Examples of Ponzi Scheme Fraudulent Investments
Lake States Inc., which was a commodity fund ponzi, took 400 investors for $60 million.
The promoters hosted lavish parties where investors discussed their good fortunes amongst themselves, creating a collective sense of trust and well-being.
For The Good of All Men
Martin Frankel AKA David Rosse AKA Eric Stevens absconded with $335 million after he found out that laxly regulated insurance companies are the perfect target for scam artists as they collect regular cash premiums that are paid out only as policies come due.
Despite being banned for life from securities trading in 1992 - after complaints that $1m had disappeared from a fund he managed - Frankel was able to set up Liberty National Securities, an unlicensed brokerage.
He took over Liberty National, which sold burial policies, then, using its assets, went on to gain controlling stakes in insurance firms in Arkansas, Mississippi, Missouri, Oklahoma and Tennessee.
By issuing false statements to company trustees he siphoned off $208 million in cash reserves for an extravagant lifestyle consisting of jets, lavish parties and a bevy of live-in ladies.
A college dropout, obsessed over the financial markets, he also bought side-by-side mansions in Greenwich Conn. worth $3 million each with proceeds from his scheme.
Wishing to draw in more money he created a benevolent foundation which purported to not only generate high returns for investors but would acquire insurers and use the profits for charitable purposes.
While pitching it he displayed an in-depth knowledge of the saints, especially St. Francis, who was known for helping the poor.
A well-connected New York business consultant introduced Frankel to various movers and shakers who Frankel hoped would add legitimacy to the St. Francis foundation.
It soon attracted investments from major church groups but eventually he was forced to flee when authorities intervened.
While eleven insurance companies in five states were horrified to learn of the missing assets, so were some prominent people whose names had been attached to the charity without their permission.
Retired CBS newsman Walter Cronkite said he was contacted by an old friend, a priest living in Rome, and asked to become a member of the St. Francis Foundation's advisory board.
It was described as a new organization that was being founded to aid charities involving children, health and education.
Cronkite said he refused, mainly because he was already busy with several other charities.
Former Chrysler chairman Lee Iacocca was also listed, although he, too, withheld giving his permission.
After Frankel disappeared, Cronkite learned that despite his refusal, his name had been listed as a member of the board on the foundation's mission statement.
"Anybody who says he's got a billion dollars and is willing to give it away is likely to attract an awful lot of people," said Cronkite.
Monsignor Emilio Colagiovanni, 82, pleaded guilty to conspiracy to commit wire fraud and to launder money while assisting Frankel in using the Saint Francis of Assisi Foundation to acquire insurance companies, while concealing Frankel's involvement, according to a complaint which charges both wire fraud and conspiracy to launder money.
The monsignor said in his statement that the plan was for Mr. Frankel to deposit $50 million into the Monitor Ecclesiasticus Foundation's bank account.
The money would then be transferred to Saint Francis and Mr. Frankel would donate an additional $5 million to Monitor Ecclesiasticus or other organizations it designated.
Mr. Frankel never transferred any of that money, but eventually gave Msgr. Colagiovanni $40,000, which he deposited in Monitor Ecclesiasticus's account at the Vatican bank.
Saint Francis never ended up acquiring any insurers, in part because regulators became suspicious about the foundation. Insurance companies and regulators were led to believe that the source of the foundation's funds were the Holy See and other Catholic entities when Frankel was the actual source.
A state initiated lawsuit says the Vatican was associated with the fraud through the actions of Colagiovanni in his role as a senior member of the Vatican government, and that other senior Vatican officials knew of the schemes but did not act to stop them, so they are seeking the $200 million-plus the amount U.S. insurance companies lost.
Frankel was to give $55 million to the Vatican as a charitable foundation whereby the Vatican would keep $5 million and Frankel would retain control over the remaining $50 million.
While the Vatican never received funds from the foundations nor furnished any from the $200 million, under the racketeering law, a party involved in the conspiracy is responsible for the entire amount stolen.
