A prominent member of a well known family in a southern small town took horrific steps to end the humiliation of being exposed as a Ponzi scheme operator. Among the companies used in the $38 million scam was his mortgage brokerage.
For about as long as anybody can remember, the Stewart family has been involved in politics and banking in tiny Union Point, Georgia.
The family founded Farmer’s Bank and three generations of Stewarts have served as mayor, including John “Ben” Stewart Jr., who held the post in the town of 1,700 eighty miles east of downtown Atlanta for the past 24 years.
“Being mayor of town and owner of the bank …runs in the family,” Fred Bright, the Ocumulgee Judicial Circuit district attorney said in a phone interview. “This is a prominent, well-known family.”
But after the morning of May 13, the reputation and legacy of the Stewart clan will forever be tainted.
It was at around 4:40 a.m. and Ben Stewart had apparently reached the brink. He was bankrupt. Federal charges had been filed against him for securities fraud and breaking lending laws. And that afternoon, a state grand jury was set to consider a 197-count indictment against him for running an alleged Ponzi scheme that involved his mortgage brokerage company.
Chances were good that he would be indicted and jailed before the day ended.
So after calling the local police chief that morning Stewart, 54, raised a .38-caliber pistol to his head and pulled the trigger, said Bright, who was investigating Stewart at the time.
“He told the chief, ‘I can’t take it anymore, I’m going to kill myself.’ The chief tried to talk him out of it,” Bright said. But by the time officers arrived at a rental property Stewart was alive, but “already had shot himself one time in the head.”
“The bullet,” Bright said, “went in the forehead and came out of the back of his head.” Stewart was declared dead by 9 a.m. The grand jury was set to hear the case against him at 10 a.m.
“His life has just spiraled out of control,” Bright said.
Stewart was accused of racketeering and securities fraud violations for allegedly bilking as many as 900 mostly small investors out of about $38 million, Bright said.
Stewart had been in the finance business since breaking away from the family banking business more than 20 years ago. Bright said he used up to a dozen companies, including a mortgage brokerage, to attract investors and run “a Ponzi or pyramid scheme.”
“Basically, he was just stealing people’s money,” he said.
Most of the firms were simply shell companies Stewart formed to try and stay one step ahead of state and federal regulators, Bright said.
Because the Stewart family was so well known, people trusted him with their money. Investors game him from $10,000 to as much as $750,000.
“For some of these people, this was there life’s savings,” Bright said.
But Stewart was using the money to support what Bright called “a lavish lifestyle.” He owned four vacation homes, belonged to 12 country clubs, flew on a private plane and frequently traveled to Las Vegas, where he stayed in fine hotels such as the MGM Grand Casino and would spend “tens if not hundreds of thousands of dollars,” Bright said.
It was a suspicious investor who eventually exposed Stewart.
Stewart also had legal problems with the federal government.
The Securities and Exchange Commission (SEC) filed a lawsuit against Stewart, alleging that since 1989 he had “unlawfully” sold approximately $6 million in unregistered securities, according to a written statement from the SEC.
On March 25, The United States District Court for the Middle District of Georgia entered a permanent injunction against Stewart, ordering him to pay restitution and civil fines. Documents show Stewart consented to the order without admitting or denying the allegations.
The Federal Trade Commission (FTC) had also field charges against Stewart and nine of his companies, including the mortgage brokerage, for violating federal lending laws. At the time Stewart operated more than 60 branches of Stewart Finance in Georgia, Louisiana, Missouri, Illinois and Tennessee.
The FTC charged Stewart, described as a “subprime lender” in the agency’s complaint, with “frequently and aggressively” duping low income and elderly customers into taking costly consumer and refinance loans.
