The Fraudfather

Abstract

According to court documents, Rand failed to drill nine of the 13 wells that he touted to investors and instead used their money to buy a house, a $368,000 speedboat, numerous pieces of jewelry and $70,000 worth of firearms. Tony Rand is sentenced in Pulaski County Circuit Court to three years of probation on a felony charge related to the hot checks and ordered to pay restitution of $3,303. * March 1991: A Little Rock grand jury indicts Rand on 26 counts of fraud and money laundering in a $17 million scheme to deceive lenders and suppliers.

Twenty years ago, W.A. "Tony" Rand was convicted in Little Rock federal court of defrauding lenders who bought into his aspirations of building a 400-screen movie theater chain.

The North Little Rock businessman churned $17 million through his Rand Theatres operation to feed his family's taste for the good life - crimes described as the largest fraud committed by an individual convicted in the Eastern District Court of Arkansas.

A nearly seven-year stretch in prison apparently served only to inspire a vastly larger interstate scheme from Texas. This gambit involved Rand, now 70, and his five sons swindling hundreds of oil and gas investors of more than $110 million. Some suspect their schemes at times resembled a plot line in a zany 1968 movie "The Producers."

The family members, some of whom were estranged, operated several sophisticated scams to rake in the necessary cash to enjoy the trappings of multimillion-dollar success.

Investors from all over unwittingly supported the Rands in lavish style.

Rand and his youngest sons, Mark, Greg and Bill, accomplished their fraud through Aspen Exploration Inc. of Plano, Texas.

While it's hard to pinpoint the exact date the criminal enterprise began, the indictment of Tony, Greg, Mark and Bill handed down in May 2009 indicates that it was in full swing by December 2005.

Mark Rand, 45, who will be sentenced on Aug. 31, signed a plea agreement a year ago admitting to three counts of securities fraud. After Mark folded, so did the others.

In a January plea agreement with U.S. attorneys in Dallas, his father admitted guilt to one count each of conspiracy to commit mail fraud and one count of securities fraud, while brother Greg, 47, acknowledged one count of conspiracy to commit mail fraud and three counts of securities fraud, and Bill, the youngest brother at 41, copped to three counts of securities fraud.

Tony, Greg and Bill agreed to pay eye-popping restitution of $99.7 million and forfeit their ill-gotten treasure. Tony and Bill are scheduled to report to prison on Aug. 31; Greg's judgment did not include a specific date to report.

A sampling of their booty includes: Greg's 2006 Sunseeker Predator yacht with a 1,500-horse-power engine; Mark's 1967 Ferrari 275 GTB/4, classic guitars (two Gibson Les Pauls and Fender Stratocasters from 1960 and 1965), art (including a Picasso drawing), jewelry and fine wine; Tony's Jamali painting, 2005 Ferrari and 2007 Mercedes; and $850,000 from the sale of Bill's lake house on Eden Isle in Heber Springs.

Big Brothers

The eldest Rand brothers, Wayne, 49, and Jeff, 48, ran separate oil and gas scams that led to their own judicial reckoning this year as well.

Wayne Rand, president of Rockwall Oil Co. (aka Black Lake Energy Inc.), was sentenced in January to 20 years in Texas state prison for conning investors out of $8 million.

According to court documents, Rand failed to drill nine of the 13 wells that he touted to investors and instead used their money to buy a house, a $368,000 speedboat, numerous pieces of jewelry and $70,000 worth of firearms.

Jeff Rand admitted defrauding investors as early as October 2001. His scam may have been the first to start, and it was the first to unravel after a dogged investigation by Arkansas Securities Department attorney Ted Holder led to a cease-and-desist order in December 2006.

After that order, a lawyer for Aspen Exploration told Arkansas Business that Jeff's business and that of Tony, Greg, Mark and Bill were completely separate. "They are estranged brothers for the most part," attorney Cheryl Moore said.

