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Entries in Attorney (9)

Sunday
Jul062014

Attorney and Daughter Charged With $23 Million Ponzi Scheme

"Ninety-nine percent of cases we see are caused by unregistered investments or investment advisors.  The best thing investors can do is check with our website or call our office to make sure the investment is registered and the person they are dealing with is registered."

- Indiana Secretary of State

An Indiana attorney and his daughter have been arrested and charged with masterminding a $23 million Ponzi scheme that allegedly targeted senior citizens.  Charles Blackwelder, 69, and his daughter, Cara Grumme, 41, were charged by Indiana authorities with twenty felonies, including nine counts of fraudulent sale of securities and four counts of securities fraud on a victim over 60.  Each of the felonies carry at least a four-year minimum sentence.  Blackwelder remains in an Indiana jail where he is being held on a $500,000 bond.  

According to the Indiana Secretary of State, Blackwelder operated CFS LLC ("CFS") in Carmel, Indiana, as an unregistered company that offered investors an opportunity to purchase "real estate investment opportunities" that would allegedly operate as a legal shield of those assets from consideration for qualification for Medicaid.  In total, the company took in over $23 million for over a decade from several hundred Indiana investors - many of them senior citizens.

However, Indiana authorities allege that CFS was nothing more than a Ponzi scheme, using new investor funds to pay returns to existing investors.  While investors were told that they were purchasing undivided interests in properties, authorities allege that in, in reality, the subject real estate was either previously sold or had already entered foreclosure.  In addition, Blackwelder and Grumme were accused of using several of the properties for their own use.

The Indiana Secretary of State Securities Division filed an enforcement action last year against Blackwelder, his son Chad, and Grumme related to their ownership of CFS Inc.  While A receiver was appointed, with over $23 million in claims filed by investors and debtors.  According to the receiver, CFS Inc. may have oversold interests in its properties by as much as 48%.  

Wednesday
Aug312011

Two Florida Lawyers Disciplined for Involvement in Ponzi Schemes

The Florida Bar announced that it had handed down disciplinary sanctions against two Florida lawyers implicated in recent Ponzi schemes.  Howard Kusnick, implicated for his role in Howard Rothstein's $1.2 billion Ponzi scheme, and Michael McNerney, who was the lead attorney for Mutual Benefits Corp., each received the Florida Bar's official decision on their future ability to practice law.  Kusnick was disbarred for his role, while McNerney received an indefinite suspension from the practice of law.

Kusnick is currently awaiting sentencing after entering a guilty plea to conspiracy to commit wire fraud in connection with Rothstein's Ponzi scheme.  McNerney, earlier sentenced to five years in prison for his role as counsel for the failed Mutual Benefits Corp., received an indefinite suspension from the Florida Bar.  

A copy of Kusnick's Disbarment Consent is here.

A copy of McNerney's Guilty Plea is here.

Sunday
Aug282011

Former FBI Agent Sentenced to Prison for Ponzi Scheme

An attorney and former FBI agent was sentenced to prison for orchestrating a $4 million Ponzi scheme.  Cary Alan Burdette, from Trussville, Alabama, received a sentence of twenty years in prison, with at least five of those years to be spent in a state penitentiary.  Burdette had pled guilty in July to three counts of fraud in connection with the sale of securities.  

Burdette was indicted in 2009 on thirteen counts of securities fraud and one count each of Sale of an Unregistered Security and Sale of Securities by an Unregistered Agent and four counts of theft of property in the first degree.  According to authorities, Burdette sold promissory notes to several investors with the promise of eight to twelve percent annual returns.  Burdette represented to investors that their funds would be invested in real estate and medical technology ventures.  In total, over $4 million was entrusted to Burdette.  However, an investigation by the Alabama Securities Commission ("ASC") revealed that the majority of these funds were not invested, and instead were used by Burdette to make payments to existing investors and to pay personal expenses.  Additionally, neither Burdette nor the securities sold by Burdette were registered with the ASC.

Burdette is scheduled to report to prison on October 3rd.

 

Sunday
Aug282011

Attorney Sentenced to Five Years for Role in Ponzi Scheme

A Fort Lauderdale attorney was sentenced to five years in federal prison for his role in a giant Ponzi scheme that defrauded thousands of investors out of nearly $1 billion.  United States District Judge Adalberto Jordan sentenced Michael J. McNerney, 63, to the maximum sentence possible for wire fraud.  McNerney was the former lead attorney for Mutual Benefits Corp., a viatical settlement broker shut down by the SEC in 2004 and accused of operating a giant Ponzi scheme.

Mutual Benefits solicited investors to purchase viatical settlements and life insurance policies, pitching guaranteed returns on policies purchased by elderly and terminally ill individuals.  From 1994 to 2004, more than $1.25 billion was raised from 30,000 investors.  Prosecutors indicted McNerney in December 2008 on twenty-five counts in association with his role as outside counsel for Mutual Benefits.  The indictment was later dropped when McNerney pled guilty to a single count of conspiracy to commit mail and wire fraud and agreed to aid authorities in their investigation against other Mutual Benefits executives.  In his role as outside counsel, McNerney acknowledged concealing from regulators the involvement of one executive's criminal past that included a fraud conviction.  McNerney also failed to stop the company from making false representations concerning the company's prowess at estimating life expectancies.  

McNerney is the tenth individual to be convicted for a role in the scheme.  Along with the sentence, he was also ordered to pay $826 million in restitution to victims at a rate of 10% of future income.  Three top executives have pled not guilty and are currently scheduled to stand trial in 2013.

Tuesday
Aug092011

Kansas Lawyer Sentenced to Four Years in Prison for Texas Ponzi Scheme

A federal judge sentenced a Kansas lawyer to nearly four years in prison for operating a Ponzi scheme that bilked investors out of more than $2 million. Clifford R. Roth, 62, was sentenced by United States District Judge Marcia Crone to forty-six months in prison and ordered to pay over $2 million in restitution to defrauded investors.  Roth pled guilty earlier this year to an information charging him with interstate transportation of money taken by fraud.  

Roth, a licensed attorney in Kansas, traveled to Beaumont, Texas, in November 2007 and began soliciting investors to finance the purchase of bank holding company stock, which in turn would purchase an Oklahoma bank that would open a branch in Beaumont.  Investors were promised that their stock purchases would be held in escrow until the bank purchase was completed, and in the event the bank purchase did not occur, investors would receive their initial investment along with accrued interest.  As a result of these misrepresentations, dozens of investors contributed a total of $2.5 million to Roth.  Yet, according to the FBI, Roth never acquired a bank.  Instead, Roth misappropriated investor funds to a company he controlled to pay personal expenses and make payments to previous unrelated creditors of Roth.  

Roth, once a name partner at Kansas City law firm Gaar Buxbaum & Roth, has been ordered to begin serving his sentence by August 23, 2011.