An 86-Year old Georgia man pled guilty to charges he defrauded members of his church and gym out of more than $3 million in a Ponzi scheme. Joseph Klos, 86, pled guilty to ten counts of securities fraud and agreed with prosecutors to serve one year in jail an pay $2.3 million in restitution to his victims. Klos, who at 86 is believed to be the oldest individual since at least 2002 implicated in a Ponzi scheme, had originally faced up to 55 years in prison after being charged in April 2011 with twenty-eight counts of securities fraud. According to the terms of his agreement with prosecutors, the one-year sentence is contingent on Klos fully satisfying the restitution order by the scheduled sentencing date of December 28. Should he fail to fully repay his victims by then, the sentence changes to a sixty-eight month sentence.
Klos was charged with using his companies, Stephen Klos & Associates, Genesis and Genesis II, along with his position as head usher at the Mercer Island Covenant Church to solicit investors, targeting elderly congregants, Investors were told that their money would be used to invest in the stock market and could expect to receive annual returns of fifteen percent. According to prosecutors, Klos told investors that the Bible did not advocate charging interest, and thus he chose to invest victim's money "out of the goodness of his heart." In total, Klos raised approximately $3.5 million from his victims between 2004 and 2009. Of that amount, Klos pocketed nearly $1 million, while over $2 million was returned to investors in the form of fictitious interest payments.
Not surpassingly, this was the second time Klos had been accused of operating a Ponzi scheme. Indeed, he had been barred from future association with securities institutions after being implicated in another Ponzi scheme in the early 1990's that raised more than $3 million from investors. While the case was settled without an admission of guilty and Klos never faced criminal charges, he was ordered to repay nearly $400,000 in penalties.
Sentencing is currently scheduled for December 28, 2012.