A Vatican spokesman said Colagiovanni was a retired priest at the time of the alleged scheme and was acting "as a private Italian citizen."
Frankel, 47, after pleading guilty to 24 federal charges including racketeering, securities fraud and conspiracy could face a sentence of 150 years in jail and $6.5m in fines.
Prosecutors have said they will back a lower penalty if he helps recover some of the stolen funds beyond the $70 million already recovered.
Seven other people have entered guilty pleas in the case. Three of Mr. Frankel's associates are expected to face trial early next year.
12/04 - A former powerhouse fund-raiser for the Republican party and the Catholic church pleaded guilty yesterday to taking part in financier Martin Frankel's scheme to loot insurance companies in five states.
Thomas Bolan, 80, a lawyer of New York City, introduced Frankel to high-ranking church officials and helped him run a phony Roman Catholic foundation used to hide the plot.
We Can't Make Enough
In one investment program called Southern Tool & Equipment Repair & Investment Services victims were told that their invested funds would be used to purchase used tractor-trailers that were being reconditioned and sold for a profit to large corporations such as Wal-Mart and K-Mart.
Promoters told investors that they operated a distant plant which bought, reconstructed and sold used tractor-trailers but it was actually an elaborate Ponzi scheme that defrauded 31 investors out of more than $800,000.
They never purchased or sold any tractor-trailers, were not licensed investment brokers and they spent a large sum of the swindled money for personal expenses.
You're a Bad Man Charlie Brown
Charles Thomas Brown, age 66, DBA Preferred Trust Company, was sentenced to 17 ½ years for operating a $23,000,000 ponzi scheme that involved over 300 victims.
He pled guilty to one count of Fraudulent Schemes and Artifices and one count of Theft, both class two felonies.
He issued investors six month "promissory notes" that were to earn a return of between 8% and 18%.
At the end of a six month term, he simply sent the investor a new promissory "note" that canceled the previous one which automatically "rolled over" for another six month term.
Unless the investor contacted him and requested that the investment be paid back he had control of all deposits on which no interest was actually being generated.
Pledge With an Edge
A man who ran a $300 million ponzi scheme has been indicted on charges of defrauding more than 500 people in 17 states.
He promised to pay interest as high as 36% on investments in companies that make short-term, high-interest loans.
Investors were told that the money would be invested in Cash 4 Titles and similar companies that provide high-interest loans to borrowers who pledge their car titles and future payroll checks as collateral.
Almost none of the investor funds went to Cash 4 Titles or to any other company engaged in providing 'car title loans' or making 'payroll check advances'.
Instead, he used some of the money to pay off previous investors but transferred the bulk of it to an offshore account at the Bank of Bermuda.
Prosecutors are seeking the forfeiture of more than $25 million that he earned off the scheme, along with titles to his homes.
They also seek forfeiture of the title and interest he held in a commercial aviation company.
A settlement between the Bank of Bermuda and victims of the Cayman-based Ponzi scheme received approval of the courts 10/12/01.
While continuing to deny liability, the settlement agreement provides for a payment of up to 50% of actual out of pocket losses to investors in Cash 4 Titles, although the total payment, including all court approved fees and expenses, is not to exceed $67.5 million.
Texas Tea Gives You Gas
By selling interests in 29 limited partnerships, the principles of Beacon Income Funds defrauded approximately 1,100 investors, most of whom were senior citizens, who were told that the partnerships would invest in oil and gas production.
When the earlier partnerships had poor financial results the promoters used the funds contributed by investors in later partnerships to pay distributions to earlier investors.
The Beacon Income Funds paid distributions out to investors and the owners until the victims lost all of the $23 million they had invested.
A Lot of Gas
One promoter effected his schemes by creating a series of limited partnerships, which as explained in respective partnership prospectuses, was to acquire rights in various oil and gas producing properties, allegedly located in Texas, Ohio, Louisiana, Mississippi, Oklahoma, or Belize.
