published Saturday, December 29th, 2012

Soddy-Daisy tax preparer won’t answer bankruptcy trustee’s questions in connection with alleged Ponzi scheme

  • photo
    Jack Brown is co-owner of Brown's Tax Service and ABC Day Care in Soddy-Daisy.

THE TOYS

2011 van -- repos-sessed

2011 GMC handicap van

2010 fishing boat -- repossessed

2010 Itasco Cambria motor home

2010 dirt bike

2008 Chevy Avalanche truck

2008 Escalade -- Half-owned by Jason Brown

2009 motorcycle -- gift to grandson

2009 ATV -- gift to grandson

2007 pink four-wheeler -- gift to grand-daughter

1995 Georgie Boy RV

1940 Ford coupe

1934 Lincoln

Golf cart

Honda motorcycle

Trailer

Three tractors

Polaris vehicle

Large gymnasium

Pool table

Golf simulator

Bar and stools

Tables and chairs

Games

Boston Garden flooring

Source: U.S. Bankruptcy Court, Eastern District

A Soddy-Daisy tax preparer accused of engineering a massive Ponzi scheme is resisting efforts by officials to uncover millions of dollars allegedly squandered in the scam.

Dozens of jilted investors, including a Church of God pastor and a handful of congregants, say Jack Brown promised returns as high as 15 percent. But creditors' attorney Rebecca Hicks charged that Brown never invested the nearly $10 million he took from residents. Instead he spent the life savings of retirees and widows on lakefront property, large homes and a pink four-wheeler for his granddaughter.

Brown "engaged in an elaborate scheme to cover up and conceal the true nature of his activities," Hicks wrote in a complaint. Brown has "in fact been operating a Ponzi scheme which has now collapsed," she wrote.

The list of Brown's toys reads like the summer catalog for Bass Pro Shops.

He bought a boat, a motorcycle, a golf cart, three guns, two motor homes, a four-wheeler, several tractors and two classic cars, not to mention his own indoor amusement park in what he calls a "gymnasium" that he constructed on the gated property he shared with his son.

Inside the indoor playground, the Browns installed a golf simulator, a full bar, various games, a pool table and the actual floor from the Boston Garden sports arena. Before Boston Garden was demolished in 1998, the famous arena hosted the Boston Celtics and Bruins, as well as a who's who of classic rock icons.

In total, Brown claims just $1.4 million in assets, including virtually no cash, with which to pay back his investors. In bankruptcy filings, Brown estimated his average expenses at $88,371 per year against current yearly income of $29,832.

Bankruptcy trustee Jerry Farinash, who is working to recover more than $12 million from the onetime tax preparer's estate, said Brown has not fully cooperated in the investigation.

"The debtor and/or his wife have refused to answer questions which would not be protected under the Fifth Amendment," Farinash wrote in a court filing. "It is true that the debtor and his wife have met with the trustee; however, it is untrue that they have fully cooperated with the trustee."

Through an attorney, Brown called in sick for a creditors' meeting, claiming a laundry list of worsening health symptoms. According to a doctor's note from Dr. Joe Watlington, Brown suffers from a series of medical conditions that are fast deteriorating into congestive heart failure. He has suffered an embolic stroke and is not able to feed himself because of complications stemming from diabetes, Watlington said.

"Currently he is at bed rest, and requiring transportation by ambulance anywhere he goes," Watlington wrote.

But Brown's illness is not the issue, argued U.S. Trustee Samuel Crocker, who represents the federal government's interest in the case. Crocker argued that Brown must answer for the millions of dollars in missing money, whether it's over the phone or at a nursing home.

"These numerous creditors will likely want to attend the meeting of creditors and ask the debtor about his dissipation of over $10 million," Crocker wrote, adding that he, too, would like some answers. "The U.S. Trustee has a substantial number of questions for the debtor, and his family members, regarding the receipt and use of millions of dollars in 'investor' funds."

Though victims reached by the Times Free Press have yet to hear from law enforcement or other officials on the status of their money, Brown has signaled his intentions in court filings to sell some of his property and vehicles.

But the money from the sale of several properties and other large items is slated to go back to the banks and lenders who loaned him the cash he needed to support his lifestyle, rather than to the retirees who surrendered their life savings to the smiling man they knew from Sale Creek Church of God.

So-called "unsecured" creditors, whose proof of investment in this case was often a handwritten promissory note from Brown, are typically the last to get paid.

Still unresolved is what role Brown's family played, if any, in the enterprise. Both his wife, Janet Brown, and son, Jason Brown, are listed as co-owners of several of his ventures. Jason Brown is a co-debtor on two loans and ran many of the company's business operations, according to a company biography.

The family lives in a gated compound with a lake and pool and owns properties and businesses throughout the Soddy-Daisy area. Other than the tax service, the Browns own two ABC Nursery & Learning Centers and Soddy-Daisy Money Express -- a check-cashing operation.

Neither Jason Brown nor Janet Brown could be reached for comment. Brown's attorney has not responded to requests for comment.

A meeting of creditors is scheduled at 9 a.m. Jan. 8.

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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