A Hendersonville businessman with a history of allegedly shady investment schemes has been indicted by a federal grand jury on charges of wire fraud for his alleged part in a fractional-ownership yacht company, the U.S. Attorney’s Office said Thursday.
According to the federal indictment, Alton S. Minton, 44, along with two other individuals only referred to in court documents as “Person A” and “Person B,” set up a company in May 2004 — YachtOne Holdings LLC — that would allow investors to have a fractional ownership in yachts, much like a time share.
But unlike a time share, a fractional-ownership purchaser actually buys part of the asset itself, not just the right to use the asset. A yacht was later purchased, and Minton began working for the company.
The Hendersonville businessman's “principal role” in the venture “was to market the company and to obtain clients to purchase fractional-ownership interests in the yacht.” But according to federal authorities, Minton's plan was to devise a scheme and defraud his business partners.
Between June 2004 and January 2005, Minton allegedly began shopping for investors in person and via wire and mail, representing himself not as an employee of the legitimate YachtOne Holdings but entities called YachtOne Inc. and YachtOne. Neither of these companies existed, according to authorities.
In his pitch to potential investors, Minton allegedly asked backers for capital for operating expenses and for the purchase of yachts. He also allegedly told investors they would “receive stock or ownership shares in the company.”
But in reality, YachtOne Holdings LLC was set up as a limited liability corporation and was “not a stock-issuing company.” Minton also told backers their investments were “guaranteed” and issued promissory notes requiring repayment in stock or money by a certain date, the indictment says.
Minton allegedly set up separate bank accounts in the fake companies’ names and pocketed the money from investors, the indictment says. These funds — as much as $960,000 — then went to cover his “living expenses, past personal debts, and other purposes.” All this took place without the knowledge of Person A or B.
As the fraud developed, Minton also told some investors that YachtOne Inc. was going to be acquired by one or more successor companies, including Innovate Inc., Lakeside Financial Inc., or Federated Purchaser and that investors would still be repaid in currency, stock or both.
Ultimately, the company was not successful and failed to sell any legitimate fractional-ownership shares in the yacht or to make any profit.
This is not Minton's first involvement with a fractional-ownership enterprise. In 2002, he founded FractionAir, a company that sold similar ownership shares in private jets; the business eventually counted Tennessee Titans coach Jeff Fisher, former Titans player Eddie George and former Vice President Al Gore as investors. Former U.S. Congressman Bob Clement sat on the company's board in the mid 2000s.
But the financial skies were never clear for FractionAir. Minton was ousted from the company in 2004 by William P. Danielczyk, chairman of the Galen Capital Group, the controlling interest in the venture. In 2006, the company was on the verge of bankruptcy when accusations arose against the original leadership. In a July 2006 letter to creditors, Galen's attorney Robert Kargen stated “the original management of FractionAir caused problems in selling fractional interests in aircraft that were not owned by the company, but were leased.”
With the company's future in uncertainty, Clement's involvement with FractionAir came up during his 2007 mayoral bid. At that time, the candidate's campaign chairman, Nashville lawyer Larry Woods, told www.nashvillePost.com irregularities arose during Minton's tenure at the company and that the executive “had been engaged in business practices that he should not have been engaged in.”
“Based on that information, Bob and the majority of the board voted to replace Mr. Minton,” Woods said at the time.
“As this indictment demonstrates, white-collar fraud cases come in many shapes and sizes. Regardless of the type of fraud, the common denominator is always a victim who lost money because of another person’s lies,” said U.S. Attorney Ed Yarbrough. “The U.S. Attorney’s Office and its law enforcement partners will continue to investigate and prosecute those who victimize the investing public and other innocent victims.”
If convicted on the federal mail fraud charge, Minton could face up to 20 years in prison.