When the Texas State Securities Board dropped the hammer on Brooklynn Chandler Willy almost six years ago, it set her friend Paula Vacek on a path to getting convicted for wire fraud.
Vacek was laundering money to Willy – some from Lubbock-based Ferrum IV.
Willy could no longer take that money out in the open – and she was ordered to pay back clients more than $2.7 million in commissions. Why? Because she accepted an agreement with the Texas State Securities Board (TSSB) for the sale of unregistered securities.
Vacek, facing her own trouble, secretly recorded Willy for federal agents before taking a plea deal this year.
Willy and Vacek are both awaiting sentencing after pleading guilty earlier this year to federal charges. Among the charges Willy admitted: Conspiracy to Commit Money Laundering.
That brings us to the present. Joshua Allen and Michael Cox of Lubbock are on trial in San Antonio for securities fraud and conspiracy. Vacek testified Thursday.
The two Lubbock men have been accused in civil litigation of using Lubbock-based Ferrum Capital (and related companies) as a Ponzi scheme. Federal officials have also occasionally called it a Ponzi.
Before Vacek took the stand
Before Vacek took the stand, Greta Cantwell, assistant director of the Enforcement Division of the TSSB, outlined the board’s investigation of Willy and Ferrum.
Willy was a registered investment advisor. As an independent contractor, she had to work under a firm. She was terminated and registered her own firm, Cantwell said.
Willy’s filing was flagged, Cantwell said, because she was terminated for selling alternative investments – Ferrum promissory notes.
The TSSB disciplined her, saying they’d register her firm, but:
- Could no longer sell Ferrum products.
- Had to return $2.75 million in commissions.
- She was suspended for a year.
“The investments in Ferrum were not suitable for those investors and they were owed fiduciary [information],” Cantwell said.
The TSSB also started monitoring Willy.
“She was subject to inspection and had to give us information. We received notice and heard she was not fully complying,” Cantwell said.
TSSB requested more financial and bank records from Willy.
The prosecution asked Cantwell if Willy receiving funds from Ferrum would violate her agreement.
The defense objected but was overruled.
Allen’s attorney Eddie Mendoza then asked Cantwell if she was involved in the Ferrum investigation along with Willy.
Yes, she answered, saying they were separate but related investigations.
Mendoza then asked if she saw things in the Willy investigation that did not involve Allen, and she said Ferrum was involved.
Mendoza wanted to push further but his line of questioning was shot down by an objection from prosecutors which was sustained by Judge Fred Biery.
Original charges against Willy
We mentioned earlier in the story that Vacek wore a wire to help federal investigators gain evidence against Willy.
The original charges against Willy were Obstruction and False Statement.
At first, Willy was indicted alone – months before Allen and Cox.
About a month before she was indicted, FBI agents interviewed her. She lied.
According to the indictment she was “falsely stating to federal agents” that one of the documents from her customers was a “true reflection” of what happened. It wasn’t, according to the indictment.
She took a deal for 10 federal charges, which we covered here.
Vacek on the stand
Vacek worked as an accountant and was close friends with Willy.
After Willy got into trouble with the state board, she “asked me to receive funds and then send them to her bank account,” Vacek said.
The money was sent to Cold Moon Holdings.
“What’s it do?” she was asked.
“Nothing. It’s a shell company,” Vacek answered. “[Willy] asked me to receive deposits and wire them to her.”
Vacek was asked why.
“She was under investigation from the [board] and money needed to be filtered through Cold Moon Holdings,” Vacek said.
So $576,000 from Ferrum IV and $500,000 from a client of Willy’s was sent to the Cold Moon Holdings account at First Commercial Bank in New Braunfels, Vacek said.
Vacek attempted to wire it to Willy’s account but the bank president told her they wouldn’t approve the wire because they knew about the Willy investigation, she said.
Vacek told the court she called Willy, who told her she’d get back to her.
Willy called back and said an account would be set up with a Lubbock bank, making it easier for the transfer to work, Vacek said.
Willy talked to someone at Ferrum, but Vacek didn’t know who, she said. An account was set up at First Bank & Trust, then she transferred money to Willy.
Willy asked for a second transfer, telling Vacek she needed it to pay back commissions.
“The money couldn’t show in her account,” Vacek said.
When asked if Vacek thought this was OK, she said no.
So why did she do it?
“I was trying to help her in ways she helped me,” Vacek said, inferring Willy helped her with a serious crisis, but did not offer more.
“I wish I hadn’t,” Vacek added.
Prosecutors showed $350,000 was sent from Ferrum to the Cold Moon Holdings account in Lubbock in early 2022. A day later, that amount was sent to Willy.
Vacek cross examined
Allen’s attorney Anthony Box then cross-examined Vacek. He asked if she expected testifying would give her a lighter sentence.
She said that was her hope but had no expectation.
Box brought up a different situation where she convinced two people to invest $200,000 and she used it for her own benefit.
“Was Ferrum involved?” he asked and Vacek said no.
Read our series on Ferrum
LubbockLights.com covered Ferrum for more than a year-and-a-half.
Click here to see our series of stories.
The case against Vacek
Records in the Vacek case said from late 2021 through early 2024 she accepted money from a couple “… by means of materially false and fraudulent pretenses, representations, and promises.”
“Instead of being invested, Vacek used this money for her own purposes,” the criminal charge against her said.
But she also played a role for Willy in Ferrum IV, according to records filed in the Allen/Cox case. Assistant U.S. Attorney Joseph Blackwell wrote up allegations that Allen and Cox used Ferrum IV to move money to Vacek, who in turn moved it over to Willy.
“In 2019, an elderly couple, Randall and Terry McGuire, invested $200,000 in Ferrum Capital. In the spring of 2021, Willy and Cox convinced the McGuires to make two additional investments totaling $700,000 in Ferrum IV,” Blackwell wrote.
“The McGuires’ money itself was moved from Ferrum IV to Vacek to Willy,” Blackwell’s documentation said.
“… It is evidence of a financial transaction ‘designed in whole or in part to conceal and disguise the nature, location, source, ownership, and control’ of investor proceeds,” Blackwell wrote as he was making the case for a money laundering conspiracy.
Vacek’s plea agreement was not publicly available – but according to the San Antonio Express-News, Vacek was ordered to pay more than $780,000 in restitution. Blackwell previously said in open court that Vacek had been cooperating with investigators for about two years and was expected to testify at the Allen/Cox trial, according to the Express-News.
