Fredric “Rick” Dryer, who was accused of scamming investors out of millions of dollars in a massive real estate fraud scheme, has been sentenced to prison for 132 years by a Denver, Colorado, district court judge.

The Sixty-year-old Dryer was convicted in July of 2008 on 43 felony counts including racketeering, securities fraud and theft. He was indicted in 2006 with two co-defendants–Richard Darrow and Jeffrey Dietz–for using his companies, Mile High Capital Group and Replacement Property Solutions, to cheat scores of investors out of their money.

In addition to the 132-year prison term, Dryer was ordered to pay $3,426,460.08 in restitution.

Denver Chief Deputy District Attorney Joe Morales and Deputy District Attorney Kandace Gerdes took Dryer to trial last summer. Morales argued for a lengthy prison term, asking the Court for justice on behalf of each victim. Dryer’s 132 year sentence ranks among the longest in Colorado for a white collar criminal.

Dryer’s co-defendants pleaded guilty earlier. Richard Darrow, age 43, pleaded guilty to violating the Colorado Organized Crime Control Act and was sentenced to a suspended 20-year prison term that requires 2 years in the Denver County Jail and 10 years of probation. He has also been ordered to pay $1,150,000 in restitution.

Jeffrey Dietz, age 39, pleaded guilty to securities fraud and was sentenced to 2 years of probation and ordered to pay $990,406 in restitution.

For more on this story, please read Bob Mook’s excellent article “Mile High Capital founder Dryer sentenced to 132 years” in the Denver Business Journal.

Updated: 9:05 P.M. ET, July 17, 2008

According to reports out of Denver, Colorado, Fredric “Rick” Dryer has been found guilty on 44 out of 60 felony counts in a securities fraud case involving Dryer’s former company, Mile High Capital Group, LLC. From Bob Mook at the well-respected Denver Business Journal:

Dryer– the self-described multimillionaire, real estate guru and founder of Mile High — was found guilty on counts of violations of the Colorado Organized Crime Control Act, conspiracy to commit securities fraud, securities fraud and theft. He was found not guilty of 14 counts of securities fraud and two counts of theft.

Dryer sat expressionless as the verdicts were read. He faces a maximum sentence of 24 years for each criminal count.

Dryer was convicted of 44 felony counts including violating the Colorado Organized Crime Control Act (racketeering), securities fraud, and theft. The jury found him not guilty on 15 additional counts.

Dryer and two co-defendants were indicted in 2006, accused of duping hundreds of investors who invested in his companies, Mile High Capital Group and Replacement Property Solutions. Denver’s Chief Deputy District Attorney Joe Morales and Deputy District Attorney Kandace Gerdes prosecuted the case, which spanned 12 days of testimony and three days of jury deliberations. According to Morales, after the jury was discharged, Dryer, who had been out on bond, was led from the courtroom in handcuffs to be held in custody pending sentencing on September 12, 2008 at 1:30 P.M Mountain Time in Denver District Courtroom 10.

Dryer now faces from between eight to 528 years in prison under the watchful eye of the Colorado Department of Corrections.

Dryer’s two co-defendants pleaded guilty earlier. Richard Darrow, 43, pleaded guilty to violating the Colorado Organized Crime Control Act and was sentenced to a suspended 20-year prison term that requires two years in the Denver County Jail and 10 years on probation. He was also ordered to pay $1,150,048.00 in restitution. Jeffrey Dietz, 38, pleaded guilty to securities fraud and was sentenced to two years probation and ordered to pay $990,406.00 in restitution.

In 2000, Rick Dryer launched Mile High Capital Group, LLC (MHCG)–a builder and developer of single-family homes, at the time specializing in mountain building. It was in late 2002, when Dryer was approached by out of state investment clubs looking for a reputable Colorado builder/developer, that the business model changed. Dryer didn’t think mountain properties were suitable for income property, so he began to research what would work.

Over the next two years, MHCG evolved into a builder of just such properties. Its reputation grew. Infinity Broadcasting sent its program directors to ask MHCG to sponsor its Rich Dad Poor Dad Real Estate Workshops, with Dryer as the main speaker with Robert Kiyosaki. Dryer’s research and experience evolved into what was to become his Right Place Right Time Real Estate Investment Strategies syllabus.

MHCG grew with Dryer’s reputation. The company planned to develop subdivisions around the country on the edges of high-growth areas where demand for rental properties was expected to be high. MHCG would then sell the rental properties to investors. The plan was to make it easy for real estate investors to purchase revenue-generating properties.

