Idaho contends ex-Boise broker defrauded clients

BOISE, Idaho (AP) -- The Idaho Department of Finance has filed a lawsuit against a former Boise mortgage broker, accusing him of violating state securities laws, defrauding investors and using their funds for his own personal gain.

The lawsuit filed recently in state court in Benewah County names Stephen L. Howell, who now lives near the small northern Idaho town of Plummer.

Howell allegedly misrepresented his fund's investments by omitting material and engaging in business practices that essentially amounted to fraud and deceit, according to the lawsuit. Agency investigators believe Howell collected $24 million from investors between 2004 and 2008.

Several companies founded or managed by Howell also are named in the complaint. The state alleges Howell used the companies to lure investors, then used their money to finance real estate investments, make risky loans and in one case finance a resort property near Sheridan, Wyo.

The "companies are all mere alter egos for Howell, and were used to effectuate the fraudulent course of business related to the offer or sale of securities," the complaint states. "Their corporate existence should be ignored."

Howell's attorney, Mike Ramsden of Coeur d'Alene, has filed a response in court denying any wrongdoing. He also claims a statute of limitations applies and has asked the judge to dismiss the case.

Ramsden didn't immediately return a phone message Thursday, and Howell didn't immediately provide a response when reached by The Associated Press.

State lawyers are asking 1st District Judge Fred Gibler to permanently stop Howell from selling securities in Idaho and impose fines of $10,000 per violation in securities law. The state also is asking the court to freeze Howell's personal assets and appoint a receiver to take control of assets Howell still oversees.

The companies named in the lawsuit include Security Financial Services Inc., Security Financial Fund LLC, and Security Investors Fund LLC. The lawsuit claims Howell either owned or managed those companies.

The lawsuit accuses Howell of launching Security Financial Fund in 2004 to combine investor funds to finance a bigger pool of loans and mortgages, then founding Security Investors Fund three years later for the same purpose.

The state accuses Howell of defrauding investors by making misleading statements about the investments made by those two funds, by failing to disclose material and by "engaging in a course of business that operated as a fraud or deceit upon other persons."

State lawyers allege Howell, operating as manager of the funds, made numerous and favorable loans to himself and his family and made loans to borrowers who were bad credit risks.

"Howell essentially treated the funds as a personal asset and used the monies and opportunities related to the business transactions of the funds as a means to enrich himself, often to the contrary of the best interests of the funds and their investors," according to the complaint.

By September 2009, Howell owed his funds more than $11.4 million, state lawyers alleged. Howell and his funds have not accepted any new investor money or made any new loans since 2008, according to the lawsuit.

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Associated Press writer John Miller in Boise contributed to this report.