Victims try to recoup losses from investment scam

EUGENE, Ore. (AP) - Authorities say victims of an investment scam are unlikely to get much of their money back from James Scott McKee, who pleaded guilty last month to nine counts of aggravated theft and securities fraud.

But the victims aren't giving up, and the Eugene Register-Guard reports that some are going to court to seek compensation from one of McKee's former partners.

Seventeen people have joined in a civil lawsuit against several investment partnerships and funds managed by the former partner, Steve Master. They're seeking $2.5 million, alleging violations of state securities laws and claims that the Master partnerships and funds are liable for the losses because McKee was a partner in those businesses at the time they invested.

Richard Yugler, the Portland attorney representing Master, said no one has ever accused Master or his companies of improper conduct and said both also are victims of McKee.

"Steve Master has fully cooperated with every police investigation into Scott McKee," Yugler said. "We've had our own complaints about Scott McKee. We've had our own direct financial losses because of Scott McKee."

Master, a Eugene developer, is seeking dismissal of the suit. He severed all ties with McKee in 2010, before police served a search warrant on McKee's home and office and arrested him the following year. All but one of the crimes in the indictment against McKee took place between 2008 and 2010, when he was actively recruiting investors to the Master funds and in some cases diverting their money into other projects or for his own use.

It's unclear exactly how much money investors lost.

Investigators have alleged that McKee at times lied to investors about the level of risk and put money from customers seeking low-risk investments into high-risk projects or funds.

McKee is scheduled to be sentenced in March. Prosecutor William Warnisher of the Lane County Attorney's Office says he expects to ask the judge to order McKee to pay about $500,000 in restitution. Prosecutors have agreed not to ask for more than four years in prison and won't oppose allowing him early release for good behavior.

McKee has almost no assets. On Oct. 1 he was granted Chapter 7 bankruptcy liquidation. However, court judgments cannot be eliminated through bankruptcy.

Even if he were able to pay off $500,000 in restitution, investors still will fall short. Court documents indicate that just three of the nine victims named in the indictments invested and mostly lost a total of $684,000.

"Because of the bankruptcy, we don't have reason to believe he has assets sufficient to make reparations," Warnisher said. "We don't believe that he has any hidden assets."