As far as real estate investment gurus go, Dryer had a track record and reputation that was good and getting better. Typical real estate investment gurus charge thousands of dollars for information that’s worth no more than about $50. They pitch risk-free, get-rich-quick schemes. They encourage people who are in no position to invest in real estate to become full-time investors. Most of these gurus are not successful real estate investors themselves–if they could make millions in real estate, they would not be spending their time pushing seminars.

Dryer was different. His Right Place Right Time Real Estate Investment Strategies were well known in the industry, and he had a solid public record of accurate predictions about emerging markets and trends. He became a popular and frequent speaker at Robert Kiyosaki’s Rich Dad Poor Dad real estate investor workshops around the country before starting his own workshops. He seemed to know his stuff and was said to careful remind people that investing in real estate carries risk. Dryer seemed like the real thing, and MHCG seemed like a legitimate company offering genuine real estate investment opportunities.

Through his seminars, Dryer promoted MHCG to attendees, and they were eager to buy these rental properties. The risk seemed negligible. After all, Dryer had a proven system in place for identifying areas where rental properties would soon be in high demand. His system was so successful, in fact, that many celebrities had bought into the program, including:

• Gary Eldred, PhD, author of Investing in Real Estate and professor of Trump University
• Richard Florida, PhD author of The Rise of the Creative Class and professor in the School of Public Policy at George Mason University
• Richard Karlgaard Publisher of Forbes magazine and author of Life 2.0
• Dan McCabe, Esq., CES of the Investment Exchange Group
• David Bach, New York Times and Wall Street Journal best-selling author of The Automatic Millionaire; Start Late, Finish Rich; and the entire Finish Rich series
• Mark Victor Hansen, New York Times and Wall Street Journal best-selling co-author of the Chicken Soup series

Having these big names involved added to Dryer’s and his company’s credibility, and the list of customers began to grow as investors spread the word to their friends and relatives of Dryer’s Right Place seminars. Money was pouring in. Under the direction of founder and CEO Rick Dryer, MHCG had risen from its humble beginnings to become a $150 million real estate business in just five years. According to court documents, MHCG had over a quarter billion dollars in sales by 2005.

Unfortunately, the product being sold was never delivered, and today Dryer was found guilty of committing some pretty serious real estate fraud-related acts.

Regular Flipping Frenzy readers may recall back around the end of last year and the beginning of this year when I posted several blog entries under the header of “Mile High Monday.” For background information or if you’re new to the blog or just forgot, click on any of the following links:

• December 10, 2007: Rocky Mountain Monday Continued — Said Differently: Mile High Monday
• December 17, 2007: Mile High Monday, Second Installment
• December 24, 2007: Mile High Monday, Fourth Installment: The Indictment
• December 31, 2007: Mile High Monday — the Fifth Installment: Introducing the Key Players
• January 7, 2008: Mile High Monday — the Sixth Installment: Introducing the Key Players
• June 2, 2008: Mile High Capital Group’s Richard Darrow Sentenced

Word today out of Colorado is that Dryer’s trial is nearly over. From Bob Mook at the Denver Business Journal:

Closing arguments in the criminal securities fraud trial of Mile High Capital Group founder Fredric “Rick “ Dryer were made Monday and the case sent to the jury.

Dryer, a flamboyant, self-described real estate “guru” who pitched investments in duplex projects at lavish sales promotions around the country, is charged with 60 felony counts — including violations of Colorado’s organized crime control act, securities fraud, conspiracy to commit securities fraud and theft.

Dryer pleaded “not guilty” to all charges. If convicted, he faces up to 24 years for each felony count.

Prosecutors alleged in a month-long trial that Mile High and its affiliated companies collected more than $44 million from about 1,200 investors from across the United States but completed just over 40 rental duplex units promised to investors between August 2003 and October 2005.

“It takes a lifetime for some people to make the kind of money he took. And that’s why we’re here,” Denver Deputy District Attorney Joe Morales said. “He knew he was a failure and he knew he was a convicted failure … but he took the money anyway.”

Dryer and other Mile High executives booked luxury hotels and convention centers to put on heavily advertised seminars promoting the value of investing in the company’s alleged real estate projects in high-growth areas of the country.

Dryer promised solid financial returns for each $16,500 initial payment on…

For more on this developing story, read the rest of Mook’s article, Mile High case goes to jury.

