Defunct Rindge-based firm denies Ponzi scheme allegations made by Fitzwilliam construction firm's lawyersBy DAVE SOLOMON
New Hampshire Union Leader
September 16. 2012 6:47PM
Attorneys for Park Construction of Fitzwilliam say their clients were bilked of millions of dollars in a Ponzi scheme perpetrated by Aaron Olson and his uncle, Eric Olson, through the now-defunct Rindge-based KMO Associates. The response from Eric Olson's attorneys, filed on Sept. 7, can be summed up in two words: Prove it.
The Park Construction lawsuit, filed in late June, forced into the public domain circumstances surrounding the demise of KMO, which had been the subject of rumors circulating in the Monadanock region for months about millions of dollars lost by investors, most of whom share family or church connections in the Rindge and New Ipswich area.
The lawsuit was filed June 30 by attorney Peter S. Cowan of Sheehan, Phinney, Bass and Green in Manchester. It details the way the alleged scheme operated, at least according to the lawyers representing the three brothers who owned Park Construction - Steven, Mark and David Norby.
Based on evidence and testimony presented in preliminary hearings in July, Merrimack County Superior Court Judge Richard B. McNamara awarded Park Construction a $15.2 million attachment against Eric Olson and his son, Ted, after ruling that Eric was engaged in a partnership with Aaron Olson, and that Park has a reasonable chance of winning its claim to the millions at stake.
McNamara gave lawyers for Eric Olson a deadline of Sept. 7 to file their response, which they did. Eric Olson's main defense appears to be that he was just another investor and had little knowledge of how his nephew, Aaron Olson, ran KMO. In responding to many of the charges, Eric Olson's attorneys simply state, 'Eric Olson is without sufficient information to either admit or deny the allegations contained in this paragraph and therefore puts the plaintiffs to their proof.'
The response does contain some specific denials. Eric Olson denies he was the chief beneficiary of any Ponzi scheme. He denies that he pressured Aaron Olson to provide him with grossly disproportionate distributions from KMO, and he denies that any distributions made to him were the cause of the collapse of KMO.
He denies that he pressured Aaron by making threats of criminal prosecution or that he pressured Aaron to sign and validate fraudulent account documents.
At the heart of the lawsuit is the claim that most of the $15 million invested by the Norby brothers was simply turned around as payouts to Eric Olson and his son, Ted, which is denied in the response.
'Eric Olson further states that at no time was he aware of the plaintiff's investment with KMO prior to initiation of this lawsuit. At all times, Eric Olson reasonably believed that the distributions he received from his KMO account were principal or income derived from legitimate investments made with funds he deposited with KMO, Aaron Olson and AEO (a firm Aaron ran before he created KMO).
Attorney's for Eric Olson filed a motion for reconsideration on Aug. 10, asking Judge McNamara to reconsider his ruling that Eric Olson was engaged in a partnership with Aaron Olson. That motion and several others filed since the case was initiated were scheduled for a hearing on Sept. 13. Lawyers for both sides were in court that day, but there was no hearing. Instead, they met with a new judge assigned to the case for a scheduling conference, only to emerge with no new dates set for hearings and no information as to why the case was reassigned.
Judge McNamara issued an order dated Sept. 10 in which he recused himself from the case, which has since been reassigned to the only other judge at the Superior Court in Concord, Larry M. Smukler.
Laura Kiernan, communications director for the state court system, said judges are not required to reveal the reasons they recuse themselves, and rarely, if ever, do so.
McNamara's narrative opinion supporting his decision to maintain the attachment on the assets of Eric and Ted Olson made specific reference to the fact that Aaron Olson refused to testify at the early hearings in the case, asserting his Fifth Amendment right against self-incrimination.
On Sept. 7, the date Ted Olson's reply was submitted, Aaron Olson's attorney submitted a motion for protective order that would prevent Aaron from being subpoenaed to appear at the Sept. 13 hearing or at any additional preliminary and pretrial hearings in the case.
'Aaron Olson had been subpoenaed previously for a hearing on July 20. At that hearing, he invoked his right against self-incrimination in response to all questions relating to the activities of KMO and investments by Eric Olson. Aaron Olson will invoke his rights against self-incrimination at the upcoming hearing and in future hearings on this matter,' wrote his attorney.
Attorneys for KMO replied that 'a protective order to prevent Aaron from ever testifying again on these issues is grossly unjust and unreasonable. His motion should be denied.'