The monies raised from the limited partner investors for units purchased were said to be held in trust until sufficient funds were acquired for the purchase of the prospect oil and gas property.
The monies were also to be used solely to acquire and manage the oil and gas properties and for no other non-partnership purpose.
In fact, very little of the $150 million raised was actually invested in oil and gas properties.
Rather, in an undisclosed pattern of self-dealing, the great bulk of monies were actually commingled and diverted for the promoters’ own use and benefit to sustain lavish lifestyles and to pay fictitious "dividends" to earlier investors in other limited partnerships.
They were aided and abetted by a company which generated materially false and misleading geology reports which were used to placate existing investors and to induce new limited partners to invest.
The promoters fraudulently misrepresented the true financial condition of the investment and refused reasonable requests for access to the books and records of the Limited Partnerships.
Instead they deliberately promoted a false sense of financial well-being with periodic letters and brochures sent through the mail which reassured Limited Partners but omitted to state the fact that the actual proceeds from real oil and gas properties were only a minute fraction of the amounts paid out as partnership dividends, and that the periodic payments were sustained only from the ponzi scheme sale of new units to an ever-widening circle of victims.
Are We Still Friends
Over three years, the principles of the Financial Instruments Group defrauded about 1,000 investors out of approximately $13,400,000 in a ponzi scam which promised interest as high as 100 to 150 percent annually and paid finders fees to investors to refer friends and acquaintances.
Food For Thought
CNC was a ponzi scheme where salespeople sold investment "contracts" for approximately $25,000 each and then supposedly used the money to make monthly food products purchases for subsequent sale to food wholesalers and supermarket chains.
CNC paid its sales staff a monthly commission for each contract they sold for as long as the investor kept the principal invested in CNC.
This commission generally amounted to $150 per month for each contract.
They helped some of their investors evade federal income tax on the CNC "dividend" income because CNC did not report it to the IRS.
They also accepted cash investments from some of its investors, who received their monthly dividends in cash, rather than by check as other investors did.
The head of CNC fled to the Cayman Islands but returned and pleaded guilty to mail fraud and money laundering for which he was sentenced to 10 years in prison for a scheme which created over $67 million in losses.
It Looked Good on Paper
Elliott Enterprises lost millions of dollars each year for seven years.
Nevertheless, they retained their current investors and attracted new ones by making false claims regarding the safety and performance of their investments.
For example, they told everyone they had a good track record and were financially sound.
They said they were a regulated bank and assured investors that particular investments were insured or secured when, in fact, the investments were often backed with insufficient, worthless or non-existent collateral.
They falsely told investors that income from their investments would be tax-free and that they had always received a clean bill of health by periodic audits by the Florida Department of Professional Regulation when, in fact, no such audits were ever performed.
They lulled their investors by sending regular, competitive interest payments at rates just above the market rate but were only able to maintain these payments, despite huge, mounting losses, by the use of a ponzi scheme.
The owners themselves profited enormously from this arrangement. Their extravagant lifestyle included multi-million dollar residences, resort homes, and luxury automobiles.
Following the failure of the enterprise, investors and creditors have recovered from the receiver 10.5 cents on the dollar.
An Incentive to Lie
An employee of BP Oil who, when he fell behind in making payments on the American Express account provided to him by the company, instigated a Ponzi scheme to make himself money.
Over a five year period he told friends, relatives, and acquaintances that, as an employee, he could invest in an incentive program BP Oil had for its executives.
He further told them that the investments would mature every few months and would yield a high rate of return.
He persuaded 44 victims to purchase investment "units." As part of the scheme, he used money "invested" by later victims to pay "interest" to earlier victims.
This provided the successful image necessary to entice new victims and to encourage additional investments from earlier victims.
He was not an executive of BP Oil; BP Oil did not have such an executive investment program; and he did not use the money to make investments.
The total amount he received from all victims was $525,865. The total amount he returned to the victims was $242,513. Only twelve of his victims received back more money than they invested.
The total amount lost by the other victims, those who suffered individual net losses, was $391,540.
