New York Recidivist Fraudster Sentenced For $31 Million Ponzi Scheme

A New York man with a lengthy criminal history learned he will spend at least the next six years in prison for operating a Ponzi scheme targeting Florida retirees and Orthodox Jews that ultimately defrauded victims out of at least $31 million.  Joseph Greenblatt received a sentence of six-to-eighteen years after previously pleading guilty to charges of Grand Larceny in the First and Second Degrees, Criminal Violation of the Martin Act, Tax Fraud, and other related crimes.  Greenblatt had at least two prior fraud convictions since 1995, and is also awaiting trial on charges that he wrote nearly $2 million in bad checks to investors.

Greenblatt operated Maywood Capital ("Maywood"), which held itself out as a successful real estate investment company.  Beginning in October 1995, Greenblatt solicited investors to invest in Maywood, often placing advertisements in Florida newspapers to target retirees.  Investors were told that their funds would be used to buy, refurbish, and re-sell prime Manhattan real estate, and that each investment was secured by recorded first mortgages.  Ultimately, Greenblatt raised over $31 million from investors.

However, in reality only some of the properties acquired using investor funds were secured by a mortgage.  Additionally, where a mortgage did exist, it was often not a first mortgage and never specified that the investor was the mortgagor, thus rendering those investments unsecured.  Indeed, on several occasions, Maywood had no ownership interest in the subject properties.  In typical Ponzi scheme fashion, Greenblatt misappropriated investor funds for a variety of unauthorized purposes, including personal expenses and the payment of restitution owed in previous fraud convictions.

A simple criminal background check might have raised red flags for investors, who would have discovered that Greenblatt had a lengthy criminal background that included serving time for defrauding the Department of Housing and Urban Development, as well as a 1995 securities fraud conviction.

Two New Jersey attorneys also were implicated in the scheme, with one attorney joining Maywood after being disbarred - for misappropriating client funds.  Peter Vogel, 74, and Joseph Mongelli, 48, both pled guilty to fraud charges for their role in the scheme.  Mongelli received a six-month sentence, while Vogel received probation.  

SEC: Secretive 'Trust' With World War II Ties That Promised 38% Annual Returns Was $15 Million Ponzi Scheme

The Securities and Exchange Commission ("SEC") instituted a civil enforcement action against a Florida man and a California woman, alleging that the investment opportunity promising 38% annual returns and requiring strict secrecy was, in reality, a Ponzi scheme that raised more than $15 million from unsuspecting investors.  Billy W. McClintock, 70, and Diane Alexander, also 70, were charged with multiple violations of federal securities laws in connection with the alleged scheme, which promised lucrative gains through a highly-secretive entity known as the "Trust".  The SEC is seeking injunctive relief, an asset freeze, disgorgement of all ill-gotten gains, and civil monetary penalties.

According to the SEC, McClintock was a resident of Bradenton, Florida, and had previously served time in prison due to a cocaine trafficking conviction.  McClintock and Alexander apparently shared a long-time friendship, and sometime before 2002, McClintock confided to Alexander that he was associated with a secretive investment club known as the "Trust".  Apparently, while on a trip to London, McClintock had happened upon a man named "John" who was a member of the Trust and disclosed to McClintock that he could lend money to the Trust and receive a 38% annual return.  The "Trust" was allegedly formed after World War II by several wealthy European families, with offices in Luxembourg and Zurich, and had the power to create money "through fractional banking and the sale of banking debentures"

The "Trust" was shrouded by heavy secrecy, with McClintock being told that the communication of any details about the trust to any third person, such as an attorney, certified financial accountant, or financial planner, would result in that person's permanent ban from participating in the Trust.  After hearing McClintock's story, Alexander accepted McClintock's offer to serve as United States Regional Director for the Trust, in addition to three other unnamed Regional Directors.  Along with McClintock - the 'United States National Director' - the two relayed the same story to potential investors, along with the promise of steady annual returns of 38%.  The two also appealed to investors' religious beliefs, telling them to "put your money in the Trust and your trust in God.” In total, approximately 220 investors contributed over $15 million to the "Trust".

However, contrary to their representations, there is no evidence that any secretive Trust ever existed, and neither Alexander nor McClintock ever sent any investor funds to any Trust.  Rather, according to the SEC, investor funds were simply pooled together in classic Ponzi scheme fashion, and the regular interest payments made to investors were in fact comprised of these commingled funds.  Additionally, investors were not told that, in return for referring investors to the "Trust", Alexander received a 'management' fee of 5%, which she also received for every investor that 'rolled over' their principal investment upon expiration. As the SEC stated, 

the Trust is a Ponzi scheme in which new investor funds, not Trust profits, pay the purported fees  and interest owed to earlier investors. 

Ironically, Alexander sought to convince investors to disregard the old agage that  'If it sounds too good to be true, it probably is,' claiming that it was simply 'a lie that came from the pit of hell.' 

A copy of the SEC complaint is here.

Two Former Stanford Accounting Executives Convicted of Fraud Charges

A Houston federal jury found two former Stanford Group accounting executives guilty of multiple fraud charges as criminal prosecutions draw to a close in those accused of playing a role in R. Allen Stanford's $7 billion Ponzi scheme.  Gilbert Lopez Jr., 70, and Mark Kuhrt, 40, were each convicted of nine counts of wire fraud, as well as one count of conspiracy to commit wire fraud.  Each of those charges carries a maximum term of twenty years in prison.  Prosecutors had accused the two of conspiring to inflate the value of certain assets to meet massive shortfalls in Stanford's scheme, including trying to flip a Caribbean resort property among various Stanford entities to inflate its value from $63 million to over $3 billion - in a matter of months.  

