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Feds: Huffman confesses to scam

500 investors scammed out of $25 million over 17 years, officials say.

HUFFMAN DETAILS

J.V. Huffman Jr., 45, president of Biltmore Financial Group Inc., was arrested Nov. 7 and charged with four counts of felony securities fraud and four counts of felony obtaining property by false pretense. He is in jail under a $1 million secured bond.

Huffman is accused of issuing promissory notes through his company. He told investors the funds would be used to buy and sell real estate mortgages or deeds of trust. Investigators with the N.C. Secretary of State’s office believe Huffman took investors’ money for personal use.

Do you know J.V. Huffman, Jr?

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By Sarah Newell Williamson | Hickory Daily Record

Published: November 14, 2008

CLAREMONT - J.V. Huffman Jr. confessed to scamming hundreds of investors out of millions of dollars, according to documents released Thursday by the U.S. Securities and Exchange Commission.

In a civil action lawsuit filed in federal court Wednesday by the SEC against the Huffman and his company, the Biltmore Financial Group Inc., the SEC said Huffman conducted a Ponzi scheme, pulling in 500 people in North Carolina and other states since 1991.

He raised about $25 million from these investors, who initially believed they were investing in a mutual fund. After Sept. 11, 2001, Huffman expanded his claims, and told investors the Biltmore Financial pooled investors' money to purchase and sell mortgages for a profit.

Huffman confessed to authorities a week ago, when the N.C. Secretary of State's office searched his home on Wishing Well Lane in Claremont, according to a release from the SEC. He told authorities he never invested the funds the investors gave his company, Biltmore Financial, and said he used new investor funds to pay the profits of earlier investors. Some funds were used for his lavish lifestyle, including an Aston Martin convertible, a $1 million RV, renovations to his home, vacations and rental properties.

"In a tragic example of the way a fraudster operates a Ponzi scheme, Huffman deceived neighbors and members of his church and religious community, as well as strangers, to finance his extravagant way of life," said Katherine Addleman, director of the SEC's Atlanta, Ga., regional office. "Huffman lied to get investors' trust and then spent their invested funds on fancy cars and vacation homes."

Huffman's wife, Gilda, was named as a relief defendant in the civil suit, so assets filed under both names could be attained, according to officials with the SEC.

An order also was filed in federal court Wednesday to appoint a receiver and freeze all of Huffman's and Biltmore Financial's assets. These include assets, money, securities and properties. A receiver's job is to take control of assets and ensure they're protected. Walt Pettit, of Kellam and Pettit in Charlotte, was appointed as the receiver.

According to the order, Pettit has the authority to manage, control and operate Huffman's estate. He can use the income, earnings and profits of the estate to take into possession any goods, money, lands, books or record of accounts, data or materials, conduct the business operations of Biltmore Financial and the properties they control and make any payments or dispose of assets as necessary. Pettit also can receive and collect money owed to Biltmore Financial and Huffman, and can renew or cancel lease agreements.

As the receiver, Pettit must file a preliminary report with the court within 45 days of the order, identifying the location and values of Huffman's and Biltmore Financial's assets, and any liabilities he had.

The receiver also is the individual who will ultimately decide how Huffman's profits will be divided up.

The order also states that funds be frozen, with the exception of $15,000 for living expenses for the Huffmans for one month. After one month, Huffman can apply to the court with a signed, sworn statement of financial condition for the amount they need for ordinary living expenses.

The scheme:
Since 1991, J.V. Huffman Jr. operated Biltmore Financial Group Inc. Investors gave him $1,000 or more, and were told the money would be invested in a mutual fund.

After Sept. 11, 2001, Huffman changed his claims to investors by saying profits were generated by buying and selling mortgages. Profits fluctuated at market rates, but were guaranteed "never to drop below 0.00 percent."

Investors received monthly or quarterly reports, and were told they could withdraw their money without penalty in no more than 30 days. Biltmore Financial said its "approach is very conservative and tries to provide a healthy return at no risk."

According to the Biltmore Financial Group Company Dossier, which was sent to investors, interest rates paid to investors ranged from 8.02 percent one year to as high as 16.54 percent in 2007. In Huffman's first year, 1991, interest was 10.15 percent.

Other information provided to investors stated that "measures are taken to insure against any loss. Included but not limited to various forms of insurance from: State Farm, Thrivent Financial, American Express, Asset Guarantee, Securities Investor Protection Corporation." It also states the company's assets are insured and secured by the FDIC, SIPC and Thrivent Financial Services.