Attorney General Mark Brnovich announced that a State Grand Jury indicted Idaho resident Bradley Heinrichs with four counts of Fraudulent Schemes and Artifices, and one count each of Illegal Control of an Enterprise, Theft, and Conspiracy, for allegedly operating a real estate investment racketeering enterprise with Stephen J. Hatch between January 2005 and December 2014.
According to the indictment, Heinrichs solicited over $82,000,000 from investors as part of a complex real estate investment enterprise that included numerous commercial land holdings. While managing the real estate portfolio, Heinrichs is purported to have committed various racketeering acts, including theft, a scheme or artifice to defraud, money laundering, and the intentional or reckless sale of unregistered securities or real property securities.
As part of the racketeering acts, the indictment alleges that Heinrichs:
- Overleveraged property without disclosing the details to investors;
- Used new investor money to pay off loans held by existing investors;
- Transferred investor money between different enterprises without authorization;
- Misled investors about the value of their investments and the likelihood they would be repaid when they inquired about overdue notes; and
- Used religious affinity to secure loans and distract or dispel investor concerns.
To obtain investments, Heinrichs’ enterprises allegedly issued promissory notes to investors. Those notes were supposedly not secured, and not all issued notes were subject to an exception from registration. The indictment alleges that most investors believed their investments were secured by deeds of trust, either in the actual land or in the companies that owned the land, but because the projects were vastly overleveraged, the investors’ security interests were illusory.
Then, Heinrichs is alleged to have deceptively placated investors’ inquiries about projects or missed payments. Specifically, the indictment purports that Heinrichs regularly sent investors an “Investment Summary” that showed ever-increasing interest earnings with no warnings that there was insufficient money to pay out those earnings. Heinrichs then supposedly relied on religious affinity to solicit investments, gain trust, and assure investors that they would make money.
Assistant Attorney General Nick Klingerman is prosecuting this case. It was investigated by the Arizona Attorney General’s Office Special Investigations Section.
Heinrichs’ co-defendant Stephen J. Hatch previously pleaded guilty to one count of Fraudulent Schemes and Artifices in Maricopa County Superior Court CR 2017-005444-001. He was sentenced to five years imprisonment and ordered to pay $1,000,000 in restitution.
All defendants are presumed innocent until convicted in a court of law.
Copy of indictment here.