Colorado Ponzi Schemer Receives Five Year Prison Sentence

A federal judge sentenced a 72-year old man to five years in prison for operating a Ponzi scheme that stole hundreds of thousands of dollars from investors, some of whom were solicited at Alcoholics Anonymous meetings. Richard Horace Mayfield, 72, was arrested in April 2011 and initially charged with ten felonies in connection with the scheme.  He later entered a guilty plea to one felony charge of theft in July.  

From the mid-1990s to 2010, Mayfield operated the Maverick Sales Group and Richard H. Mayfield and Associates.  During the lifetime of the scheme, Mayfield took in nearly half-a-million dollars from twenty-two investors, who were promised a no-risk investing opportunity.  At least some of the victims were solicited by Mayfield at Alcoholics Anonymous meetings.  Mayfield paid out nearly half of investor funds in the form of interest payments to investors, resulting in a total net loss to investors exceeding $271,000.

At the time of his arrest, Mayfield had been on probation for an unrelated misdemeanor theft case from 2008.  He was sentenced to serve a one-year sentence for the probation violation, which will be served concurrently with his five-year sentence.  He is scheduled to serve his sentence at the Colorado Department of Corrections.

Two Plead Guilty to $52 Million Ponzi Scheme

A Kansas attorney and a British real estate speculator each pled guilty to their role in a Ponzi scheme that bilked investors out of more than $52 million.  James Scott Brown, 66, of Leawood, Kansas, and Derek J. Smith, 67, of Oxfordshire in the United Kingdom, each entered guilty pleas to charges of conspiracy to commit mail fraud and conspiracy to commit wire fraud before United States District Judge Linda R. Reade in the Northern District of Iowa.  Each of the charges carries a maximum prison sentence of five years and criminal monetary penalties of up to $250,000.  Under the Mandatory Victim Restitution Act, restitution may also be ordered to defrauded victims.  

Brown and Smith, along with Martin T. Sigillito, were the target of a 22-count federal indictment unsealed on April 28, 2011.  According to the indictment, Brown and Sigillito, also an attorney, began marketing the British Lending Program ("BLP") to investors in 2000.  Investors were solicited to invest in the BLP, which was advertised as a prominent real estate development venture.  The two represented to potential investors that Smith was a highly successful real estate investor who had a proven track record of identifying undervalued properties that could be quickly purchased, refurbished, and resold for a quick profit.  BLP borrowed large amounts of money from investors, who were told that they would receive high rates of interest in return.  During the scheme, which lasted nearly a decade, BLP took in investor loans" of nearly $52.5 million.  Yet little if any of these funds were used for legitimate real estate projects.  Instead, Smith, Sigillito, and Brown each were paid multi-million dollar "fees" for their involvement.  Additionally, approximately $27 million was used to make payments to investors in the form of interest payments and principal redemptions.  At the time of the indictment, BLP was alleged to be insolvent. 

As a result of their plea agreement, both Smith and Brown agreed to forfeit any property gained through proceeds of the fraud, including a $52.5 million judgment.  Brown also agreed to forfeit a 207-acre farm in Arkansas, while Smith agreed to forfeit several pieces of property in England.  The U.S. Probation Department will calculate a sentencing recommendation based on federal sentencing guidelines.  

The Department of Justice Press Release announcing the indictment is here.

A Copy of the Indictment is here.

"Amish Bernie Madoff" Charged With Massive Ponzi Scheme in Cleveland

Authorities announced that an Ohio man was charged with operating a massive Ponzi scheme than spanned two decades and defrauded thousands of Amish victims of over $30 million.  In an indictment unsealed Wednesday, Monroe Beachy, 77, was charged with one count of mail fraud in connection with the scheme.  Beachy, who did not graduate high school, is alleged to have acquired his financial knowledge from classes at H&R Block.  He is expected to surrender to federal authorities by Friday.

From at least 1990 through June 2010, Beachy solicited primarily Amish investors through his company A&M Investments.  Beachy promised potential investors that their principal would remain safe and promised a stream of constant annual returns.  Investors were told that their funds would be invested in Ginnie Mae Bond Funds, a type of mortgage-backed security issued by the Government National Mortgage Association and guaranteed by the United States government.  To assure investors of the legitimacy of his operation, Beachy provided investors with fictitious monthly statements showing their account balances and accruing interest. Authorities estimate that approximately 2,698 people and entities invested $33 million with Beachy.  Yet, instead of investing in bonds, Beachy allegedly sustained heavy losses investing in risky stocks and junk bonds.  Total losses are estimated at nearly $17 million.  

If convicted of the charge of mail fraud, Beachy faces a maximum prison sentence of twenty years in prison, along with criminal fines, and will likely be ordered to pay restitution to his victims.

A copy of the indictment is here.

Five Indicted in $26 Million California Ponzi Scheme

A federal grand jury indicted five California residents with running a real estate Ponzi scheme that defrauded victims out of over $26 million. A 27-count superseding indictment was returned against Michael Bolden, 57; Christopher Jackson, 43; Victor Alvarado, 50; Nicholo Arceo, 38; and Erica Arceo, 43; all out of Sacramento, California.  All were charged with mail fraud and wire fraud.   

According to the indictment, the defendants operated Diversified Management Consultants, which operated as an 'umbrella' for various investment clubs including Genesis Innovations and Equishare Capital.  Potential investors were induced to turn over their savings and retirement funds, and promised that their money would be used to purchase property and building structures for a real estate venture.  In total, over $26 million was invested by more than 180 individuals.  Yet, instead of purchasing real estate, investor funds were used to pay returns to other investors in classic Ponzi scheme fashion and to fund the defendants' luxury lifestyles.  

If convicted of the charges, each defendant faces up to twenty years in federal prison and a fine of up to $250,000. 

A copy of a Justice Department Press Release announcing the indictment is here.

Woman Pleads Guilty to $8 Million Ponzi Scheme

A New Jersey woman admitted to running a Ponzi scheme that scammed investors out of more than $2 million.  Jenifer Devine, 39, entered a guilty plea to charges of wire fraud in connection with the scheme that ultimately took in more than $8 million from investors.  Devine was arrested and charged in late 2010. Wire fraud carries a maximum sentence of twenty years in prison and criminal monetary penalties of up to $1 million.

According to the indictment, Devine operated the scheme from December 2008 until September 2010 through her company, Devine Wholesale.  The business was advertised as a wholesale business that bought and sold clothing and electronics for profit.  To solicit investors to finance the operation, Devine created fictitious inventory lists and made both oral and written representations the the business was profitable.  Investors were given promissory notes reflecting their investment and providing for payment of interest and return of principal within short periods, often thirty to sixty days.  Investors were typically promised interest rates of 25% per investment.  Yet, instead of running a wholesale business, Devine had virtually no business operations and instead used the vast majority of incoming funds to pay other investors.  The remaining funds were used to fund a lavish lifestyle that included travel and retail purchases.

Sentencing has been scheduled for December 20, 2011.  Devine faces a maximum prison sentence of twenty years, criminal monetary penalties, and will likely be ordered to pay restitution to defrauded victims.

A copy of the charging document is here.