Baron Thomas charged with fraud

[Dave Siciliano]

From the Beechlist.

Best,

Dave

Looks like they sold over $10,000,000 in investments with planes as collateral. Advertised in TAP. This won't be pretty.
===========================================


http://images.edocket.azcc.gov/docketpdf/0000107510.pdf

Jan 5, 2010. Barron Thomas Aviation is being called before the Arizona Corporation Commission Securities Division to answer the charge of selling unregistered securities:

"An Arizona investor purchased a $50,000 12% Investment from BT and 3TA on or about March 14, 2005. On April 22, 2005, BT and BTA used the Arizona investor's money to repay the prior Texas investor. BT and BTA then caused a new FAA Lien to be effected in favor of the new Arizona investor on the N8194W Airplane.

However, unbeknownst to either the Texas or Arizona investor, the blue and white 48194W Airplane was at all times relevant laying in pieces in an open air storage yard in a severely deteriorated state. The N8194W Airplane is comprised of a separated, dented fuselage with faded paint, no wings, no landing gear and includes other defects."

["Smooth Talker"]

Oh my.

And I thought he was just a dick because he would not return my calls when I wanted to buy an airplane from him.

Small favors ... thank you, Lord!

[Nathan young]

I've never personally engaged with BT, but always thought his practice of redacting N-numbers from both the text and .jpgs in his advertisements was strange... it did not leave me with a good impression.

Originally Posted by Dave Siciliano

From the Beechlist.

Best,

Dave

Looks like they sold over $10,000,000 in investments with planes as collateral. Advertised in TAP. This won't be pretty.
===========================================


http://images.edocket.azcc.gov/docketpdf/0000107510.pdf

Jan 5, 2010. Barron Thomas Aviation is being called before the Arizona Corporation Commission Securities Division to answer the charge of selling unregistered securities:

"An Arizona investor purchased a $50,000 12% Investment from BT and 3TA on or about March 14, 2005. On April 22, 2005, BT and BTA used the Arizona investor's money to repay the prior Texas investor. BT and BTA then caused a new FAA Lien to be effected in favor of the new Arizona investor on the N8194W Airplane.

However, unbeknownst to either the Texas or Arizona investor, the blue and white 48194W Airplane was at all times relevant laying in pieces in an open air storage yard in a severely deteriorated state. The N8194W Airplane is comprised of a separated, dented fuselage with faded paint, no wings, no landing gear and includes other defects."

[Wayne]

Not uncommon for brokers who know their listing agreements may expire prior to the time the airplane is sold. They don't want to provide potential buyers with information that would allow them to make direct contact with the owner. Their position is that they incurred the expense of running the ad and will not be reimbursed by commission earnings unless it sells.

Originally Posted by nyoung

I've never personally engaged with BT, but always thought his practice of redacting N-numbers from both the text and .jpgs in his advertisements was strange... it did not leave me with a good impression.

[Ben]

Originally Posted by wabower

Not uncommon for brokers who know their listing agreements may expire prior to the time the airplane is sold. They don't want to provide potential buyers with information that would allow them to make direct contact with the owner. Their position is that they incurred the expense of running the ad and will not be reimbursed by commission earnings unless it sells.

For BT that is the least of their problems.

[Wayne]

Agreed. He's been advertising (apparently) non-existent airplanes for many years. In fairness, airplanes similar to the ones he listed probably existed, he just didn't happen to have a listing agreement to sell them. But if you lock up all the airplane traders who employ similar tactics, the airports are going to have a glut of rental space on their hands.

At one time a local friend owned a B-90. One day the big snake-oil broker in Florida called and tried to sell it to him.

Originally Posted by N801BH

For BT that is the least of their problems.

[denny]

A fella at our local airport took a fancy to one of Mr. Thomas' listings... When he called, they kept insisting that they had to have his credit card numbers to show he was serious BEFORE they could discuss the airplane with him because of wasting their time with tire kickers... He wisely hung up on them...