To follow up on a story we reported here on FlippingFrenzy.com earlier this year, Mile High Capital Group’s Richard Darrow–who pleaded guilty in March of this year to one count of violating Colorado’s Organized Crime Control Act–has been ordered by a Denver, Colo. District Court to pay over $1.15 million in restitution to his victims, and spend two years in a local work-release program. The 42-year-old Darrow, along with Fredric R. (”Rick”) Dryer and Jeffrey Dietz, was originally charged with 58 counts, including racketeering, securities fraud, and theft, all in connection with a real estate Ponzi scheme that is said to have netted nearly a quarter billion dollars for Dryer and others.

From today’s online edition of the Denver Business Journal:

Darrow sentenced in Mile High Capital case
Denver Business Journal – by Bob Mook

A judge ordered one of the key players in an alleged multimillion dollar real estate investment scam to pay victims more than $1.15 million in restitution at a June 2 sentencing hearing in Denver District Court.

Richard Darrow, 42, pleaded guilty to one count of violating Colorado’s Organized Crime Control Act in March.

Denver District Court Judge Catherine Lemon dismissed 27 other charges — including securities fraud and theft — after Darrow agreed to cooperate with prosecutors in the June 23 trial of Fredric “Rick” Dryer, the 60-year-old founder of the bankrupt Mile High Capital Group Ltd., a real estate investment company.

In addition to the restitution order, Darrow will enter a two-year work-release program that will enable him to continue working at a local building materials company and return to jail after work. He earlier agreed to a 20-year sentence that would be suspended in 10 years after successful completion of probation.

Darrow once managed Replacement Property Solutions, a company which purported to process legal transactions under so-called 1031 real estate exchange regulations that allow investors to transfer equity from one property to another without incurring capital gains.

In 2005, RPS customers complained to state officials that their funds were transferred to Mile High without their consent or knowledge.

RPS shared office space with Mile High in Greenwood Village but wasn’t officially affiliated with the company.

According to a 2006 indictment, at least 15 RPS customers never got their money back. Prosecutors allege that Mile High didn’t have the financial ability to complete land purchases or develop property as promised and used investors money to pay for Dryer’s lavish investment seminars which were held a major metropolitan markets throughout the country.

Mile High is currently being operated by a trustee appointed by the U.S. Bankruptcy Court. The company began liquidation proceedings late last year.

Lynn Kimbrough, a spokeswoman for the Denver District Attorney’s office, said the $1.15 million in restitution covers an interest rate of 8 percent per year plus out-of-pocket legal expenses incurred by victims.

© 2008 American City Business Journals, Inc.

For more information about this case, see all six of our blog entries about the problems with Mile High Capital Group.

Over the course of about seven years, Mile High Capital Group managed to grow from nothing to a real estate investment company with nearly a half billion dollars in sales and then crash, leaving hundreds of investors scrambling to collect pennies on a dollar. Here, I provide a timeline to describe what occurred over the course of the past seven years.

2000: Fredric “Rick” Dryer launches Mile High Capital Group, LLC (MHCG)–a builder and developer of single-family homes, at the time specializing in mountain building.

2002: Dryer is approached by out-of-state investment clubs looking for a reputable Colorado builder/developer. MHCG’s business model changes; the company begins to specialize in building and selling rental properties to investors.

2002-2004: Infinity Broadcasting sent its program directors to ask MHCG to sponsor its Rich Dad Poor Dad Real Estate Workshops, with Dryer as the main speaker with Robert Kiyosaki. Rick Dryer develops his Right Place Right Time Real Estate Investment Strategies syllabus, starts seminars from Franklin Masters Institute, developed by a promoter as part of an educational schemata. When the promoter failed to deliver educational schemata, MHCG took over Franklin Masters, which became its marketing arm.

2003: Jeffrey Dietz joins MHCG after six years in real estate sales, marketing, and development. Dietz will later be named President of MHCG.

2004: Total 2004 sales estimated at $120 million.

December 2004: As the company grew, Dryer wanted to bring in operational managers or purchasers so he could concentrate on project analysis and the Right Place Right Time seminars. Dietz convinces Dryer that his multi millionaire brother in law, Andrew McFaul, would be perfect for the job–McFaul supposedly had a lot of capital and a great deal of on-point experience. McFaul joins Mile High a few weeks after pleading guilty to felony theft for stealing more than $10,000 of tools from the workers building his house. McFaul fails to disclose the conviction.

January 2005: Dryer hands operations (building and delivery of product, and financing) over to COO Andy McFaul, and his brother in law, executive vice president Jeffry Dietz. Dryer remains CEO in title only until June 2005.

Mid 2005: Sales for the first half of 2005 are estimated at $275 million. Jeff Dietz, MHCG’s new president estimates projected sales for 2005 to be nearly $600 million.

