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Tuesday
Oct252011

California Woman Sentenced to Prison in $7 Million Ponzi Scheme

A California woman was sentenced to nine years in prison for orchestrating a Ponzi scheme that took in nearly $7 million from investors.  Guadalupe Valencia, 47, of West Covina, California, was sentenced by United States District Judge S. James Otero, who also ordered Valencia to pay $5.2 million in restitution to her victims, which was the amount authorities estimated as the total loss amount.  Valencia has been in custody since December 2010, when she pled guilty to six federal charges: two counts of mail fraud, two counts of wire fraud and two counts of tax fraud.  She had faced a maximum possible sentence of 86 years in federal prison and fines totalling $1.5 million.

Valencia, who also went by Lupe Valencia, operated The Real Estate and Loan Consultants, a.k.a RE Equity Group, LLC ("RE Group") from 2001 until 2009, promoting two investment pools that funded loans to purchase real estate and fund small businesses.  In return for their investment, investors were provided with promissory notes that Valencia promised were fully secured and backed by various forms of collateral that operated as a "money-back guarantee."  Valencia promised investors short-term returns ranging from 8% to 20%, often in as little as forty-five days.  In total, 150 investors entrusted over $6 million with Valencia and RE Group.  But instead of funding loans to purchase real estate or lending to small businesses, Valencia admitted to using new investor funds to pay returns to existing investors in a classic Ponzi scheme.  Additionally, Valencia failed to qualify the promissory notes as securities in violation of the California Corporate Securities Law of 1968.  

Valencia was also charged with tax fraud charges due to her failure to report $280,000 in income on her 207 tax return and $470,000 in income on her 2008 tax return.

A copy of the Desist and Refrain Order issued by the California Corporations Commission is here.

 

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