And any damn fool who believes he is going to get 12% on his money, over the phone, deserves what he got...

denny-o

[steingar]

There was a long thread about BT eating aircraft deposits on the Red Board. Sounds like its about time.

[iBazinga!]

BT and fraud. Wow color me surprised. NOT!

[Bill Burkett]

That attachment starts getting pretty interesting around page 14. His previous history in Texas was an eye-opener, too...


Trapper John

[Bill S.]

Originally Posted by wabower

Not uncommon for brokers who know their listing agreements may expire prior to the time the airplane is sold. They don't want to provide potential buyers with information that would allow them to make direct contact with the owner. Their position is that they incurred the expense of running the ad and will not be reimbursed by commission earnings unless it sells.

There are ways to protect one's self against that as a broker.

Many real estate agents have used the same trick for a couple of reasons:

1) to force the prospective buyer to call and build a "relationship" - and hopefully upsell them to something more expensive,
2) to justify the fees by leading the "great unwashed" buyer through the process, and
3) to prevent the prospective buyer from doing due-diligence prior to presenting the property, meaning that the broker controls more of the information flow.

It's all about "sell" and "upsell", and about forcing the buyer to make more of a commitment to the deal.

yeah, there are risks, but it's part of the job.

Fortunately, the internet has made a difference in information flow and the ability of brokers to pull off some of these stunts.

Originally Posted by smigaldi

BT and fraud. Wow color me surprised. NOT!

Now if we can get a few of the other charlatans....

[TangoWhiskey]

Question for the business lawyers: When does soliciting business investments / operating capital from private investors cross the line to "offering securities"? If I solicit and obtain venture capital, or investments from friends and relatives, is that illegal? Or is it the scope of what BT did, the "holding out" (in aviation parlance) in TAP advertisements, that crossed a line?

[TangoWhiskey]

The documents describe paying off one investor's principal using the funds from new incoming investors... can you spell p - o - n - z - i ?

[Harley Reich]

Put him in to room with Bernie so they can compare notes.

HR

[Wayne]

Certain exemptions are available, depending on whether you're making a private or a public offering. If you advertise publicly (as Thomas did with his trade-a-plane ads) you obviously face more scrutiny and must jump through more hoops.

If you only sell privately and only to "accredited" investors (generally defined as financially sohpisticated folks with tangible net worth--excluding their home--in excess of a mil, high income, etc you can have offer to as many as you want, and admit quite a few. There are also exemptions if you don't get compensated for the sale, don't publicly advertise for investors, blah.

By definition, almost any activity for which you provide common management to a group of others who provide the money involves the sale of a security, and the term is almosta s broad as some FAR's. Beaver pelts, for example, have been deemed a security by the regulators.

My "real" career in investment banking and syndication was mostly with privately offered securities. The rules are somewhat tricky. Most people simply don't know what they need to know.

Originally Posted by TangoWhiskey

Question for the business lawyers: When does soliciting business investments / operating capital from private investors cross the line to "offering securities"? If I solicit and obtain venture capital, or investments from friends and relatives, is that illegal? Or is it the scope of what BT did, the "holding out" (in aviation parlance) in TAP advertisements, that crossed a line?

[TangoWhiskey]

Originally Posted by wabower

The rules are somewhat tricky. Most people simply don't know what they need to know.

And that's why there are attorneys to advise us... of course, that presumes you're trying to play by the rules. ;-)

I think reading this one paragraph from his offering, which labeled only one risk to the investment and was laden with grammatical errors, and the use of the word "part" instead of "par", would have been sufficient to raise flags in my mind. If this doesn't scream "I wrote this myself without the help of an attorney", nothing does.

Risk: The risk in this deal is a cataclysmic world event that completely stops aircraft sales and exhausts our ability to make interest payments (or sell the airplane) until the panic subsides and the market returns to normal. Our feeling is that, in such a disaster, most all other business situations will experience the same business interruption, so the risk in our deal is probably on part with most other business.

[Wayne]

Even a simple private placement offering memorandum can easily be 50-60 pages. I usually start by reading the first page of the proposed business plan, then the sections on risk factors and management compensation. If those make any sense, I might read more.