They Were So Small
The Omni Capital Group in Florida purportedly sold investment opportunities in the form of shares, contract rights, and participation rights in limited partnerships formed to purchase and sell small, privately held companies for a profit.
In reality, Omni was a ponzi scheme which caused 150 victims to invest $27,032,811.
It had no assets other than the money invested by the victims and generated no business income or profit except for some minimal rental revenue.
To expand the scheme and keep investors involved in the limited partnerships as long as possible, the owner spent some of the money on producing false account statements reflecting annual rates of return of 20-30%.
He also acquired and displayed symbols of success, such as an airplane, fictional glossy brochures, staffed offices, and a country club membership.
Somewhat of a Gamble
Prosecutors said the Bennett Funding Group enticed people in 46 states to invest in office equipment leases that did not exist, swindling more than 22,000 investors out of $700 million.
They purported to acquire leases on mostly "small ticket items" ( under $15,000 ) such as photocopiers and facsimile machines.
The supposed end-users were municipalities, which agreed to make monthly payments on the equipment for terms between two and five years, so the investments were emphasized as tax-exempt and safe, and comparable to more conventional municipal bonds.
They agreed to service the leases and had a staff of 180 employees that performed the administrative tasks necessary to maintain the contracts.
Investors had no part to play in these efforts, and were led to expect that their profits would come solely from the efforts of others.
The investments were sold by more than one hundred brokers throughout the United States.
When investors were given documents, it looked as if they owned an interest in a lease which represented a municipality's promise to pay.
Although they purported to be passing through payments from a particular lease to a corresponding investor, they did not do so.
In fact, they sold numerous leases to more than one investor at a time, such as $55 million worth of bogus photocopier leases with NYC Transit.
Of the at least $1 billion of funds that had been deposited into their general operating account from some 20,000 investors, some was used to make payments to investors and to pay commissions to brokers while other money was diverted to other causes.
Over $10 million was paid to a principle and over $30 million to various people and entities connected to him and members of his family.
He used some of the money to buy Vernon Downs racetrack near Syracuse and also ordered that tens of millions of dollars of the company's money be spent on gambling ventures, including $19 million for a gambling barge.
Rather than paying investors by passing through payments on leases, they pooled the contributions received from investors and lessees into one account, from which they made payments to investors.
The payments to investors had no relationship to payments made on the purportedly assigned contracts; they generally paid investors regardless of whether the end-user was delinquent in payments.
They used funds that came from new investors to make payments to earlier purchasers of the lease assignments.
They engaged in numerous sham transactions that enabled them to appear as a profitable company, purportedly in the business of financing the acquisition of office equipment and resort time-share contracts when, in fact, it was suffering massive losses.
They avoided reporting losses by improperly recognizing income from sham, year-end transactions and by giving false invoices and other documents to their auditors.
Eventually, they reached a point where new investments were outstripped by obligations to earlier investors.
In January, 1996, all investors were notified that the rate of interest they had been receiving would be temporarily reduced due to a short term problem. In March 1996, they filed for bankruptcy.
The promoter admitted in court that he lied to the Securities and Exchange Commission after it began investigating his company but said he never intended to defraud investors.
A Better Life For Who?
The Better Life Club of America out of Washington sold investments in an advertising business that would use "900 pay-per-call lines".
They raked in $2 million per week at the end with an overall take of $50 million from 6000 investors. Claiming to provide office equipment leases to governments even banks were taken in.
When it finally closed down, The Better Life Club did not have anywhere near enough money to keep paying off its promissory notes which promised a doubling of your investment each three months.
The courts found he had only about $2.7 million in the bank but was obligated to pay investors more than $50 million over the next three months.
Since the BLC made no profits from any legitimate business activity, he had to raise this $50 million from new investors.
It would have been virtually impossible for him to pull in such an enormous amount of money from new investors the next payment date.
But even if he had found a way, he then would have owed those new investors over $100 million in a further three months.
