Ronald J. Sheppard was on his way to tell his story to the state
grand jury Tuesday when he was told not to bother coming in.
A day later, the grand jury levied 10 charges against the former
head of HomeGold Financial Inc., claiming his lies about his lavish
lifestyle and the company’s health contributed to the biggest
financial collapse in state history.
When the Columbia mortgage company flamed out in March 2003,
stock owners were left with worthless shares. And the nearly 9,000
owners of junk bonds in its Carolina Investors subsidiary lost $278
million.
The 10-count indictment, released Thursday, charges the Lexington
man with securities fraud, bank fraud, insurance fraud, forgery,
obtaining goods under false pretenses, breach of trust, perjury and
conspiracy.
He faces a maximum penalty of 57 years in prison and fines of
more than $165,000.
Sheppard, 48, is to be arraigned Tuesday. He is expected to enter
a plea of not guilty. A date for the trial, expected to be held in
Lexington County, has not been set.
James Griffin, Sheppard’s attorney, said, “We are disturbed
Ronald Sheppard was denied the opportunity to tell the grand jury
his side of the story.”
Sheppard has always maintained his innocence, Griffin said. His
client, a ninth-grade dropout from Brookland-Cayce High School,
relied on a cadre of consultants such as lawyers and
accountants.
Griffin, hinting at the direction of Sheppard’s defense, added
that HomeGold’s financial disclosures — statements now being called
into question by the indictment — were prepared by lawyers and
accountants advising HomeGold’s management.
The 40-page indictment claims Sheppard was at the core of many
problems that ultimately resulted in South Carolina’s largest
bankruptcy.
Losses mounted as early as 1998, but the problems became grave
after the 2000 merger of HomeGold with Sheppard’s mortgage company,
HomeSense.
When Sheppard became chief executive, the state grand jury
claims, he almost instantly started the scheme to defraud
investors.
For instance, HomeGold gave Sheppard $4 million in cash and
assumed an additional $1.7 million of his debt.
The problem, the grand jury alleges, is that the company’s
financial documents listed payments to Sheppard as a loan, but in
reality it was never expected to be repaid. Investors reading a
HomeGold financial statement would see this $5.7 million as an asset
that was actually an expense.
Meanwhile, the money raised by Carolina Investors — the more than
$278 million ultimately lost by investors — was called a loan to
HomeGold.
The grand jury alleges that as Carolina Investors sent more money
to HomeGold to fund its money-losing operations, the less likely it
was to ever be repaid.
The indictment claims Sheppard actively worked to keep the
companies’ true financial status from being known by key board
members, such as Carolina Investors’ largest investor, Don Bobo.
Former Carolina Investors chairman Earle E. Morris, in his
defense on fraud charges, claimed Sheppard lied to him, too. The
former lieutenant governor was convicted on fraud charges a year ago
today.
Now, S.C. Attorney General Henry McMaster is preparing to go to
court and prove Morris’ point — that Sheppard purposefully misled
investors, board members and government regulators.
“We intend to prove Mr. Sheppard did knowingly and willfully
violate state law,” McMaster said. “There is a wide variety of
criminal involvement included in this indictment.”
Sheppard also is charged with giving false information to banks
while buying HomeGold in 2002.
After HomeGold’s outside auditors issued their opinion that the
company was unlikely to survive the year, Sheppard applied for a
$2.5 million line of credit for a new company that he started in
order to buy HomeGold assets.
In his loan application, Sheppard said his 6.8 million shares of
HomeGold stock were worth $3.2 million. The indictment claims the
shares were worth just $374,000.
McMaster said Sheppard’s indictment is not the end of his
office’s investigation. He also declined to call this indictment a
comfort for the investors demanding justice.
“I don’t know if there is anything that will bring comfort to the
investors,” McMaster said. “Their loss was enormous — $278
million.”
Reach Werner at (803) 771-8509 or bwerner@thestate.com.