Originally Posted by TangoWhiskey

And that's why there are attorneys to advise us... of course, that presumes you're trying to play by the rules. ;-)

I think reading this one paragraph from his offering, which labeled only one risk to the investment and was laden with grammatical errors, and the use of the word "part" instead of "par", would have been sufficient to raise flags in my mind. If this doesn't scream "I wrote this myself without the help of an attorney", nothing does.

[murphey]

Originally Posted by nyoung

I've never personally engaged with BT, but always thought his practice of redacting N-numbers from both the text and .jpgs in his advertisements was strange... it did not leave me with a good impression.

BT did not always have the contract to sell an airplane he was advertising.

I did attempt to purchase an airplane from him once. At the time, my father (a retired used car salesman) lived in Phoenix and was negotiating for me. Dad called me one afternoon and told me to stay far away from BT. Dad called to set up an appointment to see the airplane. BT responded that he'd just sent the plane out for a new paint job.

Now, both in the airplane biz and the car biz, the only reason you'd paint the vehicle before letting someone see it was due to damage. Or worse.

The cockles of my heart are warming...BT deserves being tossed in the county lockup (Sheriff A, have fun!) with a couple guys from the deep south named Bubba.....

[Tim Winters]

Originally Posted by smigaldi

BT and fraud. Wow color me surprised.

The N8194W Airplane is comprised of a separated, dented fuselage with faded paint, no wings, no landing gear and includes other defects

I really love that part. Other defects? Like the ones listed aren't enough?

[John Baker]

Originally Posted by SCCutler

Oh my.

And I thought he was just a dick because he would not return my calls when I wanted to buy an airplane from him.

Small favors ... thank you, Lord!

That exact same thing happened to me. Then he sends me cards wanting to buy my airplane. I called him about it, in essence saying why should I sell him my plane when he refused to sell me one. He said "I simply did not work hard enough, in my efforts to buy from him." I could not believe he was saying that to me. I told him to take me off his mailing list, never happened, I still get the cards.

John

[Bill Burkett]

Originally Posted by John Baker

I told him to take me off his mailing list, never happened, I still get the cards.

LOL, I guess you'll know when he goes to the can after the return address changes to, "Federal Bureau of Prisons".


Trapper John

[denny]

*My "real" career in investment banking and syndication*

My real career from puberty on has been deflowering virgins, drinking beer with various young ladies in the back seat of a 51 Ford (with fogged windows), working on my tan and looking studly...
Unfortunately, it didn't pay enough and I was forced to get an education and take a job (bummer)...
OTOH, I should have gone to Hollywood, taken a job wiping tables and been discovered so I could have been a Shawn Penn, etc. making 10-20 mil a flick., banging Pretty Woman, jumping on couches, etc...
Damn, the regrets I have...

denny-o

[TangoWhiskey]

Originally Posted by Trapper John

LOL, I guess you'll know when he goes to the can after the return address changes to, "Federal Bureau of Prisons".


Trapper John

From what I read of the complaint documents linked at the top of this thread, they weren't pursuing prison time; just "cease and desist" and "make good on the investments already made".

[Bill Burkett]

Originally Posted by TangoWhiskey

From what I read of the complaint documents linked at the top of this thread, they weren't pursuing prison time; just "cease and desist" and "make good on the investments already made".

That's because it's a state Securities Commission complaint. Start reading around page 14, and it doesn't take much imagination to see a prosecutor investigating and eventually filing fraud charges.


Trapper John

[Mooney E]

If you will check out the ads that Barron Thomas has right now (Feb 2010) he has a 1963 Mooney "C" for $28500. The first time I called he answered me right back and said that he had a deposit on it from a buyer and would keep me posted on what transpired. Two weeks later I called him to see what the tail number of the plane was. No response. I called every day for a week. Finally he answered the phone and replied, "if you want to send a deposit I will show you the tail numbers when you arrive on site". What kind of idiot does he think people are anyway?