July 1, 2005: According to an MHCG press release, Dryer sells MHCG to a group headed by Andrew McFaul, its COO, and Jeffrey Dietz, its executive vice president for $100,000, so he (Dryer) can focus his energies on his Right Place Right Time seminars. According to McFaul’s attorney, Phil Feigin, the press release was a lie and no money ever changed hands. However, several people report having witnessed McFaul and Dietz claiming to have bought the company.

September 2005: According to McFaul’s lawyer, (Feigin again) McFaul left MHCG in the summer of 2005 after realizing that “he and many others had been the victims of an enormous scam orchestrated by Mr. Dryer and Mr. Dryer alone.” Dryer supporters say McFaul and Dietz fled the company after Dryer got wind of what was going on and ordered the Board of Directors to hire outside accountants and a former FBI division chief to dig into what was happening.

October 2005: Dryer orders the Board of Directors to hire a new president and stipulate to a receivership with a group he had hired to run the company. Michael Noone, a lawyer for the receiver who took control of Mile High in October after regulators received complaints discovers that the company has almost no money. Noone suspects a Ponzi scheme. Funds collected from investors are used to cover operating expenses rather than build the duplexes. According to Dryer’s supporters, he made this clear by telling prospective investors who made deposits at the time of signing their contracts, “It’s no longer your money. It’s our money.” This is also stipulated in the MHCG contracts.

November-December 2005: The receiver spends 90 days without taking much action because it could not get a consensus from the Division of Securities. According to court filings, the receiver nevertheless has developed a plan to operate the business and recover millions of dollars, perhaps making everyone whole. Despite having stipulated with MHCG to the receivership, the Division of Securities takes the unusual step of asking for the operational receiver to be replaced by a liquidating receiver of its choice. MHCG management’s lawyers join with Dryer’s lawyers and get a stay, and a hearing is ordered to prove that MHCG is no Ponzi scheme but a legitimate business with a plan for recovering everyone’s funds.

January, 2006: Three hours before that hearing, the receivers file for bankruptcy protection for MHCG. Receivers had listed $13 million in debt and a possible $5 million in assets. Receiver said it was possible that other developers could take over four of the company’s 40 projects and provide duplexes to about 500 investors. Colorado Securities Commissioner Fred Joseph was less hopeful. According to some estimates, investors could expect to receive no more than about 20 cents on a dollar.

The bankruptcy court appoints a trustee, and the receivers are removed. The Trustee later litigates against pay for the receiver, implying their inaction and incompetence had cost the estate millions, and they shouldn’t be paid.

He said, she said…

MHCG investors stand to lose a lot of money and are justifiably upset, but whether the losses are the result of criminal action or incompetence has yet to be determined. As it stands, this is a classic case of he said, she said, with everyone involved pointing fingers:

• Prosecutors claim that Dryer, Darrow, and Dietz conspired to steal millions of dollars from investors.
• Dryer claims that mismanagement on the part of Dietz and McFaul led to initial problems with developing the investment properties and that gross incompetence on the part of the appointed receivers prevented MHCG from recovering and delivering properties to investors.
• Dietz and McFaul claim that Dryer was the criminal mastermind, conning investors out of millions of dollars and then setting them up as the fall guys just before everything started to unravel.

Over the coming weeks, I will be doing my own independent investigation and reporting my findings on Mile High Monday in the hopes of sorting out exactly what happened and determining the parties that I believe are primarily responsible. For more on this case, see all the Mile High Monday posts here on Flipping Frenzy.

The case against Mile High Capital Group (MHCG) involves a colorful cast of characters, each of whom has an intriguing background of his own. In this installment of Mile High Monday, we introduce you to the key players, including the founder and former CEO of MHCG, Fredric “Rick” Dryer.

Fredric “Rick” Dryer is the creator of and speaker on the popular Right Place Right Time Real Estate Investment Strategies™ seminars, which have drawn tens of thousands of eager real estate investors to venues from Los Angeles, San Diego, and San Francisco to Boston, Philadelphia, and Washington DC. Rick also co-hosted a popular online talk show called Real Estate Wealth: Myths, Facts & Strategies with Gary Eldred, in which Gary and Rick offer listeners advice on how to successfully invest in real estate.

Throughout his 30-year career, Dryer has been involved in several different areas of real estate investing, including government lease-backs, subdivision development, land development, apartment development, and condo conversions. In recent years, he began to focus his interests on long-term investments, specifically the purchase of individual homes (attached and detached) in order to rent them out to establish cash flow while the properties appreciated. Dryer specialized in identifying high-growth areas and developing rental properties on the outer boundaries of these areas where they would be in high demand.

