Morris found guilty on all counts

Earle Morris enters the court room with defense attorneys Kathleen Schultz and Christian Stegmaier. Morris was convicted by a jury on all counts of the indictment. Staff/Ken Osburn e-mail this story to a friend Related Related stories: • Morris verdict opens emotions floodgate Photo gallery • Jury's verdict handed down

A six-man, six-woman jury found Morris, 76, guilty on 22 counts of securities fraud for telling investors to keep their money in the Pickens-based company although he knew it was sliding into insolvency. An estimated 12,000 residents, many elderly and from the Upstate, lost $278 million when Carolina Investors closed last year.

Attorney General Henry McMaster said the investigation of Carolina Investors and its parent company, HomeGold Financial Inc., is continuing. But he would not comment on the possibility of more action by the state grand jury, which has indicted three former company officers, including Morris.

Circuit Judge James W. Johnson Jr. is scheduled to sentence Morris today. He faces up to 213 years in prison and more than $1 million in fines, according to the Attorney General's Office, which prosecuted the case. Morris remained free on bond, despite a government request he immediately be taken to jail.

The jury, picked from Florence County to ensure Morris got a fair trial, deliberated more than five hours before returning its verdict. Morris showed no emotion as the verdict to each individual count was read.

Without comment, he left through a back door to the courtroom, escorted by family members and attorneys.

"Hopefully, we can now get peace," said investor Martha Murphree. "Someone had to take responsibility."

Before the verdict was announced, Johnson warned spectators to control their emotions or leave the courtroom. Thus, reaction from the handful of investors inside was muted.

But outside the courtroom was a different story as investors hurried into the third-floor hallway at the Greenville County Courthouse.

"It turned out the way I wanted it to," said Bonnie Nichols as she pumped her first in the air.

"I think there was a lot of sadness in the courtroom," said Barbara Smith. "But I think justice was served."

McMaster said the jury's decision was "a significant conviction."

"Based on the evidence, the jury made the right decision," McMaster told reporters.

The request by prosecutors to have Morris taken to jail was "appropriate," McMaster said. "Our position was Mr. Morris should have gone to jail once the guilty verdict was returned."

McMaster said the government will ask for a "substantial jail sentence" for Morris, who testified he is suffering from prostate cancer. The issue of restitution to investors also must be decided, McMaster said.

After the jury's verdict was announced, defense attorneys quickly moved for a new trial. Johnson denied their motions.

Jurors, through a court official, declined comment.

The government said that as chairman of Carolina Investors, Morris between 1998 and March 2003 used a scheme or planned to defraud investors and he made untrue statements or omitted key information to them to convince them to keep their money in the failing company.

Defense attorneys said, however, HomeGold officials kept Morris in the dark about HomeGold's true financial condition and he relied on its officers, accountants and lawyers for information he relayed to investors.

Prosecutors said investors kept their money in Carolina Investors, which remained in business for 40 years, because of their faith in Morris' statements that Carolina Investors was financially secure.

Investors believed Morris because of his extensive financial background and his stellar reputation and his being an Upstate native, even though Morris knew the company was in trouble, according to government attorneys.

Morris said he only repeated to investors what he had been told by HomeGold officers: That the company was fine. Investors such as William McDavid of Greenville County testified that Morris said the company was "solid as the Rock of Gibraltar."

Prosecutors said Morris had reviewed financial documents about HomeGold and should have known the company was not solid.

But Morris said such documents were not "my business."

"It was not my job to keep up with that," Morris said, adding that he had no fiscal or administrative duties at HomeGold. Morris said he relied on HomeGold officers, not on the financial documents.

Morris, testifying in his own defense, said he had no warning of the company's impending collapse despite its parent firm's massive borrowing from Carolina Investors to stay in business and its filings with federal regulators that showed steep financial losses.

He told investors that the company was strong and HomeGold was working toward renewed profitability "because that's what HomeGold told me," Morris said.

Several character witnesses, including former South Carolina Gov. Robert E. McNair, testified they did not believe Morris would intentionally defraud anyone.

Government attorneys said Morris knew about HomeGold's financial matters because he attended meetings with top HomeGold officials, including former company Chairman Jack Sterling, as well as meetings with employees and state Securities Commission officials.

Prosecutors also said Morris had access to company financial records filed with federal regulators. Morris said he didn't read them thoroughly.

Morris also said that as chairman, he trusted Sterling and Greenville attorney Tommy Wyche, who was secretary and legal adviser for Columbia-based HomeGold and its predecessor, Greenville-based Emergent Corp., from 1991 until April 2002, according to court records. Wyche's firm was securities counsel for HomeGold and Carolina Investors, according to court records.

"I had great confidence from his firm," Morris said of Wyche.

Government attorneys said Sterling, also a Carolina Investors board member, told Morris and former Carolina Investors President Larry C. Owen over lunch in January 2003 that a conservatorship, which prosecutors said would have frozen investors' assets, was being considered.

Morris told defense attorney Joel Collins of Columbia he came away from the meeting feeling things were vastly different regarding HomeGold.

"My impression was that they knew information that we didn't," Morris testified. "We had never heard about receivership."

Wyche and Sterling have denied any wrongdoing.

Owen, 61, in July pleaded guilty to 22 counts of securities fraud and is awaiting sentencing. His wife, Anne Owen, 51, a former Carolina Investors senior vice president of investments, is awaiting trail on securities fraud charges.

HomeGold was a finance company that specialized in originating, selling and servicing subprime first- and second-lien residential mortgages. Its business was funded through loans from Carolina Investors, which sold unsecured notes and debentures, according to Securities and Exchange Commission documents.

Investors can expect to recoup about 18 cents on the dollar once assets are sold and the company is liquidated, bankruptcy officials have said.