Jeff, president of Wave Energy Corp. of Houston, pleaded guilty on June 28 to one count of mail fraud for bilking investors of between $2.5 million and $7.5 million in a scam that started when he and Wave were domiciled in Hot Springs.

His victims included at least two Arkansans: Todd Hickingbotham and Phillip Tappan, both of Little Rock.

Hickingbotham has never commented publicly on the Rand case. Tappan told Arkansas Business that he agreed to invest $80,000 with his old college friend in 2004.

"It's so easy to see how he's been so successful at getting people to give him money," Tappan said last week. "He has a great personality and is larger than life when it comes to oratory skills."

In 2003 alone, according to the ASD order, Jeff Rand raised close to $2 million from investors: "Approximately $675,000 of it went to pay for Rand's acquisition of a duck hunting club, and the rest went to pay for Rand's horse racing and breeding operation, Wave's business expenses and other miscellaneous Rand personal expenses."

Jeff was indicted by a federal grand jury in Hot Springs in March 2008, but the indictment was kept sealed for two more years. And another 15 months passed before Jeff, now living in Washington state, pleaded guilty in Fort Smith.

Jeff's sentencing hearing has not yet been scheduled.

A Family Tradition

Little Rock architect Gary Dean, whose children went through school with the Rand boys, was stunned to learn of the family's fraud schemes in Texas.

"When you see all these kids growing up and all this happens," Dean said. "Golly, it's such a tragedy."

The ability to attract collection suits is a family trait passed down to the sons even before their criminal charges. Tony Rand's litigious magnetism was displayed 20 years ago when his movie theater business was falling apart.

Back then, Rand was asked why his companies were involved in so many lawsuits. "They are insignificant as far as my total picture is concerned and insignificant as far as the effect on our welfare and our expansion plans," he told Arkansas Business in 1989.

"You step on toes, make mistakes, have some controversy. Who doesn't, particularly in dealing in Texas real estate?"

Edmund Pankau, a Houston private investigator, had a different impression.

"From our initial investigation and what I have seen since that time, it appears his business is a house of cards," Pankau said nearly 22 years ago. "And it's all caving in."

Three months later, Pankau offered an even harsher assessment of Rand: "There's so many Tony Rands out there, but people don't want to believe they've been taken, too. I call this type of person a world-class con man."

"Even when he was in his heyday, he was a slow pay," said Bob Laman, a former general contractor who dealt with Rand back in the day.

That was evident back in the 1970s, when he was evicted from his office space in the Lakewood House in North Little Rock for failure to pay his rent.

But when Arkansas Business asked about his suspect reputation for handling money in a 1989 interview, Rand said, "I think we're good money managers. I don't recall ever not paying a debt in 21 years."

'The Darndest Things'

A bad memory when it comes to repaying investors is another Rand family characteristic.

William Pierre of Muskegon, Mich., was an elderly investor who lived to see the Rands answer for their crimes. He relentlessly sought justice from politicians and law enforcement agencies from Texas to Washington, D.C.

He believed the Rands trumped up expenses on dry holes and withheld money on producing wells.

John Hays, the 69-year-old publisher of the Morning Paper in Ruston, La., believes part of the Rands' game was "dry holing," overselling shares in a well that isn't expected to produce any oil or gas. It's a scheme eerily similar to that of "The Producers" in the classic Mel Brooks comedy.

"The last thing they want to do is hit something," Hays said. "If you sell more than 100 percent, you don't want to actually hit a well because then you have to pay the investors."

Like "The Producers," oilfield scammers like the Rands often prey on elderly investors, whose memory can be suspect, whose pride might prevent them from complaining and whose mortality might eliminate them. (One of Jeff's investors was television personality Art Linkletter, who bragged about his "oil drilling partner" during a 2002 appearance on "Larry King Live," a few days after his 90th birthday. Linkletter died in May 2010.)

"If you stall long enough, they go to the nursing home or die," Hays said.