In 2000, Dryer launched MHCG to develop his own rental properties. He soon realized, through his Right Place Right Time seminars, that a market existed for the types of properties he was developing: a market that consisted of investors who wanted to purchase rental properties for current cash flow and the opportunity to cash in on long-term appreciation. By 2002, MHCG started developing properties specifically for the purpose of selling these properties to investors.

According to Dryer, in 2004, he realized that he needed assistance in running MHCG and that his true passions were centered in his Right Place Right Time Seminars and in working directly with investors. To achieve his goals, he decided to bring someone else on board to manage land acquisitions and property development.

Over the past 20-plus years, Dryer has had more than his fair share of run-ins with the law. In 1983, he pleaded no contest to criminal securities law violations in Wisconsin. According to court records, in one case, Dryer formed a limited partnership to buy a plot of land. He then misrepresented the deal to his partners and diverted a substantial amount of the money invested to his own use. He was sentenced in January, 1984 to four years’ probation on one count of fraud and four years probation (two concurrent two-year probationary periods) on two counts of selling non-exempt securities.

Dryer claims that he was the victim of an over-ambitious prosecutor in Wisconsin by the name of Phil Feigin, who happens to resurface in Colorado years later to further haunt Dryer (see below).

Shortly after pleading no contest to security violations in Wisconsin but prior to his sentencing, Dryer moved to Colorado. Within four years (in 1987), he was in legal trouble again. This time, he pleaded no contest to ten counts of securities fraud in Boulder County in connection with the sale of promissory notes. He was sentenced to eight years’ probation and ordered to pay restitution of $89,100.

From 1987 until 2000, Dryer appears to have been free and clear of legal troubles. In 2000, he launched MHCG, and by 2005, he was back in trouble as investors began filing complaints against his company. On August 23, 2006, the legal problems became official when a 2006 Denver County Statutory Grand Jury handed down its indictment of Fredric R. Dryer, Richard J. Darrow, and Jeffrey Dietz on 58 counts, including racketeering, conspiracy to commit securities fraud, securities fraud, conspiracy to commit theft, and theft. Since this time, nine more counts have been added for a total of 67.

Dryer has pleaded not guilty on all counts.

RICHARD J. DARROW

Richard J. Darrow managed MHCG’s sister company RPS (Replacement Property Solutions, Inc.). RPS acted as a “qualified intermediary” for tax-deferred 1031 Exchanges. With a 1031 exchange, you can exchange one investment property for another without having to pay taxes on the capital gains from selling the first property, assuming the properties are of “like kind.” Think of it as a rollover for real estate investments. Although RPS was a separate company, distinct from MHCG, it handled many of the 1031 exchanges for clients who wanted to exchange their current properties for MHCG investment properties.

Darrow has a felony conviction under his belt. In 1999, he pled guilty to fraud and motor vehicle theft, striking a plea bargain in which he agreed to share his knowledge of identity theft with law enforcement. Darrow also shared his knowledge of identity theft with a national audience on a CBS News special called “The Identity Thief Preys on Unsuspecting Victims,” in which Darrow is referred to as an “identity thief extraordinaire.”

Darrow has pleaded not guilty on all counts related to the indictment.

ANDREW MCFAUL

In January of 2005, Andrew McFaul took on the role of COO (chief operating officer) of MHCG. This was only about a year after McFaul had his run-in with the law. In 2002, McFaul was building a home in the Crested Butte area in Gunnison County, Colorado. According to court records, he became upset with the contractor, High Mountain Concepts, and related subcontractors. Out of spite, he took various tools and other implements from the contractor and subcontractors without their knowledge.

Unbeknownst to the contractor and subcontractor, McFaul had a secret room built into his house, a panic room of sorts, in which he hid the tools and other implements he had taken. When law enforcement officers searched the premises, they discovered not only the stolen property, but also two “short shotguns.” This resulted in an additional charge of possession of illegal weapons. McFaul’s attorney negotiated a plea agreement in which McFaul was required to pay restitution to the victims of the theft in the amount of $36,393.00 and perform 192 hours of public service.

According to his petition to plead guilty, McFaul states that he completed school through the 12th grade plus two years of college. Given his criminal record and somewhat limited education, one may wonder what qualifications Dryer thought McFaul had to justify hiring McFaul, placing him in the position of COO, and later allegedly selling the company to him. Was McFaul really qualified? Did Dryer simply make a poor business decision? Or was Dryer intentionally placing McFaul in a position in which he could make McFaul the “fall guy?” What did Dryer know about McFaul or what didn’t he know about him that may have prevented the losses incurred by trusting investors?

