Bad stock tip cost Sauk investors $1.3M

By Brian D. Bridgeford, Capital Newspapers

BARABOO — A former Baraboo investment adviser faces a possible 12-year prison term after being charged last week with making false statements that authorities say led to $1.3 million in losses for local residents who bought fraudulent stocks.

Royce J. Raymond, 44, appeared in court Friday to face charges for statements authorities say he made to investors in February and March 2005.

During that period, Raymond was promoting investments in Reno, Nev.-based Tri Energy Inc., according to court records. He failed to tell his clients the stock was not registered for sale in Wisconsin, and Washington state authorities had ordered brokers to stop selling it in their state.

Raymond also made promises to some clients that he would protect them from losses when his own home was being foreclosed on, and Wisconsin authorities filed legal action against him for failure to pay nearly $14,000 in taxes, the records show.

Raymond settled the tax case by paying what he owned, records show.

In a one-page document sent to prospective investors, Raymond stated he had studied the stock in detail and promised they would make at least 20 percent on their money, and possibility as much as 120 percent in a "relatively short time."

In May 2005, the federal Securities and Exchange Commission won a court order freezing the assets of Tri Energy Inc. and described the company as a fraud. Profits were supposedly going to be generated by helping a Saudi Arabian prince move gold from Israel to the United Arab Emirates. Instead, investors who received money were simply getting part of the funds paid in by new investors drawn into the scheme, the SEC reported.

Nationwide, hundreds of investors lost $12 million.

Raymond was working from an office in downtown Baraboo as a representative of Securities Service Network Inc. FBI investigators filed reports that claim his actions promoting Tri Energy Inc. were done without the permission of his employer, and he instructed investors to wire money directly from their banks to the Tri Energy Inc.

In April 2007, a Sauk County Sheriff's Department detective spoke to Raymond. At that time, Raymond said the only investigation he did of Tri Energy was to look at the firm's Web site, according to court records. He did not check to see if it was registered with the state or take other steps to ensure it was a legitimate stock, the report shows.

In a phone conversation Tuesday evening from his home, Raymond insisted he did not intend to defraud his clients. Between 2000 and 2005, investments in the stock market produced very poor results, and he said his judgment was distorted by his desire to find investments that would be successful for his clients.

He said he talked with the owners of the company and they claimed to own rights to low-sulfur coal that could potentially be very profitable at a time when gas prices were rising.

"It turned out to be a terrible loss for everyone involved," he said. "I checked it out and thought it was legitimate."

Raymond said he has gotten out of the investment business and is studying to be a nurse.

Authorities spoke with Sauk County residents who say they wired money to Tri Energy based on Raymond's advice. About 15 people lost a total of about $1.3 million, investigators say.

After his hearing Friday, Raymond is free on a $10,000 signature bond. He is due back in court June 3. If convicted, each counts carries a maximum penalty of a $10,000 fine and up to six years in prison.