The doubling would have continued every three months and there was no way for him to get out of it without defaulting. Like all Ponzi schemes, the "Advertising Pool" was doomed to fail and leave thousands of investors empty-handed.
Most of it was paid out to earlier investors who saw their money double.
In a bid to lure in others they arranged to give payout cheques to existing investors at promotional seminars.
The doubling was only made possible with the money of later investors.
The initiator spent approximately $1.2 million of the investors' money on a house, pool, Jaguar, trust funds for his children, etc.
He also made "loans" of $1.2 million to various people, many of whom were his friends and BLC insiders, and then made little or no effort to get back the principal or any interest.
On June 11, 2001, Robert N. Taylor pled guilty to one count each of mail fraud and for failing to appear whereby he admitted that he carried out a fraudulent $50 million Ponzi scheme.
The second count arose out of his failure to appear for a retrial after his first trial resulted in a hung jury.
He faces a sentence of up to 36 months imprisonment on the mail fraud count and 12 months on the failure to appear count, followed by a term of three years of supervised probation.
He is currently serving a 10-year sentence for third degree burglary.
Taylor's Better Life Club scheme was the subject of an SEC civil enforcement action 09/95. [U.S. v. Robert N. Taylor, USDC for D.C. Criminal No. 99-0312 EGS]
Every Home Will Buy One
You get a call which offers a chance to buy from Sterling Multi-Media a "Media Unit" that entitles you to share the proceeds from products sold in a number of television commercials that they place in various media markets.
The products, with a "proven consumer appeal" —range from water-filled dumbbells to "The Talking Pet Tag" —have a retail price of $20 each.
But, according to them, their actual cost is $5, so each sale yields a $15 profit.
They tell you that each commercial spot is almost certain to generate at least five sales.
They also tell you that all previous investors have earned returns of 50% or more, as well as the return of their principal, within 60-90 days and that you are highly likely to receive similar returns.
They guarantee that you will earn at least a 25% profit, as well as the return of your principal, within 90 days of investing your money by purchasing blocks of television commercials that promote various products.
In fact, contrary to what they told you, many investors who purchased the Media Units have not received any profits or return of their principal, more than 90 days later, or ever.
To the extent that some investors did receive profits, they apparently came from money invested by other investors, through what proved to be a deceptive ponzi scheme that bilked investors out of $35 million dollars, not from the sale of the products advertised on TV.
The Sterling Group sold such imaginative products as the "Aquabell," a water-filled dumbbell, the "Talking Pet Tag," and a plastic wrap dispenser known as "KenKut" by means of late-night television commercials broadcast between the hours of 11:00 p.m. and 4:00 a.m.
They telemarketed media units, an investment that afforded investors the opportunity to receive a portion of the profits generated from the sales of these innovative products.
The media units sold for $5,000, with a minimum purchase of two units required. Each media unit entitled you to participate in 201 commercials.
You would receive $7.50 for each product sold during your 201 commercials, up to a maximum of five products per commercial.
According to them, you would likely receive $37.50 per commercial for a total of $7,537 —an astronomical fifty percent return in sixty to ninety days.
They raised at least $13,000,000 from investors in the media-unit scheme, retaining an estimated $6,300,000 in commissions.
Unknown to you, they would receive 45% of your $5,000 investment.
It turns out that the late night consumer was not as gullible as the investors, for Sterling could not sell enough Talking Pet Tags and Aquabells to return the promised yields.
Instead, they used later investors' investments to pay the promised yields to earlier investors —a classic Ponzi scheme.
When charged with securities fraud and racketeering they claimed that they should retain the 45% commissions they received for their hard work in the fraud, even though they acknowledged that the investors were defrauded.
They also felt hard done by financially, even though the district court released monies to pay for their living expenses and attorneys' fees.
Incredibly, they also contend that the court was hasty in trying to freeze their assets as "the district court did not find that there was a likelihood of asset dissipation."
Contrary to this assertion, early on in the scheme they created an irrevocable trust under the law of the Cook Islands.