JEFFREY DIETZ

Jeffrey Dietz is more than just the person who took over as CEO and Executive Vice President of MHCG after Dryer resigned as CEO in 2005. Dietz is also McFaul’s brother-in-law.

According to McFaul and Dietz, Dryer was the sole person responsible for the fraud [the fraud, that is, that is alleged to have occurred at MHCG]–Dryer handed responsibility over to the two men just as the problems started becoming apparent in order to set them up as the fall guys. According to Dryer, MHCG was in fine shape until McFaul and Dietz took over–through their mismanagement, duplexes failed to be built and delivered to investors as promised. Dryer’s job at this time was primarily devoted to promotion and sales. McFaul and Dietz were responsible for making sure the product was delivered.

Dietz has struck a plea bargain with the Denver district attorney in exchange for cooperating with authorities in the case against Dryer.

PHIL FEIGIN

Phil Feigin is currently Andrew McFaul’s attorney. If the name sounds familiar, it should. This is the same Phil Feigin who prosecuted Rick Dryer in Wisconsin. When MHCG started having legal problems, McFaul did a little research and found that Feigin had moved from Wisconsin to Colorado. McFaul then placed Feigin on retainer to represent him in the case.

NICK SABARDIN

Nick Sabardin is the president of Convergent Acquisitions & Development, Inc., a Charlotte, North Carolina-based company that develops and sells rental properties to real estate investors (much like MHCG). Sabardin graduated from the prestigious Sorbonne University in Paris, France, before spending several years as a business consultant to some of France’s largest corporations. He completed his education by earning an MBA here in the United States, with an emphasis on technology and marketing. He flew as an Airline Transport Pilot under the US Airways colors for five years after graduation, and eventually fell in love with the Charlotte area. He is an experienced real estate investor.

Dryer currently serves as a consultant for Convergent and other companies in North Carolina. Sabardin is one of Dryer’s most avid advocates. He believes that the evidence will show that Dryer is completely innocent and that McFaul and Dietz ran MHCG into the ground. Following Dryer’s investment strategies, Sabardin is committed to building a company that achieves what MHCG failed to achieve; that is, develop and manage rental properties for investors that provide current cash flow along with opportunities for future investment returns as the properties appreciate.

On August 23, 2006, Chief Judge of the Denver County Statutory Grand Jury issued a 58 count indictment charging Fredric R. (“Rick”) Dryer, Richard J. Darrow, and Jeffrey Dietz with 58 counts, including racketeering, securities fraud, and theft. Later, additional counts were added. The December 14, 2006 version of the indictment contains an additional 8 counts, primarily addressing losses of investors who filed claims after the original indictment. Since that date, one additional count has been added for a total of 67.

[I invite you to read the indictment--from Colorado's Department of Regulatory Agencies (DORA)--by clicking and downloading the following file: Mile High Capital Group Indictment.pdf.]

According to the first count, Dryer, Darrow, and Dietz are charged with racketeering–operating an illegal business for personal profit. The businesses named in the indictment are Mile High Capital Group, Ltd and Replacement Property Solutions, Inc. According to the indictment, Dryer, Darrow, and Dietz, “did unlawfully, feloniously, and knowingly conduct or participate, directly and indirectly, in the enterprise through a pattern of racketeering activity….”

The second and third counts are related to conspiracy to commit a crime, in this case, two crimes–securities fraud and theft. On both counts, the indictment charges that Dryer, Darrow, and Dietz, with the intent to promote or facilitate the commission of the crime… unlawfully and feloniously agreed with each other and persons known or unknown to the Grand Jury that one or more of them would engage in conduct which constituted that crime or an attempt to commit that crime, or agreed to aid the other person or persons in planning or commission or attempted commission of that crime, and an overt act in pursuance of the conspiracy was committed by one or more of the conspirators.

Pages 9 to 12 of the indictment are of particular interest, because they contain the facts of the case supporting counts 1-3.

The remaining 63 counts describe specific cases in which investors have filed claims of being cheated out of $15,000 or more by Mile High Capital Group and RPS.

Some visitors to FlippingFrenzy.com have expressed curiosity about why I have chosen to investigate this case and present my findings on Mile High Monday. After all, the state of Colorado has already performed a thorough investigation and decided that the evidence is sufficient to indict Dryer, Darrow, and Dietz. Hundreds of victims are already well aware that they have lost money and are convinced that they have been scammed. And the media, particularly the L.A. Times and the Denver Business Journal, have already reported extensively on the case. So, what reason could I possibly have for doing my own independent investigation?

