A former Tucson businessman has been indicted on charges that he ran an investment scheme that defrauded at least five people of hundreds of thousands of dollars.

Arizona Attorney General Tom Horne filed the indictment against Herbert Kay on Jan. 10, alleging fraudulent schemes and artifices, theft, illegal control of an enterprise, money laundering and sale of an unregistered security.

Kay faced arraignment in Pima County Superior Court on Friday, where he entered not-guilty pleas to all charges of the 15-count indictment. He was represented by a public defender.

The attorney general has accused Kay of operating a Ponzi-type scheme where people invested money with the intention of growing the companies they invested in, but instead the funds were used to pay off previous investors.

“The attorney general and the FBI appreciate entrepreneurs and risk takers, but we don’t appreciate people who fraud out investors,” Assistant Attorney General Mike Jette said.

He said the attorney general and investigators with the FBI suspect many more people invested with Kay but have yet to locate all of the potential victims.

The indictment lists investments from five alleged victims totaling $200,000, but Jette said the amount of money invested could rise into the multiple millions of dollars.

Kay said the indictment took him by surprise.

“I’ve never even been interviewed before,” Kay said. “I think it’s wildly unfair.”

Kay said he did solicit investors in his business over several years, but did not take one investor’s money to pay off earlier investors.

Instead, the business simply failed, something for which he said he takes full responsibility.

“There’s just nothing nefarious here,” Kay said.

Kay, who now lives in the Los Angeles area, said he proactively contacted the investors who lost money and has repaid some of their losses and has written agreements to repay the others.

He insists that the only thing he can be accused of is being a poor executive.

“I’m guilty of being a bad executive,” he said. “Failing is not a crime.”

Kay previously wrote a regular business column for the Tucson Citizen newspaper and wrote a best-selling business advice book.

The next hearing in the case is scheduled for Feb. 25.

Contact reporter Patrick McNamara at 573-4241 or pmcnamara@azstarnet.com. On Twitter @pm929.