Pierre and other surviving Rand investors can at least take satisfaction that the Rands are going to prison. That's another family tradition.

SINCE THEN ...

2014: Jeffrey Scott Rand was sentenced on Aug. 27, 2012, to 57 months in federal prison and ordered to pay $7.92 million in restitution to 138 victims of his oil and gas scam. He is in federal prison at Sheridan, Ore. His scheduled release date is Oct. 13, 2016.

Gregory Keith Rand is in federal prison at Oakdale, La. His scheduled release date is Dec. 11, 2026.

William Nicholas Rand also is in federal prison at Oakdale, La. His scheduled release date is Jan. 6, 2024.

Wayne Anthony Rand is in Texas state prison at Huntsville. His projected release date is Feb. 18, 2019.

Mark Albert Rand is in federal prison at Yazoo City, Miss., His scheduled release date is March 9, 2018.

Their Fraudfather, William Anthony "Tony" Rand, is in federal prison at Big Spring, Texas. His scheduled release date is June 14, 2016.

Cast of Characters

William Anthony Rand, 70

Past Role: President, Rand Theatres of Arkansas Inc.

* Sentenced to seven years in federal prison on Feb. 27, 1992, after his conviction for interstate transportation of money taken by bank fraud, fraud and money Laundering related to $17 million in financing to expand his theater chain.

Latest Role: Chief Financial Officer, Aspen Exploration Inc. of Plano, Texas.

* Sentenced on July 28 to 5 1/2 years in federal prison and ordered to pay $99.7 million in restitution after pleading guilty in January to securities fraud in U.S. District Court in Dallas.

Mark Albert Rand, 45

Chairman, Aspen Exploration

* Scheduled for sentencing on Aug. 31, 2011 after agreeing to plead guilty to securities fraud on Aug. 5, 2010.

Gregory Keith Rand, 47

Chief Executive Officer, Aspen Exploration

* Sentenced to 18 years in federal prison on July 28, 2011 and also liable for the $99.7 million in restitution after pleading guilty to securities fraud in January.

William Nicholas Rand, 41

President, Aspen Exploration

* Sentenced to 14 years in federal prison on July 28, 2011 and also liable for the $99.7 million in restitution after pleading guilty to securities fraud in January.

Wayne Anthony Rand, 49

President, Rockwall Oil Co.

* Sentenced to one year in Kansas state prison for securities fraud and ordered to pay restitution of $88,000 to two victims on Feb. 9, 2010. The sentence from Clay County District Court was suspended to two years of probation.

* Sentenced to 20 years in Texas state prison on Jan. 24, 2011, after pleading guilty in District Court in Rockwall to felony theft of more than $200,000.

Jeffrey Scott Rand, 48

President, Wave Energy Corp.

* Awaits sentencing after pleading guilty on June 28, 2011 to one count of mail fraud with stipulated damages of between $2.5 million and $7.5 million in U.S. District Court in Fort Smith.

Tony Rand's First Fraud

* January 1986: In a case he ultimately loses, Tony Rand is sued for not paying minimum wages to 36 Rand Theatres employees since May 14, 1982.

* February 1989: Ten major film distribution companies sue Rand Theatres, claiming Rand shortchanged them on their share of ticket sales.

* March 1989: As part of a shareholder battle for control of North Little Rock's National Bank of Arkansas, financial investigator Edmund Pankau reveals that Rand and his businesses are named in 57 lawsuits plus tax liens totaling $60,000. Rand, who held an 18 percent stake in NBA's holding company, says the litigation and liens result from the normal course of doing business.

* June 1989: Jeff Rand, 25-year-old executive vice president and director of real estate for Rand Theatres, reports the company's expansion plan is working perfectly. At the time, Rand Theatres has 126 screens in operation in Arkansas, Texas and Tennessee. The Rands announce plans for a $200 million expansion that will boost the chain to 400 screens.

