Montana State Auditor John Morrison and UBS Financial Services (formerly PaineWebber) have reached a settlement to provide more than $4.5 million in restitution to the victims identified in the Auditor’s action against former gubernatorial candidate, Patrick Davison.
In August, the Auditor’s Securities Department filed a Notice of Proposed Agency Disciplinary Action and a Temporary Cease and Desist Order against Billings businessman, Patrick Davison. The Department originally alleged Davison committed securities fraud against two Montana families causing the families to lose more than $1.2 million. Subsequently, the Department filed an Amended Notice of Proposed Agency Disciplinary Action against Davison, alleging six additional complainants were defrauded by Davison so he could promote and conduct an illegal Ponzi scheme.
Davison was charged with defrauding nine complainants by selling them bogus investments. The allegations stated that Davison sold these fraudulent investments, putting the investment monies into accounts he owned or controlled outside of UBS. The fake investments went to a non-existent St. Labre Indian School Trust, the Billings Catholic Schools; the Mayfair 2/Big Sky Gold Rush Raffle Event; Promissory Notes secured by non-existing collateral; investment in coal leases; and an entity entitled Foundation Assistance Group, purported by Davison to support the Montana University System.
In an effort to be responsive to the Montanans affected by the activities and to the communities in which UBS does business, the firm has offered to pay nine victims more than $4.5 million in restitution — despite the fact that some of the victimization occurred after Davison left the financial services firm and went back at least five years beyond Montana’s statute of limitations for these types of cases. The Auditor did not charge UBS with any wrongdoing.
“Ponzi schemes work on the ‘rob Peter to pay Paul’ principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses,” Morrison. “Because in the end there is generally no money, the later investors become the victims and typically get nothing back. But for UBS coming forward, these victims would have no chance of recovering their losses.”
Morrison’s office believes created the largest Ponzi scheme settlement in the state. “Thanks to the efforts of the securities staff of the State Auditor’s Office, as well as the cooperative spirit of UBS, victims will get back money they lost”
Source: Montana State Auditor’s Office
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