Monday, Sept. 14, 2009 | 5:06 p.m.
The owner of a defunct Nevada real estate exchange company, Southwest Exchange, was sentened Monday to 10 years in prison and ordered to pay about $97 million to 134 victims.
Donald McGham, 75, was sentenced by U.S. District Judge Philip M. Pro after he pleaded guilty to four counts of wire fraud on June 8, said Steven W. Myhre, acting U.S. Attorney for Nevada.
McGhan is a resident of Texas. He must self-report to federal prison by Nov. 4., Myhre said.
Southwest Exchange, Inc., operated to help tax-deferred exchanges of real estate. An individual seller could defer taxes from real property sales if a qualified intermediary such as Southwest Exchange held the proceeds of the sale in trust and bought real property within six months.
McGhan purchased Southwest Exchange on June 28, 2004, intending to use client money held in trust to buy businesses. At that time, Southwest held about $109 million in trust.
Within two weeks of McGhan's purchase of the exchange, he transferred more than $40 million from Southwest's investment account at Smith Barney to McGhan-affiliated entities as loans to enable McGhan to purchase a French breast implant manufacturing company, Myhre said.
McGhan intentionally withheld information from potential Southwest Exchange customers and other entities to buy the implant manufacturer and other companies, investigators said.
From August 2006 to January 2007 McGhan continued to seek new Southwest Exchange customers under the false pretense that the company was financially secure, Myhre said. In that same period, McGhan caused customers to deposit almost $95 million with Southwest Exchange. He also bought two other exchange companies, one in California and the other Idaho.