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Father, son arrested on fraud counts By JESSICA SMITH -- Armed with secret grand jury indictments, Medford police on Friday arrested a 59-year-old man and his son for bilking elderly Rogue Valley residents out of hundreds of thousands of dollars. Johnnie Lee Scott and his son, Richard K. Scott, 31, both of Medford, face racketeering charges after eight men and women in Jackson and Josephine counties lost $700,000 in investments made between July 1996 and April 1997. All but one of the local investors are elderly, ranging in age from 66 to 87. The youngest investor is 24. Some invested discretionary funds while others handed their entire nest egg over to the Scotts. Their investments ranged from $5,000 to $300,000, police said. Detective Steve Edson, who led the investigation, said several of the investors face financial troubles. One woman lives on welfare and can't afford a phone, another may lose her house and a third may not be able to afford her rent, he said. But in 1996 and 1997, the investors thought they were betting on a sure thing -- death. The Scotts, who ran New Life Agency Inc. as agents for Personal Choice Opportunities, a national securities company, specialized in viatical settlements -- investments that bank on the deaths of terminally ill patients who sell their life insurance policies at discounted rates to get cash for medical expenses. Investors were guaranteed repayment, plus a rate of return as high as 50 percent, when the policyholder died and PCO collected the full benefit, police said. But the parent company, which was shut down in 1997 for mismanaging funds, didn't buy the policies and couldn't repay its investors, authorities said. Although it was PCO that misappropriated the funds, the state holds the Scotts responsible as well. Under Oregon law, securities brokers must be licensed in the state. The Scotts were not. Add to that the personal loans solicited by the Scotts to help them build up their business, and police say they had grounds for an arrest. The Scotts have outstanding promissory notes valued between $5,000 and $130,000, police said. With the three-year statute of limitations nearly expired and their investigation of 440 pieces of evidence -- mostly financial documents -- finally complete, Medford police decided to present their case to a Jackson County grand jury Thursday. The men were arrested Friday on grand jury indictments charging them with racketeering, first-degree aggravated theft and unlicensed security transactions. Johnnie Scott also was charged with first-degree criminal mistreatment. Both men were lodged at the Jackson County Jail. They were held on $2 million bail apiece. Today's Edition : News | Sports | Business | Weather | Tempo | Classifieds Mail Tribune Copyright � The Mail Tribune 2000, Medford, Oregon USA