Convicted swindler Donald Hill Williams Jr. has written a letter from his Nevada prison cell exonerating former business associate David Colton of knowingly taking part in one of Orange County’s biggest Ponzi schemes.
“David Colton’s accusers have always charged that he was an ‘insider’ at the Hill Williams Company and knew everything that was going on,” Williams wrote. “The truth, however, is he was not an insider and I purposely excluded David Colton from knowledge concerning the inner workings of the Hill Williams Company.”
Williams, the former Anaheim Hills-based real estate developer who in 1998 pleaded guilty to investment fraud charges, raised $89 million from about 5,000 investors to build affordable housing in Orange County and the Inland Empire.
Now, he is serving a 37-month sentence at Nellis Air Force Base outside of Las Vegas while Colton, who says he worked only as an independent marketing agent for the former Hill Williams Development Corp., is being chased in court by angry investors.
An Orange County court in 1995 ordered Colton to pay almost $23.6 million to more than 1,000 derauded investors for his part in the scheme. Colton, who currently markets investments for his wife’s Irvine-based real estate development and management firms, has denied knowingly taking part in any fraud.
Williams has put his letter into the form of a six-page declaration and submitted it to Colton’s lawyers. They hope it will help curtail civil suits pending in Orange County Superior Court.
Colton says he had no prior knowledge that Williams would write a letter on his behalf.
Plaintiffs Skeptical
But Jim Pollock, lead counsel for the investors, dismissed the letter as “an obvious ploy by David Colton to get some good press.”
“He (Colton) is out selling investments again in Orange County, so he’s continuing the same practice as always,” said Pollock, an attorney with Del Mar-based Colton & Roesser. (Pollock’s partner, Roland Colton, is no relation to David Colton.)
Pollock pointed out that during a 1995 trial Williams resisted testifying on David Colton’s behalf, dodging a subpoena on a technicality. Colton blames that on advice Williams was receiving at the time to avoid any other potential legal entanglements,a point Williams refers to in his letter.
As a convicted felon, Williams acknowledges, his testimony may have “little or no credibility.” But he continues, “Still, it is my fault that Mr. Colton is going through these legal nightmares.”
As a Mormon, Williams wrote, he must seek atonement for wrongdoing by telling the truth: “That is the purpose of this declaration.”
Continuing Litigation
The Williams letter adds to intrigue surrounding the litigation between Colton and the Hill Williams investors.
Since Colton declared bankruptcy in 1995, lawyers representing investors have been going after the assets of his wife, Linda Colton. Her main holdings are tied to a real estate development firm, The Colton Co., and a property management company, Colton Capital. Both businesses are listed under Linda Colton’s name and have a combined value that has been estimated in excess of $300 million.
In August, a civil suit was filed by investors against the Coltons questioning whether assets claimed by Linda Colton were really being made available to both.
“In 1997, Linda settled a claim by the bankruptcy trustee for fraudulent transfers of $75,000,” said David Colton. “Now, two years later in August 1999, they filed a suit on the same grounds against my wife and her companies.”
Linda Colton’s attorney responded by filing a motion for a summary judgment, asking Orange County Superior Court Judge David Brickner to throw out the civil suit.
“They’re basically saying that Linda’s assets are my assets, even though she already settled that claim two years ago,” said David Colton. “They want $23 million plus interest, which is now almost $34 million.”
Pollock said any possible effort by David Colton to shield his assets from defrauded Hill Williams investors won’t work. He pointed out that Brickner has tentatively ruled against the motion for summary judgment.
“He apparently didn’t think much of it,” said Pollock. “It appears they have lost their motion for a summary judgment, based on the judge’s tentative decision.”
Brickner will allow oral arguments on the motion to be heard in court this week, on March 9.
Letter Pleases Colton
As for the Williams’ declaration, David Colton says he’s pleased to finally see someone connected with the scandal step forward.
“This letter is what I’ve been telling people for seven years,” he said. “This is a long time coming.”
Williams in his letter said that Colton, who marketed development ventures to securities brokers on behalf of Hill Williams and other corporate clients, was kept in the dark about the company’s financial problems.
Williams said that his employees were instructed not to give any “negative information” to Colton. Williams also claimed that he ordered his underlings to direct any questions by Colton regarding the company’s financial performance to him directly.
“When David Colton asked me how the projects were going or how the investments were doing, I always assured him that everything was fine,” wrote Williams.
The letter went into specifics, detailing key dates when his firm’s financial dealings began to unravel. At each point, Williams explained that Colton was specifically excluded from any discussions or decisions.
“I find no pleasure in preparing or signing this declaration,” wrote Williams. “During my bankruptcy trial, Mr. Colton testified and I must tell you he was not a friendly witness to me. Some of his characterization and recollection wounded me, but as it relates to these issues, I feel honor-bound to make clear what really happened.” n
