Commission orders $9.35 million Dacono restitution

PHOENIX — A complex case involving fraud, 110 investors and a proposed outlet mall in Dacono has almost come to a close, at least as far as the Arizona Corporation Commission is concerned.

On June 5, the commission signed off on three consent orders, which include cease and desist, restitution of $9.35 million and penalties of $110,000.

But investors are pessimistic about ever getting their money back. A foreclosure sale was scheduled for June 27.

Three Tucson businessmen — Wendell “Ted” Decker Jr., Charles W. Testino Jr. and Keith “Skip” Davis — and their respective businesses have agreed to stop defrauding investors, selling unregistered securities and being unregistered dealers.

A fourth man — Charles R. Stedman — has not agreed to a consent order and faces a June 25 hearing in Tucson.

But the case may not be closed even then. The Arizona Corporation Commission doesn’t have jurisdiction over criminal charges, and commission officials have suggested other agencies may investigate.

Decker has been working on the project — an outlet mall with a sports focus at the northeast corner of Interstate 25 and Weld County Road 8 — since 1992. When he and Stedman ran out of their own money in 1996, they brought in Testino and Davis to help them raise funds by selling short-term promissory notes, commission documents say.

The commission alleges the men sold 124 notes to 110 investors between 1995 and 1999, raising more than $5.2 million. By May 2000, the total principal due was about $5 million and the interest due was $17 million.

The commission said the men misrepresented that the investment was short-term; that the notes were secured by a deed of trust when most weren’t; and how funds were being used. They also failed to tell investors of Decker’s 1989 bankruptcy and that Stedman had been barred from the National Association of Securities Dealers in 1994. Testino was fired from one job and suspended for six months from the NASD for selling these notes.

The commission believes the money was spent, at least in part, on attorney fees and loan fees for failed funding attempts; attempts to obtain tax benefits for the future owners of the project; redeeming prior investors’ defaulted notes; interest payments to early investors with secured loans; profits to bridge lenders; Decker’s living expenses; and Decker’s and Stedman’s travel expenses.

But in an interview, Davis said again that some investors had been fully or partially repaid.

“When they had money, they paid. Giving $2 million back is not a scam,” he said. “We agreed to all these outrageous allegations the commission made to get this thing over with. None of this has been proved. They’re just the state’s findings.”

But Heather Murphy, commission public information officer, disagreed.

“Some early investors were repaid. Presumably, they were repaid with other investors’ money,” she said. “None of the investors in our action were repaid.”

Decker, Testino and Stedman could not be reached for comment.

The commission ordered the men to stop the illegal activities. It also ordered:

* Decker to pay almost $5.3 million plus 10 percent interest in restitution and $50,000 in fines.

* Testino to pay $3 million plus 10 percent interest in restitution and $50,000 in fines.

* Davis to pay more than $1 million plus 10 percent interest in restitution and $10,000 in fines.

Additionally, they cannot transfer development rights or tax credits unless doing so would result in full restitution.

Murphy said the case is unique in a couple of ways. “The promoters and investors were from Tucson and were fairly closely connected. They were respected contacts,” she said. “That made it harder for us to find out about.

“(Also,) even though it involved a promissory note, there actually was a project. There is the potential for the investors to get some money back,” she said. “Some promissory notes only have paper backing them up.”

But investors remain skeptical about even getting their principal back.

Manuel Ramirez, a teacher from Douglas, Ariz., heard about the Dacono project from another teacher and put money in the project in 1997. He planned to use the returns to help his three kids through college. Two of them are already in college and have had to take out loans.

“We trusted (Testino) with our savings and our children’s education,” he said, adding he just found out about the fraudulent nature of the case this week. “It made me feel very uncomfortable — nauseated — thinking we may have lost all that money.”

Robert Kroft, a retiree from Sierra Vista, Ariz., also heard about Dacono from a friend and invested $25,000 through Testino two years ago. He said he asked for information and his money back on many occasions.

“These people obviously knew. It was a planned deal. They knew the sand castle had to crumble. That’s just my feelings,” he said. “Maybe things just went wrong. Who knows? It was a shoddy operation.

“If I was a judge, I’d say, ?Let’s have a trial’ and then take them out back of the courthouse and shoot them,” Kroft said.