Federal financial watchdog sues Vail widow for allegedly scamming 18 investors of $5.3 million | VailDaily.com

Federal financial watchdog sues Vail widow for allegedly scamming 18 investors of $5.3 million

VAIL — A federal financial watchdog is suing the widow of a former Vail resident, saying she was part of her deceased husband’s ponzi scheme.

The Securities and Exchange Commission sued Carolyn Anderson in Denver District Federal Court last week, claiming that she and husband Michael Anderson scammed 18 investors out of more than $5.3 million between March 2014 and his death on Feb. 27, 2017. Many of those people considered the Andersons to be close friends, the SEC said.

Michael Anderson was found dead Feb. 27, 2017, in his garage, where his ATV had been running, Vail police said. He was 47.

Marriage and money

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The couple divorced in 2009, but remarried on Feb. 2, 2017, less than three weeks before Michael Anderson’s death.

In his will, executed Feb. 7, 2017, Michael Anderson bequeathed all his property to Carolyn Anderson, the SEC said. That’s also the day he made Carolyn Anderson the trustee of the Michael Anderson Trust and made the trust the sole beneficiary of a $2 million life insurance policy that the SEC says they bought with money from defrauded investors.

After the insurance company paid Michael Anderson’s death benefits, Carolyn Anderson used some of that $2 million to buy a house in Point Verde, Florida, and a Jaguar F-Pace car. She put the remaining $1.8 million in a trust for her minor children, the SEC said.

The Anderson’s Vail home, 1460 Buffehr Creek Road, Unit G, was listed in April. It sold in August for $1.5 million, according to Eagle County records.

The Andersons’ case came to the Vail Police Department’s attention when Chief Dwight Henninger received a report from Tim Christine, the NFL Players Association’s director of security. Christine alleged that the Andersons were trying to defraud a retired NFL player.

Retired Baltimore Ravens tight end Quinn Sypniewski, who played his college ball at the University of Colorado, met the Andersons when their children were in ski school together. Before long, he was one of a dozen and a half people who the SEC says the Andersons scammed.

Click to read the federal complaint against the estate of former Vail resident Michael Anderson

According to Vail police reports, Michael Anderson invited Sypniewski to be part of an investment club and suggested that Sypniewski donate $500,000 of his own money to the partnership.

A quick look by Christine found that the End of the Rainbow Foundation’s address was a mailbox in the West Vail UPS store.

He also found that Carolyn Anderson was the Rainbow Foundation’s only employee, that she had declared bankruptcy in Colorado in 2014 and that she had a $244,474 federal tax lien.

Christine told Vail police he felt “uneasy” about it. He told police it was unusual for a player to liquidate his assets and invest them in a nonprofit. The Andersons had promised Sypniewski a 6.5 percent return on his money, Christine told Vail police.

Christine also learned that Michael and Carolyn Anderson had operated under “multiple aliases,” that both have criminal records and that Michael Anderson might have been using a Social Security number that belonged to someone else.

Injuries cut Sypniewski’s NFL career short, and he told Christine that Michael Anderson was training him as a day trader, according to Vail Police Department reports.

Vail Police Detective Joseph Schreiner contacted the IRS, the SEC, the Financial Industry Regulation Authority and the Colorado Division of Securities. Those agencies began their own investigations, Vail police said.

Closer to home, the town of Vail confirmed that the Andersons had no business license to operate the Rainbow Foundation or the Rainbow Partnership, the investment club. It was registered with the state.

Michael’s Mea Culpa

Michael Anderson had reportedly been under investigation by the SEC since at least July 2016, when the agency issued a subpoena for his trade records. He did not provide them.

Around the date he died, he was scheduled to ask for an extension in his SEC case.

Before he died, Michael Anderson hired an attorney to help him draft a sworn confession, the SEC says.

He and Carolyn Anderson created Rainbow Partners and the End of the Rainbow Foundation in 2012, claiming it was a charity to help abused women and children. The SEC called it a “sham” that did “no charitable work.”

“The Rainbow Foundation was a sham charity with no office, employees, clients, business operations or charitable activities,” the SEC said.

While rounding up investors, Michael Anderson told people that he was a retired hedge-fund manager. He told them he would invest their funds for free, saying he did not need the money. He promised them annual returns of 12 percent to 48 percent and told them that up to 20 percent of the investment profits would go to the Rainbow Foundation charity.

“Instead, Mr. Anderson used Rainbow Foundation as a vehicle to misappropriate investors’ funds and pay personal expenses,” the SEC claims in its lawsuit.

The SEC says Michael Anderson lied about the success of his trading strategy, charging that he sent Rainbow Foundation investors falsified monthly account statements that claimed to show trading gains. However, in a classic ponzi-type system, he issued “profit” payments with the investors’ own money and not trading profits because there weren’t any, the SEC said.

In fact, Michael Anderson’s trading lost $589,355, but he hid it from investors, the SEC said.

Meanwhile, the Andersons transferred more than $2.3 million in investor money to Bighorn Wealth Fund L.P., Rainbow Foundation and Seaoma, all based in Vail and all owned by Michael and Carolyn Anderson, the SEC said.

In his confession, Michael Anderson claimed that he did the electronic money transfers by logging in under Carolyn Anderson’s user credentials and without her knowledge or consent. He told her to sign blank checks and forged her signature on account documents, the SEC said.

The Vail Police Department has been investigating since before Michael Anderson’s death and, along with the SEC, froze many of the Andersons’ accounts.

SEC attorney Leslie Hughes is charging Carolyn Anderson with securities fraud and is asking for a jury trial in U.S. District Court in Denver before Chief Judge Marcia S. Krieger.

On Tuesday, Nov. 14, Krieger issued a temporary restraining order. A hearing is scheduled for Tuesday, Nov. 21, in federal court.

Staff Writer Randy Wyrick can be reached at 970-748-2935 or rwyrick@vaildaily.com.

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