Two say they will not cooperate if called

The former chairman of failed Southwest Exchange and his daughter have made their first public statement about the company's failure, saying they will take the Fifth Amendment against self-incrimination if forced to testify.

Donald McGhan, the former chairman of Henderson-based Southwest Exchange, and his daughter, Nikki Pomeroy, signed affidavits on April 26 saying they would take the Fifth Amendment against self-incrimination if they were called to give depositions.

Southwest Exchange helped real estate investors delay taxes on gains from property sales. Under a provision in federal law, real estate investors may defer capital gains taxes if they roll the sales proceeds over into another property. Companies like Southwest Exchange promise to hold the proceeds from real estate property sales until the investor buys a replacement property.

Southwest Exchange shut down in late January, but $95 million belonging to 130 investors was missing.

"We're talking about people who lost their life savings in this case. It's an absolute travesty that it happened," said Brad Johnston, an attorney representing investors. "I think people ought to be going to jail."

The FBI and the Nevada Secretary of State's securities division have been investigating the Southwest Exchange collapse.

In the affidavits, Pomeroy said she and her father managed or had ownership links to the three companies -- Blackstone Ltd., Sirius Partners and International Integrated Industries.

Pomeroy was manager and Shirley McGhan, wife of Donald McGhan, owned Blackstone Ltd.

Defense attorney Mark Dzarnoski, who represents Donald McGhan and Pomeroy, did not return a call for comment.

Attorney Robert Brace of Santa Barbara, Calif., said the affidavits corroborate the class action lawsuit he filed in U.S. District Court on behalf of real estate investors.

Blackstone issued promissory notes for $50 million but had no business, Brace said. "Blackstone is a bogus entity. It had no employees, place of business, products to sell or services to render for a fee," Brace wrote in an open letter to investors who relied on Southwest Exchange.

"There could be no conceivable purpose for Blackstone, other than to steal money," Brace said Thursday.

Blackstone was used to "wash" $75 million that was pulled from Southwest Exchange and McGhan used International Integrated for "worldwide jet travel, limousine services, food and hotels," according to the document signed by Brace.

McGhan obtained $65 million from real estate investors' bank accounts to lend to Medicor Ltd., Brace said.

Efforts are being made to sell two assets belonging to Medicor -- a breast implant manufacturing company in France and another in the United Kingdom, Brace said. The French company, Eurosilicone, was purchased in 2004 with real estate investors' money, according to plaintiffs's attorneys.

Brace anticipates that most of the money recovered for plaintiffs will come from third parties, including insurance companies and Medicor. McGhan resigned as chairman and director of Medicor on Jan. 24.

In another development, plaintiffs attorneys are naming new defendants in their attempts to recover money for investors who lost money.

Attorney Johnston on Thursday filed a master complaint in the receivership case, naming 40 defendants, including directors of Medicor.

The directors include Mark E. Brown, president of YourBuyer Worldwide and former president of R&R Partners, and Thomas Y. Hartley, former chairman of Southwest Gas Corp. and former area managing partner of Deloitte Haskins & Sells.

Hartley said his attorney advised that it was "inappropriate for me to say anything."

Attempts to reach Brown for comment were unsuccessful. Also named as a defendant is Betty Kincaid who sold Southwest Exchange to McGhan.

Earlier this week, attorney Mark Ferrario filed an application seeking to have related companies put in receivership.

In the court document, the attorney said Southwest Exchange was a "sequel" to "a fraud perpetrated by the same cast of characters using the same pattern of fraudulent conduct." He referred to Medical Device Alliance, which McGhan founded in the 1990s and which raised millions of dollars from 270 individuals who invested through a private placement.

Within days of getting the money, "McGhan diverted more than $20 million of MDA funds" to some of the same entities involved with Southwest Exchange, the court document said. It points to a Nevada Supreme Court decision in 2000 that upheld appointment of a receiver who "confirmed most, if not all, of the Nevada shareholder's allegations of waste, fraud and gross mismanagement by McGhan" and others.

Shares in Medicor trade infrequently but last sold in the over-the-counter market at 8 cents, which gives the company a market value of $1.9 million, according to Yahoo Finance.

Southwest Exchange is in receivership overseen by Clark County District Judge Elizabeth Gonzalez. But Brace has filed a class action lawsuit in federal court, and another attorney filed a petition to push Southwest Exchange into involuntary bankruptcy.