* September 1989: Reports of Rand employees receiving late paychecks on bank accounts with insufficient funds draw media coverage. The payroll checks are drawn on an account at National Bank of Arkansas, where Rand is a shareholder and director. Rand attributes the bookkeeping problems to a new payroll clerk. By the end of the month, he is gone as a shareholder after selling his stock to Bob Osborne, who also takes his place as a director at the bank.

* December 1989: Rand Theatres is out of business and covered in a string of lawsuits and judgments by unpaid creditors and allegations of fraud. The Arkansas Department of Finance & Administration padlocks Rand's office for failing to pay $390,000 in delinquent sales taxes collected between 1979 and 1986.

* January 1990: Barbara/Jean Ltd. sues Rand's wife, Mary Ann, to collect $18,666 for shoes, jewelry, belts and accessories bought on credit. A $401,929 judgment from federal court in Nebraska is entered in Pulaski County Circuit Court. The award is held by Ballantyne of Omaha Inc., a movie theater equipment firm. Rand battles another supplier, Cargill Leasing Corp. of Minnetonka, Minn., over access to his personal and corporate bank records in its federal fraud case that ended in April 1991 with a $900,000 judgment against Rand.

* June 1990. Tony Rand is arrested for passing hot checks at two Maumelle grocery stores.

* August 1990: Tony and Mary Ann Rand are found in contempt of court and sent to jail by Pulaski County Circuit Judge Robin Mays for disregarding Mays' order that the couple and their 24-year-old son, Mark, deposit $93,727 into the court registry in June. Bank records indicate the Rands, with the help of some of their six children, tried to hide proceeds from the $165,000 sale of the family's second home at Eden Isle in Cleburne County.

Tony Rand, sporting a gold-plated Mickey Mouse watch, testifies that some of the money was-paid to former employees, including his son, Jeff, then 27. Mary Ann Rand claims she can't remember what happened to the rest of the money. "They are not believable witnesses," Mays says.

On the second day of the contempt hearing, Mary Ann Rand remembers spending $1,800 to throw her parents a 50th wedding anniversary party, giving her eldest son, 28-year-old Wayne, $2,000 for living expenses and spending an unspecified sum on living expenses.

Tony Rand testifies that most of the money was spent to hire a criminal lawyer to defend him from whatever charges might arise from an alleged federal investigation. Other money was spent on college tuition for their only daughter, Antoinette. After two nights in jail, the Rands come up with enough money to gain their release, the same day the Arkansas Supreme Court refuses to order their release.

* December 1990: Tony Rand is sentenced in Pulaski County Circuit Court to three years of probation on a felony charge related

to the hot checks and ordered to pay restitution of $3,303.

* March 1991: A Little Rock grand jury indicts Rand on 26 counts of fraud and money laundering in a $17 million scheme to deceive lenders and suppliers. The indictment outlines his use of false financial statements, false tax returns and false collateral to obtain funds from seven equipment-leasing companies, a bank, a credit union and two savings and loans. The scheme is facilitated by his undisclosed ownership and control of Mid-Ark Theatre Supply Co.

* August 1991: After a weeklong trial and four hours of jury deliberation, Tony Rand is convicted on all charges: 13 counts of interstate transportation of money taken by fraud, nine counts of money laundering and four counts of bank fraud.

Rand shows no emotion as the verdict is pronounced in contrast to his sobbing family members. Rand takes the stand in his own defense and also addresses the jury during closing arguments. He blames others for the financial problems that destroyed the business his family began in 1974 and asks jurors for another chance. "We have lost everything," Rand says. "I mean everything we have worked so hard to accumulate. However, we have not lost our courage, and we have not lost our faith in God, and we have not lost our faith in this country."

"Stealing is stealing," says federal prosecutor Sandra Cherry. "Federal law and the Ten Commandments don't make a distinction."

* February 1992: Rand is sentenced to seven years in federal prison. After serving his time, he moves to Texas to start a new life with his family and a new career in the oil and gas business.

Sources: Arkansas Business, Arkansas Gazette