Lexington attorney found guilty of defrauding $2M from clients in real estate scam

A Lexington lawyer faces prison time for defrauding his clients of $2 million by concealing information about real estate properties he was encouraging them to invest in.

A U.S. District Court jury on Friday unanimously found Douglas Hawkins, of Richmond, guilty of investor advisor fraud, securities fraud and two counts of wire fraud.

Hawkins was an attorney, investor advisor representative and certified financial planner, and owned his own company, Rite Financial Group, according to court documents.

In May 2013, Hawkins began working with two companies in Oregon, True Wholesale Houses and Portland Funding, that offered investors the chance to purchase promissory notes secured by real estate deeds of trust. A promissory note is a written promise by one party to make a payment of money at a date in the future.

Hawkins offered the purchase of notes to clients as a way to diversify their investment portfolios, and was paid a commission for the sale.

Although the paperwork described a note and mortgage, according to court documents Hawkins led clients to believe they were purchasing ownership interest in a piece of real estate. According to the U.S. Attorney’s Office, the properties were located in Jackson, Mississippi.

Many of the properties clients were purchasing were not in good condition and needed substantial repairs, despite Hawkins telling them otherwise, documents stated.

Hawkins also convinced investors the property that secured their mortgage was rented, when it was not, and continued to make false suggestions about the properties.

“Hawkins withheld vital information about the properties when advising his clients to invest, including that many were uninhabitable, rent collection was burdensome, and that the properties were often subject to theft and vandalism,” the U.S. Attorney’s Office stated. “He also failed to inform his clients that their investment money would be used for purposes other than their properties, including paying other investors and buying a Harley Davidson for an employee.”

In late 2015, the Oregon-based companies began to default on interest payments to the note purchasers and went defunct in August 2016.

In 2016, Hawkins established RPB Rentals MS, LLC for the purpose of transferring ownership of the Oregon companies’ properties and managing the notes.

“Hawkins used RPB to purchase additional houses and borrowed money from new investors and secured the notes with deeds of trust,” court documents state. “In essence, RPB continued the same failed business model of (the Oregon companies).

“The business model fared a little better under RPB and income from the houses did not cover interest on the notes. As a consequence, many of the investors suffered significant losses of potential income and principal.”

According to court documents, in most instances, Hawkins led his clients to believe their money was designated for the purchase or renovation of a certain piece of real estate, but the money was “commingled,” or mixed, with other investors’ money and “used whenever Douglas Hawkins needed it.”

According to the U.S. Attorney’s Office, clients are alleged to have invested $2 million to Hawkins for the properties.

He was indicted in October 2021.

“We are certainly disappointed in the conviction, we feel that the jury considered the evidence and did not take their decision lightly, but we are certainly disappointed,” Hawkins’ attorney, Whitney True Lawson, told the Herald-Leader.

Hawkins’ sentencing is scheduled for April 23 in Lexington. He faces up to 65 years in prison for the charges, potential fines and a judgment of restitution.

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