The owners were named as co-trustees of the trust, together with a trust company licensed to conduct such services under Cook Islands law.
The trust created the circumstances in which the trustee would refuse to repatriate assets to the United States by means of so-called duress provisions —such as when the government wants to get it back to its rightful owners.
In their attempt to comply with a court order, they either intentionally invoked, or intentionally failed to preclude the invocation of, an "anti-duress" clause in the trust agreement.
The invocation of that clause resulted in their removal as trustees and ensured that the assets would not be repatriated.
They say they would really like to return the millions of dollars but their offshore trust agreement just doesn't allow it.
The court held them in civil contempt and ordered them jailed pending repatriation of the assets.
On appeal, the Ninth Circuit considered their defense of "impossibility of performance".
The judge ruled that their inability to comply with the asset repatriation order was the intended result of their own conduct in setting up the trust.
Even though they later signed trust instruments appointing a government trustee, as a condition of their release from prison for contempt, the Cook Islands court still would not comply.
A Display of Greed
A 54 year old businessman with a history of criminal activity, began the Metro Display Company, with the idea of selling bus-stop shelters, with advertising space, throughout Southern California.
The advertised investment strategy was as follows: he claimed that you could buy a bus shelter for about $10,000.
He promised you $170 in monthly dividend payments and that Metro Display would buy back the shelter from you for your initial $10,000 investment after five years.
Plus, the company pledged to give you a 20% share of that shelter's advertising revenue for the following five years.
This process would supposedly double your original investment.
He pitched his plan to individual investors and soon received about $48 million from them.
The majority of his investors were retirees on fixed incomes who were hoping the investment could better their financial futures.
Soon they became one of the largest and fastest growing public bus shelter firms in Southern California.
The company owned 2,600 shelters in more than 60 cities and counties in Southern California and Southern Nevada.
He failed to advise his investors, among other things, that 25% of their investments were being used to pay sales commissions, and that funds from new investors were used to cover the monthly payments due to longtime investors.
He claimed he was selling ads in the shelters for about $1,000 a month per shelter when actually the price was closer to $200. In addition, only 10-15% of the shelters carried paying ads, not the 85% that he claimed.
Business grew dismal, new investor funds trickled to a halt, and longtime investors clamored to get their monies back from the collapsing business.
He quickly began losing control of his fraudulent scheme. Over 1,600 shelters remained to be built and only about half of the shelters sold were ever installed.
The files revealed that in just six months, Metro Display recorded losses of more than $7 million.
In its petition filed in United States Bankruptcy Court, MDA showed more than $100 million in debt and less than $1 million in assets.
The files also showed that he and his wife had diverted more than $800,000 from the bus shelter business to make improvements on their luxurious home.
They also paid generous amounts of money to relatives employed at the business.
He was sentenced to 46 months in jail and was ordered to pay restitution to his victims.
Three of Metro Display's salesmen, indicted for their parts in the scheme, were convicted and received prison terms ranging from three to seven years.
Investors were only able to get back less than half of their original investments.
About 200 Metro Display investors, many of them retirees, did not want to take their losses lying down.
They formed a group to try to get the company back on sound financial ground in the hopes of ultimately selling it, in order to recoup their losses.
Mostly volunteers, they did everything from answering phones to selling ads until, slowly, it emerged from bankruptcy and was sold.
Even though it was better than what most investment fraud victims recover, they were ultimately only able to get back less than half of their original investments.
Starting out as a legitimate enterprise, the Hill Williams Income Funds were set up as a means of raising capital for real estate development.
Over four years, the owner established four funds which allowed him to raise $89 million by offering limited partnerships to the general public.
The Funds were not conceived in fraud but after about two years they were clearly a failing venture.
It was at that time when he began soliciting investors for Fund IV while diverting new funds to earlier investors in order to lull them into a false sense of security.
By using new monies to pay old costs and interest payments to prior investors, he converted his real estate venture into a classic Ponzi scheme.
