October 20, 2009
Two former Nebraska City brokers say they shouldn't be prosecuted for securities fraud because the investors who lost more than $20 million acknowledged the risks in writing, but prosecutors said Monday the records don't tell the full story.
Rebecca Engle and Brian Schuster are accused of defrauding more than 130 investors by improperly selling risky investments in several interrelated Florida companies.
Both Engle and Schuster face eight state counts of securities fraud and several lawsuits, but at Monday's hearing attorneys for both former brokers argued prosecutors don't have enough evidence to proceed with the fraud cases.
Engle's attorney, Steve Achelpohl, said written records made when the money was invested contradict the version of events investors told state officials several years later.
Achelpohl also suggested investigators led investors to believe Engle and Schuster acted improperly with a suggestively worded survey they sent out.
Schuster's attorney, Don Schense, mostly made similar arguments about the strength of the prosecution's case. He also challenged a couple of the charges on technical legal grounds.
"It's difficult at best to come back three or four years later and argue there was some sort of deceit here," Schense said.
Special prosecutor Michael Guinan said Engle's and Schuster's clients may have signed forms saying they understood the risks of these investments, but many say now they weren't fully informed about the hazards.
Guinan, who is with the Nebraska Attorney General's office, said the difference between what the records show and what investors say now should be sorted out at trial.
All the investors involved in the criminal cases were interviewed by investigators after they answered the questionnaires, so the charges are based on more than just the survey responses, he added.
"There is ample evidence," Guinan said.
The fraud cases were filed in rural Otoe County in southeastern Nebraska, but the hearing was held about an hour away in Sarpy County because Omaha area lawyers are handling the case. Many lawyers and judges in Otoe County had conflicts of interest.
Sarpy County District Judge David Arterburn said he would rule on the defense motion after reviewing all the evidence prosecutors submitted at preliminary hearings in June and all the attorneys' arguments.
Most of the investors involved in these cases were nearing retirement age or already retired, so they wanted conservative, stable investments with little risk. They claim Engle and Schuster instead invested their money in high-risk enterprises and never fully explained the risks.
Schuster, who played fullback for Nebraska from 1992 to 1996, worked with Engle in Nebraska City for several years. The two sold securities in American Capital Corp. and Royal Palm. According to court documents, Engle and Schuster described the Florida companies in glowing terms such as "can't-miss deals" or "mini Berkshire Hathaways," referring to the Omaha-based conglomerate run by billionaire Warren Buffett.
PrimEdge Inc. later bought American Capital and Royal Palm, and Schuster became the president and chief executive of PrimEdge. He is now a law student in South Dakota, and PrimEdge is listed as an inactive corporation by the Florida Secretary of State's office.
Engle lost her securities dealing license in February 2008 as part of an agreement with state regulators. She filed for Chapter 11 bankruptcy protection in Arizona in the summer of 2008. In the bankruptcy filing, Engle said she had assets worth between $500,000 and $1 million, but estimated that she owes between $10 million and $50 million.