COLUMBIA-A man being sued in civil court in connection with several investment scams filed for bankruptcy Friday in an attempt to settle nine fraud claims made against him.
Nathan Reuter, 48, of Columbia, the founder of the Vertical Group, was being sued by nine people claiming that Reuter and others from the business bilked them out of millions of dollars during their business dealings. He filed a petition for chapter 11 bankruptcy on Friday in the U.S. District Court for Western Missouri.
“This stays the prosecution of that lawsuit so we can liquidate those, and other, claims,” said James Daniels, Reuter’s attorney. “The goal is to liquidate other claims and settle the claims in the lawsuit using the bankruptcy trust.”
According to Reuter’s bankruptcy filing, he has between $100,000 and $1 million in assets and owes between $1 million and $100 million. The filing lists the nine people suing him as creditors, with more than $3 million owed to them. An unrelated $2,956 is listed for University Hospital.
“If Mr. Reuter is acknowledging that he owes these people money by filing for bankruptcy, then the bankruptcy will be the easiest way to settle this,” said David Brown, the creditors’ attorney. He said that mediation between the creditors and Reuter had been set up in the next couple weeks, and the matter could be settled then.
Vertical Group was founded in August 2003 while Reuter was president of Liberty Financial. Documents from the secretary of state stated that the business was involved in home mortgages, insurance, securities, real estate investment and corporate finance. The Vertical Mortgage Banc LLC and Cerberus Inc. were tied to Vertical Group.
In September 2005, Daryl Miles Brown, the president of Vertical Mortgage Banc and an executive of Cerberus, was arrested on suspicion of three counts of fraud. The U.S. Attorney’s office told the Missourian at the time that Brown was accused of using “standby letters of credit” to offer high rates of return on investments. Standby letters of credit are bank-backed security instruments. Brown was accused of stealing more than $3 million in the scheme.
Reuter was accused of setting up the accounts into which investors transferred money. Reuter claimed Daryl Brown used him to set up the scam.
In one case, Reuter approached his neighbor, Michael Trom, in November 2004 and urged him to invest in the scheme, the Missourian reported in 2005. Reuter set up an account in Texas for money to be transferred into and promised Trom millions in returns.
“I really wanted to believe it was real, but the farther it went, I knew it wasn’t,” Trom told the Missourian in October 2005.
Reuter owes Trom and his wife $525,000, according to the bankruptcy filing.
Vertical Group associates Bud Allen Wofford, Sylvester Mitchell and Dennis Cole have all pleaded guilty to federal charges of fraud in the case. Mitchell pleaded guilty to conspiracy to commit money laundering in March.
Wofford admitted that he told at least one person not to turn the company into law enforcement for their business practices. Investors were told their money was being held in Cole’s name in investments in Florida. Cole did not have the money.
David Brown said that the bankruptcy filing was unexpected.
“We’ll have to assess where we’re going to go with this next,” he said.
He said his clients could take their claims to the bankruptcy court or petition for the matter to be moved back into the civil courts for their lawsuit to continue.
Daniels said the filing is all about getting the claims settled.
“This chapter 11 filing is like many others my firm handles,” he said. “It’s not to escape any claims, it’s to settle them.”