Chattanooga businessman Doug Dyer is facing a guideline range of 87-108 months in federal prison for his part in a scheme that authorities say left some 258 investors with losses of more than $3.5 million.
His attorney, Lee Davis, is asking that he be sentenced below that range. He said Dyer has a serious heart ailment and is essential to the care of his brother and mother.
Dyer and James Brennan earlier pleaded guilty to wire fraud and tax evasion. Dyer also pleaded guilty to criminal contempt. Sentencing is Sept. 29 by Federal Judge Travis McDonough for both.
Attorney Davis said in 2010 that Dyer and Brennan "believed that financial markets were improving and that there existed an opportunity to help small companies who were looking for a shareholder base so that they could become listed publicly. They envisioned matching these small companies with Form 10 shell companies in what is known as a Reverse Merger.
"This is a well understood financial practice. Traditionally, private companies become publicly traded by filing a registration statement under the Securities Act of 1933. Another established method for private companies to go public is through a Reverse Merger with a public shell company.
"In a Reverse Merger, a private operating company or its business operations are acquired by or merges into a publicly traded shell company known as a Form 10 shell. Form 10 shells are often inactive with nominal operations and assets.
"Reverse Mergers can be structured in a number of ways. The ultimate goal of all Reverse Mergers is to take a private company public without the necessity of filing a registration statement with the SEC and the complexity and cost of that process. However, how Dyer and Brennan went about potential Reverse Mergers with their companies, Scenic City F-10 I-VIII, was wrong.
"To begin with, Dyer and Brennan sold more than the stated $800,000.00 initial capitalization that they said they were raising. The second mistake was that they did not notify their investors that they had raised these additional funds.
"The criminal conduct occurred when they used the proceeds of the sales of the shares in Scenic City F-10 I-VIII from investors (the victims in this case) to run their business and pay their personal salaries. They each took money from Scenic City F-10 I-VIII for their personal use without disclosure of these disbursements to investors or obtaining prior investor approval.
"Dyer justified the payments in his own mind because the money came from accredited high-risk investors who bought shares that Dyer and Brennan owned. Since Dyer and Brennan owned the shares, Dyer and Brennan thought using these proceeds would be acceptable after the Reverse Merger took place. Dyer expected to easily find small companies that needed a shareholder base to merge so that they would trade publicly. However, investment markets had not fully recovered from the 2008 collapse, and the belief that the Reverse Mergers would be successful was misplaced. No Reverse Mergers occurred."
Attorney Davis said Dyer takes care of his brother, Steven, who suffered a traumatic brain injury in a 1989 car wreck. He stated, "For the past 25 years, Dyer has been Steven’s primary caregiver. Steven can’t drive and is dependent on Dyer for his transportation and daily needs. For example, Dyer does all grocery shopping, supports medical attention and health related services for Steven."
He said Dyer began working as a general laborer at a local manufacturing plant at $12 per hour on Jan. 26. He said he has become an invaluable employee.
Attorney Davis said Dyer's mother was in a severe car accident on Jan. 29, and he "has been the constant contact and off-site caregiver for his mother, in addition to his brother Steven."
The filing says Dyer "has a serious and potentially life-threatening heart condition."
Attorney Davis said, "Dyer’s brother Steven is solely dependent upon him for doctor appointments, transportation for Steven’s part-time job at UTC, rapid response to medical and emotional emergencies, household activities, doctor’s appointments, and general emotional support and stabilizing presence. Dyer is irreplaceable to his family members as a whole, and he is irreplaceable to the care and well-being of his brother, Steven."
There are excerpts of letters of support for Dyer:
Alison Dyer, wife of Dyer: “Doug has always strived to be a good servant, a loving and supportive husband, a caring and devoted brother, son, and uncle, and a loyal and dependable friend.”
Rev. Mark Flynn, Senior Pastor at Christ United Methodist Church: “His love for others is obvious. Over these last years, in long one-on-one conversations, I have watched him struggle with deep remorse about how all these events have unfolded.”
Jan Rhodes, friend of Dyer: “During all the struggles that Doug is facing now, he has also taken on the responsibility of his mother that has needed medical care. Doug has stepped up and made sure that his mother has the best care and is in the best facility for her medical needs. I believe it will be difficult for his mother not to have him available whenever she calls.”
L.J. Kilby, friend of Dyer: “Doug is someone who has been and can continue to be an asset to our community.”
Mark Harvey, friend of Dyer: “Doug has always been a support during difficult times. He is the first to check on you when you are sick or going through a difficult situation. Doug is not only concerned about his friends but his friends’ families as well. He is the first to check on my parents when there are trying times.”