Investors were lured by brochures, radio interviews, and email invitations for dinners, where they could learn about “9% investment return opportunities” with North Forty Development and Texas First Financial. Instead, hundreds saw their money allegedly spent on anything but real estate development.
The president of Frisco-based Christian Homes, Phillip Michael Carter, and his wife, Shelley Noel Carter, were indicted Tuesday on assorted state fraud charges stemming from alleged misuse of investor funds meant to go to real estate development ventures, the Texas State Securities Board announced Wednesday.
Phillip Carter was also indicted last week in Collin County Court on charges stemming from the sale of fraudulent promissory notes, along with Richard Gregory Tilford of Arlington, who is alleged to have raised $6 million from investors.
Carter’s wife, Shelley, was charged with money laundering and misapplying investor funds.
The indictment against Carter alleges that he raised nearly $17.5 million from nearly 100 investors, primarily elderly Texans, for real estate development projects through Texas Cash Cow Investments Inc. and North Forty Development LLC.
“Carter and Tilford told investors their money would be used to develop commercial and residential properties,” the TSSB said.
But instead of using those funds for revenue-generating investments, Carter used them for things like paying personal expenses and paying off a personal Internal Revenue Service tax lien.
What drove the developer to allegedly defraud hundreds of investors? The indictment posits that he was short of cash for his projects, which often included luxury homebuilding projects (full disclosure, we wrote about one such project last year).
Those money woes, at least by the paper trail procured by the state, began at least by December 2016, where Carter wrote a $6 million check to pay for labor and materials for projects, but the check bounced.
In October, Carter procured $32 million in funding from a Seattle-based private equity firm for ongoing construction costs for two properties. As part of that agreement, the firm has the first lien, which means other investors were put at risk of not recouping their investment if Carter defaulted on that loan.
But Carter’s investors, the state alleges, knew none of this. Nor did they know that in 2016, one of his sales agents — Bobby Eugene Guess — had been served with a target letter from the U.S. Attorney’s Office informing him that he was under investigation for mail fraud, money laundering, and securities fraud.
Guess was sentenced to 12 years in state prison in July. McKinney pastor Timothy Booth was sentenced to 68 years in state prison that month for taking almost $23 million from investors recruited by Guess.
Carter also neglected to mention to investors, the state said, that he had also gotten a target letter, and that a search warrant on Guess’s company, Texas First Financial, was executed in August 2016.
That same month, the state filed an emergency cease and desist order against Guess and Texas First Financial, ordering them to halt sales of the North Forty investment program.
Not only did Carter and Tilford not tell current investors about those actions, the indictment alleged, but they also continued to raise millions of dollars after them.
Additionally, Carter allegedly falsely claimed to investors to have a chemical engineering degree from the University of Virginia, and also said he had been a project engineer for Texas Instruments. He also claimed to have worked with “Rich Dad, Poor Dad” author Robert Kiyosaki.
Federal, state and local officials continue to investigate.
We will have more on the case as we continue our investigation as well. Did you purchase a home from Christian Homes? Were you a subcontractor? Are you an investor with North Forty? Did you attend any of the North Forty or Texas First Financial meetings? Email firstname.lastname@example.org. Responses can be kept confidential.