judge Linda R. Anderson today for his initial appearance  and arraignment on the Indictment.  The case is currently scheduled for trial on April 15, 2019,  before U.S. District Judge Carlton W. Reeves in Jackson.

“Those who prey upon and steal from others will soon find themselves on the wrong side of the law.   We will continue to investigate this massive scheme wherever the evidence may take us and will  vigorously pursue and bring to justice any other wrongdoers who were involved,” said U.S. Attorney  Hurst.

McHenry is charged with one count of securities fraud and two counts of wire fraud involving a  scheme to defraud investors, all in connection with a Ponzi scheme using Madison Timber Properties,  LLC, a company wholly owned by Arthur Lamar Adams.  Adams has previously been convicted and  sentenced for his role in the Ponzi scheme.

As charged in the Indictment, beginning as early as 2008 and continuing through April 2018, McHenry  assisted in a scheme to defraud investors by soliciting millions of dollars of funds for Adams  under false pretenses, failing to use the investors’ funds as promised, and converting investors’  funds to McHenry’s and Adams’s own benefit without the knowledge of the investors. Instead of  investing McHenry’s clients’ money, Adams used the invested funds for  his own personal benefit and for purposes other than those represented to investors, which also  included making payments due and owing to other investors, thus perpetuating the Ponzi scheme.

During the fraudulent scheme, McHenry recruited investors, and fraudulently obtained well in excess  of $18,000,000 from more than 25 investors located in multiple states.

As alleged in the Indictment, as part of the fraudulent scheme, McHenry falsely represented to  investors that Madison Timber Properties was in the business of buying timber rights from landowners and then selling the timber rights to lumber mills at a higher price. The object of the scheme was to cause individuals to invest in loans that purportedly were for the purpose of  financing contracts for the purchase of timber rights to be sold to lumber mills at a higher price.  However, neither McHenry, Adams nor Madison Timber Properties had such timber rights or contracts  with lumber mills, except in only a few instances.

McHenry and Adams entered into fraudulent investment contracts with investors, most often in the  form of promissory notes on behalf of Madison Timber Properties. The loans typically guaranteed  investors an interest rate of 12-13%, with the interest to be repaid to investors over the course  of 12-13 months. The monthly payments due on these promissory notes were typically due on either  the first or the fifteenth of the month.

McHenry and Adams created false documents causing investors to believe that their investments were  secured by sufficient collateral from which they could recover all or part of their investment in  the event that Madison Timber Properties defaulted on the loans. Specifically, Adams created false  timber deeds purporting to be contracts conveying timber rights from landowners to Madison Timber  Properties. Adams forged the signatures of landowners and also created false timber deeds  purporting to convey timber rights from Madison Timber Properties to the investors.

To further lull investors, Adams had many of the documents notarized to make the investments appear  legitimate. McHenry and Adams also required the investors to agree not to record their timber deeds  unless Madison Timber Properties defaulted on the loan agreement by failing to make a payment.

McHenry misled his investors to think that McHenry was a principal officer of Madison Timber  Properties and was personally invested with his own funds in the enterprise.  Instead, McHenry in  fact only received a ten percent commission on all the investments he recruited, which McHenry failed to disclose.

Oddly enough, William McHenry sued Lamar Adams for $10 million on May 16, 2018 in Madison County Circuit Court.  McHenry claimed in the lawsuit:

2. Prior to the last days in April 2018, McHenry had an amicable business and personal relationship with Adams. On several occasions, McHenry and Adams, along with other investors, purchased real estate for investment. McHenry was aware of Adams’ successful business dealings with a number of sophisticated, successful businessmen and financial and investment advisors. From these business and personal dealings, Adams gained McHenry’s trust. McHenry’s experience with and observations of Adams dealings with others gave McHenry the belief that Adams was a sophisticated, highly competent businessman who was reliable, honest and had integrity. Unbeknownst to McHenry, Adams exploited McHenry’s trust and confidence in his business acumen.

3. Adams’ scheme to defraud included representing to McHenry, H-22, Eddie Abdeen and others “that Madison Timber Properties was in the business of buying timber rights from landowners and then selling the timber rights to lumber mills at a higher price.” As part of the scheme, Adams created “false documents to lull” McHenry, H-22, Eddie Abdeen and numerous others to believe participation in the timber financing was safe and secure. In that respect, Adams “created false timber deeds” and “forged the signatures of landowners” in order to make the financing arrangement “appear legitimate.” To aid his deception, Adams had “documents  notarized  to  make  the  investments  appear  legitimate”  to  McHenry,  H-22,  Eddie Abdeen and others.....

6. Adams betrayed and duped McHenry into believing the timber financing loans were secure while providing an attractive rate of return. In short, McHenry had no idea or inkling Adams was a crook.

7. As a direct result of Adams’ fraudulent ponzi scheme, McHenry was named a defendant in this lawsuit and has suffered injury to his good reputation and name in the community  and  with  the  people  who  he  introduced  to  Adams  and  MTP  through  adverse publicity and his being unfairly associated with Adams’ fraudulent scheme.  Adams and MTP’s fraudulent ponzi scheme has exposed McHenry to this legal action and other potential claims as well as costs of defending himself and his good reputation....

Stay tuned.