State wins $937,000 judgement against Cedar Rapids man in fraud case

Iowa Attorney General Tom Miller's office has won a civil judgement for more than $1 million against a Cedar Rapids man and eight businesses he controlled in connection with an investment fraud case.

Unfortunately for investors who lost money, it may be a hollow victory.

Alan Lucas, 1259 Golfview Dr. NE, was accused of engaging in a pattern of fraudulent conduct for the purpose of bilking investors out of more than $150,000 they believed they had invested with Noah Thomas Aulwes of Cedar Rapids.

Aulwes, described by court documents as an associate of Lucas's, operated Covenant Asset Management, and general partner and investment manager of Covenant Investment Fund. A criminal complaint claimed Aulwes misappropriated about $200,000 of investors' funds for his personal benefit and to make Ponzi-type payments to other investors, along with about $90,000 of clients' funds that were invested in the Philippines.

Aulwes began soliciting investments in 2007 from older residents of Iowa and North Carolina. On Aug. 28 of this year, he pleaded guilty to felony charges of securities fraud, first-degree theft and money laundering.

Sixth Judicial District Judge Nancy Baumgartner sentenced Aulwes Monday to 10 years in prison on each of the three charges but ran them concurrently. Aulwes will serve 10 years in prison and was also ordered to pay $363,000 in restitution.

Lucas attended Aulwes' sentencing and tried to say he was a victim like others in the courtroom and wanted to give an impact statement, but Baumgartner stopped him. She sternly told him he wasn't considered a victim in this proceeding and advised him to not say anything because he has pending criminal charges.

In addition to the civil judgements, Lucas faces criminal charges of ongoing criminal conduct, first degree theft and money laundering.

Miller's office claims Aulwes transferred control of the Covenant Investment Fund and its remaining assets of about $189,000 to Lucas in May 2010. Lucas also assumed a $60,000 debt owed by Aulwes to the fund, but investors were not informed of the loan.

Aulwes closed bank accounts for Covenant Investment Fund and Covenant Asset Management and transferred investor funds totaling about $189,000 into accounts controlled by Lucas. Within days, Lucas drew a $9,000 check from the Covenant Investment Fund account to cover overdue rent he owed on behalf of his company, Asherlee Management.

Between May 2010 and May 2011, Miller's office contends that Lucas diverted additional investor funds, using the money to cover personal expenses as well as business and payroll expenditures unrelated to the management of Covenant Investment Fund.

On May 16, 2011, Lucas admitted to law enforcement officials that he used $23,000 of investor funds to purchase a BMW vehicle. On the same day, Linn County District Court issued a search warrant authorizing the Iowa Attorney General's office to seize the BMW and six U.S. Bank accounts controlled by Lucas containing about $4,000 of investors funds.

Shortly after the search warrant was issued, the Iowa Attorney General's Office became aware of an additional bank account containing investor funds controlled by Lucas and held in the name of Asherlee Management. The account balance was approximately $60,000.

On May 17, 2011, Lucas withdrew $5,000 in cash and obtained a bank check for $54,606.84, which was deposited in a personal account located at another bank. A second search warrant was issued and three accounts controlled by Lucas containing a total of $58,719 were frozen.

On Feb. 10, 2012, the Iowa Attorney General Office filed a petition seeking monetary damages, appointment of a receiver, injunctive relief and other remedies against Lucas and companies he controlled. The petition contended that Lucas had engaged in consumer fraud and ongoing criminal conduct.

On Sept. 12, Judge Fae Hoover-Grinde approved an order that entered default civil judgments against Lucas and companies that he controlled.

Lucas and the eight companies were ordered to pay $912,330 for victim restitution, $200,000 for violations of the Iowa Securities law, $360,000 for violating Iowa's Consumer Fraud Act, $23,750 for attorneys' fees and $830 for litigation costs.

On Nov. 28, Chief Judge Patrick Grady denied another motion by Lucas to have the civil judgements against him and the companies he controlled set aside.

Assistant Attorney General William Brauch, director of the Consumer Protection Division, said his office will attempt to collect the judgement against Lucas and the companies he controlled primarily for victim restitution. Brauch admitted that Lucas may not have the assets or finances to pay the judgement.

“Collecting judgements is always an issue in cases like this, but we will do our best,” Brauch said. “We're hoping this will be the final ruling in this matter, but we know there is still the possibility of appeal.”