published Monday, September 2nd, 2013

Soddy-Daisy Ponzi schemer Jack Brown dies

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Jack Brown, the Soddy-Daisy tax preparer who admitted taking friends' and neighbors' savings in a long-term, wide-ranging Ponzi scheme, died Friday with his tangled affairs still tied up in bankruptcy court.

Brown had been in ill health for months. In December, he missed a creditors' meeting in his bankruptcy case because of the health effects of diabetes, an embolic stroke and congestive heart failure, according to a doctor's note.

His financial affairs became public when more than 30 people filed police reports accusing Brown of losing money they had invested with him. Since then, his business was sold by order of U.S. Bankruptcy Court, and Bankruptcy Court Judge John Cook said Brown or his estate would remain liable for as much as $12 million in debts when the case wound up.

According to newspaper archives, Brown promised investors he could achieve returns as high as 15 percent on their money. He collected nearly $10 million by late 2012, but instead of investing it, he bought lakefront property, large homes and a pink four-wheeler for his daughter.

Creditors' attorney Rebecca Hicks wrote in a complaint filed in Bankruptcy Court that Brown "engaged in an elaborate scheme to cover up and conceal the true nature of his activities," and that Brown had "in fact been operating a Ponzi scheme which has now collapsed."

He admitted as much in March, talking from a hospital bed through a speaker phone to a crowd of creditors gathered in court.

As far back as 1989 he began taking money in the form of personal loans, cash and investments, he told creditors. He took the blame for the scheme on himself, saying his wife and son had nothing to do with it.

But Bankruptcy Trustee Jerry Farinash filed papers claiming his wife, Janet, and son, Jason, received hundreds of thousands of dollars in "bonuses," "salaries" and "housing allowances" through October 2012.

Brown's Tax Service closed in November and victims were left with nothing, according to court records.

The latest court action is an effort by the trustee and the bank to seize a driveway shared by the Brown family's two large houses overlooking U.S. Highway 27.

The two homes sit side by side. One has been seized. The other still is occupied by Jason Brown. In between, a Z-shaped piece of land has been claimed by Community National Bank. The trustee and the bank want to take away the single driveway serving all three properties from Jason Brown and his wife, Kimberly Brown.

"There is no other known right of way allowing Jason and Kimberly Brown access to their property," Farinash wrote in a complaint. "Their use of the property ... significantly devalues property of the estate."

Seizing the road would force Jason and Kimberly Brown to build a new driveway over the railroad tracks that cut their home off from U.S. 27, or through the forest and over the mountain behind them -- neither of which will be easy or cheap.

Community National Bank supported the motion that would allow the trustee to sue the Browns to take away their driveway, and Judge Cook granted the motion on Aug. 8.

Funeral services for Brown are set for Tuesday.

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