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Austin men face securities fraud charges in ATM scam

December 4, 2003

AUSTIN, Texas - South Austin businessman Larry Don Johnson is in custody with bail set at $1 million after being accused of securities fraud in a scam that involved luring investors with promises of high returns on ATMs, according to the Travis County District Attorney's Office.

Warrants have been issued for two of his alleged accomplices, Danny Ray Digman and Lori Lea Burrow.

According to a report in the Austin American-Statesman, the scam attracted more than $3 million in investments with the promise that the ATMs -- which sold for $3,000 each -- would yield returns of 41 percent or more annually.

The three men operated a company called Payment Works, which sold the ATMs. The company has also done business as XPress Pay ATM.

Johnson, Digman and Burrow are each charged with securities fraud in an amount of more than $100,000, sale of unregistered securities and sale of securities without being registered as a dealer, all state charges. They face up to life in prison if convicted of securities fraud. The other two charges carry a penalty of up to 10 years behind bars.

Public records show that Digman, the company's vice president, has a long criminal history. He was found guilty of larceny in 1979, theft over $200 in 1981 and two counts of theft over $750 in 1987. He was also convicted of making false, fictitious and fraudulent tax claims in 1994. He was sentenced to nearly five years in prison and three years of probation on those charges.

Johnson has a robbery and theft conviction, records show, and is on parole until 2005.

According to the American-Statesman, Payment Works placed ads in Forbes magazine earlier this year seeking investors to buy ATMs and promising a return of 70 cents per transaction, according to search warrants and arrest affidavits.

The company said in brochures that ATMs averaged between 175 and 225 transactions each month, court documents said.

Payment Works sent false statements each month to investors showing that the ATMs had generated substantial profits, even though the machines did not garner significant transactions, the documents said.

Payment Works has been under investigation since July. Authorities searched its offices in October and seized numerous records and computer documents showing that Digman, Johnson and Murrow received a "commission" of about $400,000 and that the company took in $3 million from January to July, authorities said.

Officials with the Texas State Securities Board also sent an emergency order to the company in October to stop conducting business.

State officials have appointed a Houston lawyer to freeze the company's accounts and work to get investors' money back. However, officials said the ability to reclaim such investments is generally unsuccessful.