A Florida woman was convicted of running a Ponzi scheme that bilked investors out of $100 million. Lydia Cladek, 67, was originally indicted in November 2010 and charged with four counts of wire fraud, nine counts of mail fraud, and one count of conspiracy to commit fraud. Electing to proceed to trial rather than negotiate a plea agreement with prosecutors, Cladek's decision backfired as a federal jury convicted her of all fourteen of those counts. While each count of mail fraud and wire fraud carries a maximum potential prison sentence of twenty years, a recommendation under federal sentencing guidelines will likely be lower. However, in light of the substantial amount of money involved and length of the fraud, Cladek will likely face what will amount to a life sentence in prison.
Cladek was president and founder of Lydia Cladek Inc. ("LCI"), which purported to engage in the business of high interest motor vehicle retail installment contracts. Situated in St. Augustine Beach, Florida, LCI would buy subprime automobile finance contracts from car dealers at discounted rates, and in return for funds from investors, promised a sizable portion of the interest collected as a return on investor principal. These advertised returns often exceeded 15% to 20% annually. Authorities allege that while the business started in 1998 as a legitimate business, declining business conditions forced Cladek to use investor funds to make interest payments to existing investors by 2003. Such a practice is a common trademark of a Ponzi scheme. In total, investors sunk over $100 million into Cladek's scheme. Among the victims were several non-profits that Cladek supported, whose contributions were "clawed back" in order to pay back defrauded investors.
After her conviction, United States District Judge Timothy Corrigan granted the prosecution's request to revoke Ms. Cladek's bail, and announced that sentencing would occur within 90 days. Cladek will also likely be ordered to pay restitution to her victims, although her financial status is likely precarious.
A copy of Cladek's indictment is here.