Truth be told, this case was not even on my radar when the indictment was issued. I knew of Rick Dryer and his Right Place Right Time investment seminars but had never met him until we did the radio spot together. Once I began looking into his background and after talking with Convergent Acquisitions and Development president Nick Sabardin, I found the case to be fascinating and decided to present it to FlippingFrenzy.com readers.

Sabardin is convinced that Dryer has been railroaded, and he would like to see Dryer’s name cleared. At this point, I have an open but skeptical mind, and I want to independently examine the evidence for myself before passing judgment. Not all people who are indicted are guilty. I thought that this would be a fascinating case study for my readership, however it turns out.

Another reason I am calling attention to this case is because of Dryer’s association with Convergent Acquisitions and Development. If Dryer is guilty of the charges filed against him, then investors in Convergent Acquisitions and Development should know about it. Likewise, if Dryer if free of guilt, this should clear the minds of prospective investors and make them more confident of doing business with Convergent.

Unfortunately, hundreds of people collectively lost millions of dollars, but I want to make sure the truth is told, and I think readers will find the story and the characters involved fascinating.

Rick Dryer is more than your average real estate investment guru. A typical real estate investment guru sells training in an attempt to teach people how to build wealth by investing in real estate. Dryer not only provided training, but he also built investment opportunities for his clients. In fact, his credentials in this regard were strong, because his intellectual property evolved from his real life business.

In 2002, Dryer launched Mile High Capital Group, LLC (MHCG)–a builder and developer of single-family homes, at the time specializing in mountain building. It was only in late 2002, when Dryer was approached by out of state investment clubs looking for a reputable Colorado builder/developer that the business model changed. Dryer didn’t think mountain properties were suitable for income property, so he began to research what would work.

Over the next two years, MHCG evolved into a builder of just such properties. Its reputation grew. Infinity Broadcasting sent its program directors to ask MHCG to sponsor its Rich Dad Poor Dad Real Estate Workshops, with Dryer as the main speaker with Robert Kiyosaki. Dryer’s research and experience evolved into what was to become his Right Place Right Time Real Estate Investment Strategies syllabus.

MHCG grew with Dryer’s reputation. The company planned to develop subdivisions around the country on the edges of high-growth areas where demand for rental properties was expected to be high. MHCG would then sell the rental properties to investors. The plan was to make it easy for real estate investors to purchase revenue-generating properties.

(Above: Gary Eldred, Ph.D, and Rick Dryer)

As far as real estate investment gurus go, Dryer had a track record and reputation that was good and getting better. Typical real estate investment gurus charge thousands of dollars for information that’s worth no more than about $50. They pitch risk-free, get-rich-quick schemes. They encourage people who are in no position to invest in real estate to become full-time investors. Most of these gurus are not successful real estate investors themselves–if they could make millions in real estate, they would not be spending their time pushing seminars.

Dryer is different. His “Right Place Right Time Real Estate Investment Strategies” are well known in the industry, and he has a very public record of accurate predictions about emerging markets and trends. He became a popular and frequent speaker at Robert Kiyosaki’s “Rich Dad Poor Dad” real estate investor workshops around the country before starting his own workshops. He knows his stuff and is careful to remind people that investing in real estate carries risk. Dryer seems like the real thing, and MHCG seemed like a legitimate company offering genuine real estate investment opportunities.

Through his seminars, Dryer promoted MHCG to attendees, and they were eager to buy these rental properties. The risk seemed negligible. After all, Dryer had a proven system in place for identifying areas where rental properties would soon be in high demand. His system was so successful, in fact, that many celebrities had bought into the program–celebrities with big names, such as:

• Gary Eldred, PhD, author of Investing in Real Estate and professor of Trump University
• Richard Florida, PhD author of The Rise of the Creative Class and professor in the School of Public Policy at George Mason University
• Richard Karlgaard Publisher of Forbes magazine and author of Life 2.0
• Dan McCabe, Esq., CES of the Investment Exchange Group
• David Bach, New York Times and Wall Street Journal best-selling author of The Automatic Millionaire; Start Late, Finish Rich; and the entire Finish Rich series
• Mark Victor Hansen New York Times and Wall Street Journal best-selling co-author of the Chicken Soup series

Having these big names involved added to the company’s credibility, and the list of customers began to grow as investors spread the word to their friends and relatives of Dryer’s Right Place seminars. Though it was a great forum for MHCG, Dryer was always careful to separate the company and the products from his Right Place information.

