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Wednesday
Sep142011

New York Ponzi Schemer Receives Thirteen Year Prison Sentence

A federal judge sentenced a New York man to thirteen years in federal prison for orchestrating a Ponzi scheme that defrauded investors out of nearly $6 million.  Guy W. Gane, 56, of Clarence, New York, faced a maximum total sentence of thirty years after previously pleading guilty to single charges of mail fraud and money laundering.  Delivering the sentence, United States District Judge William Skretny told Gane he was a "wolf in sheep's clothing."

Starting in 2005, Gane and Lorenzo Altadonna raised at least $5.7 million from the sale of fraudulent, unregistered securities transactions through two companies Gane owned, M-One Financial and Watermark Financial Services Group.  Nearly all of this amount, $5.1 million, was collected from the sale of convertible debentures issued by Watermark Financial and Watermark Holdings to approximately 90 investors, who were promised a fixed annual return of 10%.  The remainder of the funds were raised through the sale of promissory notes that advertised monthly returns ranging from 1% to 3.5%.  Investors were told that their investments would be used to purchase or develop real estate.  However, new investor funds were used not to purchase real estate, but instead to pay returns and note redemptions to old investors.  Additionally, Gane transferred nearly three million dollars to himself or family members, and over $500,000 to a Florida company Denkon Inc. for no apparent consideration. 

Both the SEC and the Justice Department filed actions against Gane and his conspirators.  The SEC filed an emergency enforcement action in May 2008 to halt Gane's fraud that resulted in a $5 million judgment.  Gane and two other individuals, James F. Lagona, 50, and Ian Campbell Gent, 58, were later charged in March 2010 in a 51-count indictment in connection with the scheme.   All were charged with mail fraud and conspiracy to commit mail fraud.  Gane was also charged with securities fraud and money laundering.  At a February 2011 trial, jurors convicted Gent and Lagona of conspiracy and mail fraud with the aid of Gane's testimony for the prosecution.

Additionally, Altadonna was sentenced in August 2010 to three years of supervised release for his role, and was also ordered ro pay $1.8 million in restitution to defrauded investors.  Total investor losses are estimated to exceed $5 million.  

A Copy of the SEC Complaint is here.

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