Missouri Ponzi Schemer Sentenced to Eight Years in Prison

A former financial broker was sentenced to ninety-seven months in prison for his role in a Ponzi scheme that ultimately cost investors millions of dollars.  Joshua Gould, 32, was also ordered to pay restitution of $4.3 million to the victims of his scheme  Gould was indicted earlier this year on charges of mail fraud and wire fraud, which each carry a maximum prison sentence of twenty years.

Gould was a former registered financial representative at Woodbury Financial Services in University City, Missouri.  He then joined co-defendant David Rubin at Coral Mortgage Bankers Corporation, where they solicited investors promising annual returns in exchange for funds to serve as collateral for Coral's operations.  Yet, instead of using these funds to invest in Coral's business, Gould and Rubin used the funds for personal expenses.  Gould also used investor funds to serve as start-up capital for several side businesses, including an online ticket sales broker.  Gould would provide Rubin with money to be paid to investors as purported "interest" payments.  When investors would direct that these "interest" payments be rolled into their existing principal investment, Rubin would pocket the funds.  All told, Gould misappropriated over $4 million of investor funds.

Prosecutors had asked for a sentence commensurate with federal sentencing guidelines, which suggested a minimum sentence of ninety-seven months, while Gould's attorney had requested a downward departure from the guidelines.  There is no parole in federal prison.  

Prison Sentence for Georgia Ponzi Schemer

A Statesboro man was recently sentenced to twenty-seven months in federal prison for operating a commodities trading operation that was revealed to be a Ponzi scheme.  Joseph L. Autry, 44, was also ordered to serve a three-year supervised release term, along with $155,200 in restitution to defrauded investors.

Autry operated Autry Capital Management LLC, which, from May 2008 until January 2010 took in over $250,000 from investors who were promised high returns from what they assumed was sophisticated currency future contract trading. Instead, Autry commingled investor funds and used investor funds to pay personal expenses and returns to older investors.  

Autry also faces potential fines from the Commodity Futures Trading Commission, which initiated an action against Autry in September 2010 seeking civil monetary penalties and restitution to investors.

SIPC Files Motion Opposing Wilpon Efforts to Dismiss Case

The Securities Investor Protection Corporation ("SIPC") filed documents opposing an effort by Sterling Equities, consisting of owners of the New York Mets baseball team, to dismiss trustee Irving Picard's suit seeking $1 billion transferred by Bernard Madoff. During a hearing on July 1 in New York federal court, United States District Judge Jed S. Rakoff questioned the viability of Picard's approach, which seeks not only to recover the $300 million in false profits above Sterling's initial investment, but also the $700 million of initial principal on the notion that the Mets' owners knew or should have known of the fraud through their extensive dealings and relationship with Madoff.  SIPC is in agreement with Picard that a reading of bankruptcy law permits the trustee's approach.

The vast majority of actions filed by Picard have sought only fictitious profits above and beyond an investor's initial principal.  This course of action is pursuant to Section 548(c) of the Bankruptcy Code, which states that a transferee who receives funds that would otherwise be subject to avoidance under the Code is entitled to retain those fund when the transferee gives value and the transfer is taken in good faith.  Picard has not pursued such a position in nearly all of his lawsuits, instead seeking the return of profits from so called "net winners" of Madoff's scheme for pro rata distribution to defrauded investors aptly termed "net losers."

Picard alleges that Sterling Equities and its principals should have been alerted to the nature of Madoff's scheme through numerous red flags and warning signs.  Additionally, their involvement in litigation seeking the return of principal and fictitious profits from an investment in the Bayou Superfund, which was later revealed to be a massive Ponzi scheme, should have also alerted Sterling to Madoff's fraud.  Instead, as Picard and SIPC allege, the profitable nature of the relationship with Madoff caused the Sterling defendants to ignore these warnings.  As SIPC states,  

The long-term nature of the relationship and its scope enabled the Defendants to gain insight into Madoff and his operations. In the face of such knowledge, the actions of the Defendants, as alleged in the Complaint, are proof of the Defendants’ lack of good faith, and their inability, therefore, to establish good faith as a defense to the Trustee’s fraudulent conveyance claims against them. 

A copy of SIPC's Motion Opposing the Sterling Defendant's Motion to Dismiss is here. 

Lawyer Seeks to Withdraw in South Florida Ponzi Case

Newly-filed court documents indicate that the lawyer for Joel Steinger, accused of running a $1.25 billion Ponzi scheme, is seeking to withdraw as counsel due to the apparent inability of his client to pay his legal bill.  Ed Shohat, a prominent Miami criminal defense attorney, claims he is owed in excess of $2.5 million for his past and continuing representation of Steinger, and that he has not been paid since May 2008.  While Steinger may have intended to use proceeds from the attempted sale of his $3.1 million home, prosecutors recently filed court documents indicating the government intends to seek forfeiture of the home should Steinger be convicted, reasoning that funds from his scheme were used to pay for it.

Steinger was charged in January 2009, along with several other individuals, in a twenty-five count indictment alleging that his involvement with Mutual Benefits Corp. was an elaborate Ponzi scheme that bilked more than 28,000 victims out of nearly $1 billion dollars.  Mutual Benefit purported to sell viatical and life insurance settlements through a network of sales agents, which were marketed as safe investments without risk  In reality, many of the policies marketed could not be re-sold, life-expectancy figures were manipulated, and investor funds were commingled to pay premium obligations on older policies.

Thus far, ten individuals associated with Mutual Benefits Corp. have pled guilty, including attorney Michael McNerney, who pled guilty to a conspiracy charge earlier this year.  Steinger is not scheduled to stand trial until early 2013.  Steinger's case has been overshadowed by convicted Ponzi schemer Scott Rothstein, who was indicted shortly before Steinger for a $1.2 billion Ponzi scheme selling purported civil settlements.  Rothstein has since been sentenced to 50 years in prison.

Another Guilty Plea in $29 Million Texas Ponzi Scheme

A Texas man has pled guilty to federal charges for his role in a Ponzi scheme that ultimately took in $100 million from hundreds of investors around the country.  Gregory W. Thompson, 58, entered guilty pleas to charges of securities fraud and money laundering that, under federal sentencing guidelines could result in a prison sentence of up to eight years for Thompson.  Thompson had originally been charged in an eighteen-count indictment that was later reduced to seven counts.  

Thompson was part of a group of six individuals involved with Horizon Establishment, which purported to invest in high-yield programs with foreign banks and promised investors monthly returns ranging from five to eight years.  The group ultimately took in more than $100 million of investor contributions.  The head of the scheme, Travis Correll, pled guilty in 2007 to a single wire fraud charge and is currently serving a nine-year prison sentence.  Prosecutors allege that Thompson personally collected $20 million from 40 investors, some of whom were members at his church.  Instead of investing, Thompson used the funds to pay personal expenses, including the mortgage of his now-defunct company, and to pay returns to older investors.

Thompson and the remaining participants have settled charges with the SEC, which froze the operation's assets in 2005.   Sentencing is scheduled for October 26, where it is likely Thompson will also be ordered to pay restitution to defrauded investors.