Money was pouring in. Under the direction of founder and CEO Rick Dryer, MHCG had risen from its humble beginnings to become a $150 million real estate business in just five years. According to court documents, MHCG had over a quarter billion dollars in sales by 2005.

Unfortunately, the product being sold was never delivered.

What happened? Why wasn’t the product delivered? What most of the attendees of the Right Place Right Time Seminars knew, because it was mentioned in virtually every seminar, Dryer no longer ran MHCG, though he remained titular CEO until the end of June 2005. Operations, that is the building and delivery of the product, had been turned over to Andy McFaul, COO starting January 2005, and his brother-in-law, Executive Vice President Jeffry Dietz. I will tell you more in the next Mile High Monday.

NOTE: Here’s a different take on last Monday’s blog entry… if you’re wondering who the actual players are in this seemingly sorted affair, read on:

No doubt about it, investors involved with the Mile High Capital Group (Denver, Colorado) lost millions of dollars. They put down earnest money on residential duplex properties, most of which were never built. The Mile High Capital Group sold a product that it failed to deliver, and investors lost a lot of money. Rick Dryer, founder and former CEO of Mile High is currently under indictment on 67 felony charges ranging from theft to securities fraud for his involvement in an alleged real estate Ponzi scheme.

Dryer has pleaded not guilty on all of the charges, and is scheduled to appear in Denver District Court in February of 2008. Clearly, someone is guilty of wrongdoing here, but which (if any) laws were broken, by whom, and for what purpose are still a mystery.

Shortly after my book “Protect Yourself from Real Estate and Mortgage Fraud” (co-authored with attorney and noted mortgage fraud expert Rachel Dollar) hit the bookstores, Kaplan’s public relations department contacted me. They informed me of an opportunity to promote the book via a talk show called “Real Estate Wealth, Myths Facts and Strategies”, a spin-off of Real Estate Dialogues with Rick Dryer and Professor Gary Eldred, the best selling author and head of curriculum at Trump University Real Estate Dialogues with Rick Dryer and Professor Gary Eldred. I was shocked to learn of the indictments against Dryer when I “googled” him prior to the show. I also learned that he had moved to North Carolina where he was hosting his popular “Right Place Right Time Real Estate Investment Strategies” and working as a consultant for a company called Convergent Acquisitions and Development Inc. in Charlotte, among others. He also has a home in Colorado.

I had known of Rick Dryer and his seminars for some time. I also knew of his very public record of accurate predictions as to emerging markets and trends. If there is anyone whose knowledge of real estate would seem to empower investors to earn millions in real estate, Rick Dryer would be such a person. So when I heard the rumors about millions stolen from Mile High investors, I was stunned. After all, why would a successful real estate investor, a multi-millionaire, need to steal money?

I discovered that Convergent has two things in common with Mile High. First, it acquires rental properties for investors, which is basically the same service that Mile High offered investors. Secondly, it had had great success in following Rick Dryer’s “Right Place Right Time” principles.

I called Convergent president Nicolas “Nick” Sabardin (pictured on the right) to find out more about what was going on and about Dryer’s involvement with the company. Sabardin was very cooperative; he believed anyone who looks into this will help in clearing Dryer’s name. He welcomed my interest, and thought an independent analysis would be fantastic. He offered to help in anyway he could. Shortly thereafter, my assistant and I flew to Charlotte to meet with Sabardin.

After a couple meetings, Sabardin aroused my curiosity. He and his company have an impeccable reputation. He is a Sorbonne graduate, a former airline pilot, and an MBA. He had had his lawyers do a complete background on Dryer before hiring him. What he told me, which I confirmed, made me had become fascinated with the Mile High case.

Here was a company that had over a quarter billion in sales and 45 million in cash flow, and records showed that Dryer was on the receiving end of only $50,000 in cash. If this was a case of real estate and mortgage fraud, someone was doing an excellent job of laundering the money. Where did all that money go? Why did Dryer leave Mile High? And why were clients like Convergent enjoying such success? Is Rick Dryer a criminal mastermind or the fall guy for clever con artists who used him as an unwitting accomplice, as Mr. Sabardin believes?

Over the course of the next several months, I will be independently reviewing the Mile High case myself and posting my findings, most every Monday, under the “Mile High Monday” header here on FlippingFrenzy.com. Through my posts, I hope we will all be able to discover the truth about Mile High Capital Group. From its very beginnings, through the trial, to the very end, when the judge or jury reads the verdicts… if it ever gets to trial. I invite you to tune in to what may be the unveiling of one of the most complicated and sinister corporate real estate cons of our times. But is Rick Dryer mastermind or victim? Stay tuned.