"It is a common misperception that only the gullible are defrauded in bogus ponzi schemes," said United States Attorney Nora Manella.
"In this case, the victims invested in what was originally a legitimate scheme. They were defrauded only when he decided that being a con man was preferable to being a failed businessman."
"The hallmark of a successful investment scheme is the appearance of legitimacy", Manella added.
Precisely because this real estate venture began as a legitimate enterprise, he was later able to lull and deceive thousands of prior and prospective investors.
He sustained his scheme by regularly sending mailings to existing and prospective investors and by meeting with them on frequent bus tours.
In those meetings and through the mailings, he comforted investors by creating an illusion that new projects had been successfully funded.
In fact, he was misappropriating millions of dollars while running his company at near deficit levels. His Ponzi scheme finally collapsed when the funds were forced into bankruptcy.
In a plea agreement he plead guilty to the mail fraud charges and agreed to pay approximately $30.5 million restitution to approximately 2,500 investors duped in the scheme.
New Era - Same Con
One of the all-time monster frauds was the Ponzi scheme which revolved around the Foundation for New Era Philanthropy.
Drawn by the promoter's charismatic personality, his Christian evangelism and promise of doubling donors' money within six months, hundreds of religious, educational, cultural and charitable organizations gave more than $551 million to the foundation.
And for a time, groups actually did get two dollars back for every buck they put in. Jack Bennett used the money from later contributors to pay the earlier ones double what they put in.
But he couldn't keep doing that indefinitely.
When he couldn't meet the margin calls on his account used to buy U.S. Treasury bills, that is, repay the loans, Prudential checked out New Era.
Determining it to be a Ponzi scheme Prudential closed down New Eras credit line, bringing on the foundation's collapse and his subsequent arrest and indictment on 82 counts of fraud, money laundering and tax code violations.
His impassioned pleas for forgiveness were accompanied with the excuse that he was simply poor at management and administrative duties.
The fact that no mysterious benefactors existed to fund the payoffs was not mentioned.
It was only the goodness and charity of the earlier recipients who, after forming a coalition to undo the harm, returned their gains which allowed latter participants to recover about 90% of their potential losses.
Major Ponzi Bust - article
Four Star Financial Services LLC - site dealing with the case
Time is as Precious as Gold
In November 2004, an Etowah, Tennessee woman was ordered to pay $4.8 million in restitution and serve six years in federal prison following a guilty plea in U.S. District Court to charges she helped orchestrate an investment fraud scheme.
Dianna Blair-Torbett, 48, of Etowah, was arrested in April of 2002 on a 21-count federal indictment charging her with interstate transportation of property obtained by fraud in what U.S. Attorney Harry S. Mattice Jr., called a “Ponzi scheme.”
Blair-Torbett was arrested in 2002 along with 57-year-old Knoxville resident William Devers Brannon, also indicted by a federal grand jury at the conclusion of the investigation.
The scheme involved an “investment club”which was actually a ruse to enable Blair-Torbett to obtain money under false pretenses, said Mattice.
The Etowah woman persuaded victims to allow her handle their investments with the guarantee that the would double or triple their investment in six months’ time.
Mattice said Blair-Torbett told victims their money was secured by gold located at the West Texas Metals firm, owned by Brannon.
Brannon claimed to have a process whereby he could convert common ores into precious metals such as gold and platinum, according to prosecutors.
U.S. District Judge Curtis L. Collier ordered both Blair-Torbett and Brannon to each pay $4,845,115 in restitution, but Blair-Torbett’s sentence and restitution order resulted from a guilty plea, while Brannon pressed his case to trial where a jury sentenced him on Sept. 2 to 97-months in federal prison and issued to same ordered restitution, according to Mattice.
According to Mattice, the 72-month sentence and the nearly $5 million ordered restitution are “an upward departure from the federal sentencing guidelines, which the court found was warranted due to the devastating financial and psychological harm suffered by the victims.”
Brannon received the same restitution order and a 97-month sentence to be served in federal prison, according to Mattice.