Man guilty of securities fraud gets new day in Coffee County court

A man sentenced to 20 years in prison in connection with investment fraud will be back in Coffee County Court.

Scott Alan Frye, formerly of Knoxville, Tenn., was sentenced to 20 years in prison by 12th Judicial Circuit Judge Tom Head April 13, 2011, after being found guilty of five counts of selling unregistered securities.

Frye was then transported to Jefferson County, where he faced a 74-count indictment for multiple securities law violations and where investor losses exceeded $2.2 million.

There he was sentenced to 25 years in prison after pleading guilty to 10 counts of securities fraud, causing the loss of more than $1.1 million to 19 victims.

Head set a hearing for Feb. 2 in Coffee County for Frye, who is serving his sentence in the Alabama Therapeutic Educational Facility.

In a hand written letter to Head, dated June 17, 2014, Frye asked that his sentence in Coffee County and Jefferson County run concurrently, instead of consecutively.

The Coffee County charges against Frye were the result of an investigation by the American Securities Commission Enforcement Division and the discovery that Frye had obtained $44,500 through loans taken out against retirement accounts of several Century 21 Real Estate agents in Enterprise.

According to a statement from the Alabama Securities Commission in 2011, the investigation revealed that the money obtained by Frye from the real estate agents was purportedly used to purchase notes in a Bahamian land development scheme. The real estate agents, the ASC said, had no knowledge that the funds from their retirement plans were being used to purchase unregistered securities and that Frye was using the money for personal use.

The ASC investigation led to a five-count indictment being returned against Frye by a Coffee County Grand Jury in November 2005, but prior to the indictment being served, Frye fled to the Philippines.

Frye was arrested in Manila by Philippine authorities in October 2009. He was extradited to Coffee County March 19, 2010 and held in the Coffee County Jail on $250,000 bond.

In a handwritten letter to Head, Frye asks that his sentences from Coffee and Jefferson Counties be allowed to run concurrently, instead of consecutively.

Frye was one of four people charged, and the last to be arrested, in connection with fraud cases that occurred between July 2000 and March 2005 in Alabama, Indiana, Florida, Mississippi and Tennessee.

“This is the leader of the pack,” then district attorney Gary McAliley said at Frye’s initial court appearance in March 2005. “He is a flight risk.”

In response, Frye told the court that he was never a flight risk and that he had left the United States before authorities had pressed any charges. He said he never changed his name and had remained in communication with family members while he was out of the country.

Frye’s bond had been set at $50,000 on each of five charges of transacting business in unregistered securities in what McAliley said was the county’s first international extradition case. Frye was the “Pioneer of Internet Fraud in the United States,” McAliley told the court.

The then district attorney said that Frye and co-defendants Michael A. Von Kanel, Teresa H. Von Kanel and Douglas D. Handley led their victims to believe money from the investments was being used for real estate development in Nassau, Bahamas.

Michael Von Kanel had been a John Hancock life insurance agent who administered employee retirement plans for Century 21, a real estate brokerage firm with offices throughout the Southeastern United States, until his indictment on the security fraud charges in November 2005.

Five real estate agents at the Enterprise Century 21 office had participated in the retirement plan Von Kanel presented. According to the subsequent investigation, Von Kanel had forged the local real estate firm owner’s signature on John Hancock loan disbursement forms totaling $139,500. The John Hancock Insurance Company repaid the Enterprise people for their losses, McAliley said.

The Von Kanels and Handley, Michael Von Kanel’s father-in-law, were arrested in December 2005 in Hoover and later transported to Coffee County. Their indictment was the result of a joint investigation with the Alabama Securities Commission.

Handley assisted federal security exchange officials with their investigation in 2005 and based upon that agreement, charges against him were dismissed. Both Von Kanels entered guilty pleas.