Tax Preparer, Son Plead Guilty to Defrauding Investors of $10 Million

An Orange County tax preparer and his son pleaded guilty Monday in U.S. District Court to charges they defrauded more than 400 investors of an estimated $10 million.

Leslie (Bill) Hawkey, Sr., 66, of Fullerton and Leslie (Biff) Hawkey Jr., 44, a lawyer in Gillette, Wyo., had been accused of mail fraud and other charges growing out of tax and investment schemes that authorities say bilked hundreds of Orange County investors who were clients of the senior Hawkey.

Monday’s pleas came two years after federal agents, armed with a search warrant, seized a truckload of books and records from Hawkey’s Anaheim storefront office and began re-creating thebusiness transactions.

According to federal authorities, the Hawkeys had established 155 limited partnerships through which the senior Hawkey’s clients were supposed to buy into a variety of investments, including a horror movie, a Utah shopping center, gold mines in San Bernardino and Kern counties, as well as a crop of Jerusalem artichokes that ended up being eaten by a herd of antelope in Wyoming, according to court records.

Earlier Clients Paid

Instead, the funds were taken by the Hawkeys for their own use and who then used money collected from later clients to pay off those who had invested earlier, according to Judy Hayes, a state deputy attorney general serving as a special assistant U.S. attorney in the case.

Several investors--including a Buena Park couple who lost their life savings of $342,000--attended Monday’s hearing.

“This man (Hawkey Sr.) had been a friend of mine for 17 years,” said an investor, who discussed the case last week. “You don’t know the devastation that happens when someone you trust robs you.”

The senior Hawkey faces a maximum sentence of 13 years in prison and $16,000 in fines for mail fraud, conspiracy, and aiding and abetting the preparation of a false tax return. His son could receive a 10-year sentence and $2,000 in fines for two mail fraud counts. U.S. District Judge Pamela A. Rymer set a July 20 sentencing date.

The Hawkeys not only defrauded the investors of their money but created serious state and federal income tax problems for them. The Internal Revenue Service is disallowing the tax deductions investors took for their various ventures, according to federal prosecutors.

“At the request of my father, I was retained to put together partnerships,” the younger Hawkey said in court. “I allowed funds to be commingled. . . . I at no time was involved in the solicitation or in no way, shape or form interacted with the investors.”

His father tried to explain away his role in the financial ruin of so many of his clients by telling the court Monday that he offered a variety of investments “that I thought were going to be economically sound. . . . Due to the economy in the U.S. and misjudgment on my part, they became unsound.

He told Judge Rymer that in an effort to gain his clients’ trust, he had advised them that the Hawkey Family Trust, which backed their investments, was worth $9 million and that he had sent out false financial statements. Authorities said it took investigators two years to untangle a web of bank records and to trace the funds. A state auditor spent nine months preparing a cash flow chart for the case, according to H. L. (Bookie) Almond, a veteran fraud investigator for the California Department of Justice.

The Buena Park couple who lost their life savings said that they were referred to Hawkey by a bank employee and that they decided to invest with him because he was a member of their church and they felt they could trust him.

“When we were hit with the realization that we were defrauded, there were endless sleepless nights and tears,” said the husband, who along with his wife, declined to be identified.

Able to Keep Home

He said he and his wife borrowed $95,000 against their home and gave it, along with their retirement funds, to Hawkey to invest. The husband said they have been able to keep their home, but their standard of living has dropped. His wife said they are so embarrassed that they have kept their plight a secret from everyone but their minister and out-of-state friends.

The investor who had described herself as a longtime friend of Hawkey said he put her $18,000 retirement fund in the artichoke-growing partnership. It was one of the larger financial disasters, according to court records.

The Hawkeys told investors that the artichokes would be used in macaroni products, but the plants failed to thrive in the Wyoming weather.