A Boise builder posed as a “God-fearing Christian” and swindled dozens of his Ponzi scheme’s victims out of at least $4.9 million, the Idaho Finance Department claims in a lawsuit filed Oct. 25 in Ada County District Court. Now the department is trying to recover as much of that money as it can.
The agency accuses Nathan Pyles, president of Shiloh Management Services, of overpaying himself, using new investor money to repay older investors and failing to record property deeds in some instances. He is also accused of filing multiple deeds on some properties, with investors unaware there were other claims. He is also accused of using investor money to pay for personal expenses.
“We have received the complaint and are reviewing it,” said Boise attorney David Leroy, who previously represented Pyles in another matter and is considering representing him in this case.
In an unusual twist, the complaint also accuses one of the investors — who claimed he was defrauded of $650,000 — of illegal acts. The Finance Department said Boise resident Roger Button recruited new investors and was paid commissions — activities that would require them to register as securities agents. Neither one was registered.
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The agency says the two men defrauded investors by making fraudulent claims about Shiloh’s investments and omitting material facts. Pyles is also accused of improperly using investor money.
“Pyles essentially treated Shiloh’s and investors’ money as personal assets by using the money for personal needs, for business needs as he saw them and to repay previous investors,” Deputy Attorney General Alan Conilogue wrote in the 21-page complaint.
Pyles spent several years fixing up old houses and flipping them. Later, he bought undeveloped properties and built houses on them. To finance construction, Pyles recruited investors and offered short-term notes that paid between 10 and 30 percent interest. Most investors were offered between 14 and 17 percent interest for notes that matured in six months, the Finance Department claims.
Pyles raised at least $28.8 million from at least 55 investors, the complaint alleges. All but 18 of the investors were from Idaho, but the complaint does not list their hometowns.
Shiloh Management Services was formed in March 2008. In the early years, Pyles made monthly interest payments on time to investors and sometimes made the payments early, the Finance Department said. He repaid the principal when the properties sold.
“By paying reliably, Pyles gained a reputation as offering safe investments, which became one of his selling points,” the agency said in the complaint.
Pyles told people who invested with him that the investments were safe because he only invested in projects where the amount borrowed was less than the value of the property itself, the complaint said. Thus, if the project stalled, the land could be sold and the investor repaid.
“Pyles’ sales pitches may have been true in early projects and in some later projects, but Pyles broke his promises when he began to assign three, four, five and up to eight investors interests in the same property,” the complaint said. “Although the first investor or two might be fully secured, the others were not.”
While Pyles’ projects were profitable, eventually the returns weren’t enough to cover his expenses, the complaint alleges.
The complaint alleges that Pyles “paid himself handsomely.” He listed his gross income as $250,000 in a credit application from early 22016. He testified at a bankruptcy hearing that he used the Shiloh business bank account for personal expenses, which totaled at least $386,724 between January 2014 and September 2017, two months before 10 investors mostly from Southern Idaho forced him into an involuntary bankruptcy.
As the Ponzi scheme advanced and Pyles needed more money to pay investors, the Finance Department claims he began borrowing from commercial lenders to make up the shortfall. Records show he borrowed at least $6.8 million from at least 30 commercial lenders.
The Finance Department claims Pyles “lulled some of his investors into a false sense of security” by portraying himself as a religious man. Investors said he held himself as a “God-fearing Christian to gain trust.” The names of Shiloh and other businesses Pyles operated had names that came from the Bible. Likewise, an Owyhee County subdivision he developed was named Giglal, which also appears several times in the Bible.
“These victims tended to trust Pyles more because they believed his religion made him more trustworthy,” the complaint alleges.
Button originally became acquainted with Pyles as an investor but later recruited new investors and reviewed documents for Pyles, the complaint alleges. He received a 2 percent commission for money invested by people he recruited.
Between January 2017 and September 2017, Button received 25 checks totaling $97,300. The Finance Department said Button received additional payments in earlier years but did not detail those amounts. The agency said Pyles also gave Button a number of store gift cards valued at $500 each.
Some were given by him to investors, others he passed on as a finder’s fee and others he kept himself, the complaint alleges.
Button declined to comment. Pyles did not return a call on Monday.
No hearing has been set on the lawsuit.
Last year, Pyles was arrested and accused of writing bad checks on a business account to four lenders totaling $28,437. The case was later dismissed after prosecutors said they were unable to determine whether Pyles intended to defraud the recipients. Pyles said he wrote the checks expecting that money owed to him would be received before the checks were cashed.