Creditors: Jack E. Brown family aided in Ponzi scheme

Creditors: Jack E. Brown family aided in Ponzi scheme

January 9th, 2013 by Ellis Smith in Local Regional News

WHAT'S NEXT

The next creditors meeting will be Jan. 29 at U.S. Bankruptcy Court in Chattanooga.

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

Jack E. Brown's alleged Ponzi scheme was a family affair that included his wife and son among the conspirators, victims said Tuesday at a bankruptcy hearing.

At the largest-ever creditors' meeting in U.S. Bankruptcy Court for the Eastern District of Tennessee, a throng of 50 victims called for the Browns to be jailed and their assets seized.

"They filled out the paperwork and Jack signed it," said John Fuller, who lost more than $1 million. "They should all be in jail."

That was perhaps the kindest sentiment expressed by Brown's victims, many of whom recounted that Brown would often end his conversations by reminding his victims, "I love you."

"I'd go to hang the phone up and he'd say, 'You remember that I love you guys, anything I can do for you, you let me know.'" said victim Karen Berman. "That's a psychopath."

Shelby Barnes, whose husband is disabled, argued that Brown's immediate family not only helped run the business, but has enjoyed the material benefits of it. She says the Browns owe her $47,000.

"That woman of his has got rings on every finger, and he had a watch and a ring on his finger that would kill a horse," Barnes said.

But Thomas Ray, a bankruptcy attorney representing Jack E. Brown, said the money is gone, and that there are no hidden caches of money lying about.

"The remainder of the assets that Mr. Brown has, virtually all of it is subject to liens by banks," Ray said. "The funds are all spent."

Brown suffered severe heart palpitations at the exact moment the creditors' meeting was scheduled to start, and was unable to participate in the hearing. In any case, Brown has promised to invoke his Fifth Amendment right not to incriminate himself, so the hearing was merely a formality, said bankruptcy trustee Jerry Farinash.

"It makes it difficult when we have someone who's not cooperating," he told the crowd later.

Brown promised yearly returns of up to 24 percent to their "investors" -- a near-impossibility in any financial market, according to the Better Business Bureau.

Victims range from well-known pastors and evangelists to business owners and laborers, who together have lost more than $10 million. Including bank notes, the Browns owe more than $12 million, but have reported assets of just $1.4 million.

Victims claim that the former tax preparer's wife, Janet Brown, and son, Jason Brown, ran the business over the last three years while Jack E. Brown was in and out of the hospital. Brown is ill with a number of ailments that are degenerating into heart failure, his doctor has said.

"This was a family Ponzi scheme," said Jeff Eblen, who has dealt with Brown's Tax Service since 1993.

Jerry Summers, who represents Jason Brown, said his client was "caught up in a very unfortunate situation," and is "trying to cooperate as best as we can to help the trustee."

"As far as the extent of Jason's involvement in this matter, I respectfully ask that they adhere to the old Paul Harvey adage that there's always another side to the story," he said.

Yet more than six weeks after Brown's Tax Service closed its doors, the Browns are still shielded behind the Fifth Amendment, Farinash said, living on the family estate while the scheme's victims fall further into financial ruin.

Felix Laffew, a 75-year-old retiree, came to Tuesday's bankruptcy hearing with a $49,430 promissory note bearing the signature of Jason Brown.

"I draw a Social Security check every month, but it doesn't cover my mortgage," Laffew said. "I've got some job applications out, but I haven't heard anything back yet. Most people aren't looking to hire an old man."

Federal law enforcement officials have yet to publicly file charges in the case, and officials won't say whether an investigation is under way.

"It is the policy of the U.S. attorney's office to neither comment on, nor confirm or deny the existence or status of a pending investigation," said Sharry Dedman-Beard, law enforcement coordinator and public information officer for the U.S. attorney's office in the Eastern District of Tennessee.

William Sonnenburg, assistant U.S. Trustee for the Eastern District of Tennessee, worked to calm the restive crowd Tuesday in response to questions about the apparent lack of prosecutorial progress in what most call a Ponzi scheme.

"If the U.S. attorney wants to do something in any case, or if the FBI wants to do something in any case, they don't put an ad in the paper saying they're about to do it," he said.

But while law enforcement officials may or may not be at work behind the scenes, victims like Barnes feel their money is getting farther and farther away.

"I asked [Jack E. Brown] what happens if something happens to you, what happens to our money?" Barnes said. "He said you don't have to worry about that, Jason knows everything."