Corporate Filings Hijacked of businesses

A Westwood man was sentenced to prison for stealing over $5 million from victims in a surety bond scam, officials announced Friday.

Tommy Lester Watts, 64, was sentenced to nine years and two months in prison for stealing over $5 million from victims by “purporting to sell bonds for large-scale construction and other projects, and for evading the payment of more than $1.2 million in taxes.”

He also was ordered to pay $8,995,879 in restitution.

Watts pleaded guilty on Feb. 16 to one count of transactional money laundering and one count of tax evasion, according to the U.S. Attorney’s Office. Watts also went by the names “Michael Nesbeth,” “Michael Kent,” and “Alex Mason.”

From Sept. 2016 to Sept. 2019, officials said Watts falsely claimed to be experienced in providing surety bonds and other financial guarantees for large-scale projects. He told victims he would assist them in obtaining financing for their projects through his various companies, including the Sherman Oaks-based Source One Surety LLC. 

Watts allegedly told victims that their bonds or guarantees were “underwritten by well-known companies and banks and that they were backed by assets in the millions or billions of dollars,” which was a lie, officials said. “To make his scheme appear legitimate, Watts hijacked the corporate filings of other companies and created fake employees and accounts for underwriters and banks.”

Through this method, Watts acquired around $5,238,344 from his victims which was spent on personal items such as classic and luxury cars, rent for high-end apartments and designer retail goods, court documents said.

The payments were laundered through the accounts of corporations that were not registered along with fake taxpayer identification numbers. Watts received $4,683,430 in income from 2017 through 2019, which was not reported to the IRS.

Watts was ordered to forfeit nearly $60,000 that was seized from two bank accounts, a Mercedes-Benz car and a Subaru SUV. He also agreed to pay the IRS a total of $4,226,535 in restitution, which includes at least $1,863,035 for his tax liabilities.

“It is hard to overstate how devastating this conduct was to [Watts’] victims,” prosecutors said in a sentencing memorandum. “Some lost businesses, some their life savings, others a property that had been in their family for over 200 years. They describe divorce, eviction, and physical and mental health ramifications…an inability to trust; lost reputations and dreams.”

The case was investigated by the FBI, Homeland Security Investigations, IRS Criminal Investigation, and the California Department of Insurance.