According to the superseding indictment, both Lopez and Kuhrt joined Stanford Financial Group ("SFG") in 1997.  Lopez was hired as SFG's assistant controller, while Kuhrt initially served as the fixed aset manager of SFG affiliate Stanford Leasing Company.  Lopez rose up the ranks to become SFG's Chief Accounting Officer in 2006, while Kuhrt was named Global Controller of Stanford Financial Group Global Management ("SFGGM").  

During the course of their employment, Lopez and Kuhrt participated in a series of sham transactions designed to both inflate the amount of capital contributions purportedly made by Stanford and misrepresent the extent of Stanford's repayment of billions of dollars in personal loans made by Stanford International Bank ("SIB").  Emails between Lopez and Kuhrt discussing the sham payments were featured prominently in the charging documents and used by prosecutors to show their awareness and culpability.  

Defense lawyers sought to sway jurors by claiming that Lopez and Kuhrt were simply following Stanford's instructions and never intended to commit any crimes.  Rather, it was Stanford's 'inner circle', which included former Chief Financial Officer James Davis and Chief Investment Officer Laura Pendergast-Holt, who kept other Stanford executives in the dark about the true nature of the scheme.  But the jury didn't buy this explanation, and instead sided with prosecutors in convicting the pair.  Sentencing has been scheduled for February 14, 2013, where each defendant will likely face a hefty prison sentence.

The convictions also mark the end of a string of prosecutions brought against Stanford and other executives.  Along with Stanford, who received a 110-year sentence after standing trial earlier this year, others convicted for their role in the scheme include: 

• Laura Pendergast-Holt - Chief Investment Officer - sentenced to 3-year prison term for obstructing SEC investigation;
• Jim Davis - Chief Investment Officer - After entering plea agreement with prosecutors in April 2009, has cooperated extensively and served as government's star witness at several trials;
• Tom Raffanello and Bruce Perraud - Stanford security team - Acquitted on charges relating to shredding of documents, where judge called evidence "extremely thin."

Davis, whose sentencing had been delayed while he provided extensive cooperation to prosecutors, is likely to see his sentencing date set in the near-future now that there are no pending trials.  While Davis will no doubt seek leniency for his cooperation, the charges to which he pled guilty to - conspiracy to commit mail/wire/securities fraud, mail fraud, and conspiracy to obstruct an SEC investigation - are serious charges with lengthy possible prison terms.  

A copy of the superseding indictment is here.

Previous Ponzitracker coverage of the Stanford scheme is here. 

Ponzi Schemer Who Fled to Peru When Scheme Collapsed Receives 14-Year Prison Sentence

A U.S. citizen that operated a foreign currency trading Ponzi scheme that bilked victims out of nearly $18 million was sentenced to serve more than fourteen years in federal prison.  Jeffrey Lowance, 51, was sentenced by United States District Judge Charles Norgle to serve 140 months in federal prison after previously being indicted on five counts of mail fraud, one count of wire fraud, and four counts of money laundering.  Lowrance was arrested in Peru last year, where he had reportedly fled after authorities began investigating his currency-trading operation

Beginning in at least 2004, Lowrance owned and operated Mentor Investment Group ("MIG") in San Diego, California.  MIG represented itself as a firm skilled in foreign-currency trading, soliciting potential investors with the promise that they could expect monthly returns ranging from 4% to 7%.  After the State of California issued a cease-and-desist order against MIG in 2006, Lowrance moved to Panama City, Panama, and arranged for MIG to be acquired by First Capital Savings &  Loan, Ltd. ("First Capital"), a New Zealand-based company also controlled by Lowrance.  Through First Capital, Lowrance continued to solicit investors, and raised more than $30 million from investors until the scheme's collapse in 2009.

As early as April 2008, undercover federal agents posed as potential investors and were told by Lowrance that his company was managing $37 million from over 400 investors.  However, according to authorities, First Capital was bankrupt by September 2008, and investors stopped receiving scheduled payments in July 2008.  In 2009, Lowrance fled from Panama City to Peru.  There, he is alleged to have continued his scheme operating a new entity, Private Global Banks, under the alias of Alan Carpenter. 

According to an update sent to investors in February 2009, Lowrance confessed that all of the investors' funds were gone due to his mismanagement. Lowrance was not the skilled forex trader he had represented himself to be, but instead had tried numerous methods to find a trading program that worked, including hiring two Peruvians from a trading class he started to do "chart review".  However, when the "chart review" strategy was tested with investor funds, it was not profitable.  In the update, Lowrance also warned people against going to authorities, as investors' chances of getting their money back would be hindered if Lowrance was locked up.  Lowrance was later arrested in Peru in 2011, and was subsequently extradited to the United States.  He also faced charges by the Securities and Exchange Commission and Commodity Futures Trading Commission.  

Along with this sentence, Lowrance was also ordered to pay restitution to his victims in the amount of $17.64 million.  

A compilation of legal documents pertaining to Lowrance's case is here.

The SEC complaint is here.

Cincinnati Man Sentenced to 40 Years In Third Separate Sentencing For $9 Million Ponzi Scheme

Continuing a recent spate of harsh sentences for sub-$25 million Ponzi schemes, a Cincinnati man receiving his sentence in the third jurisdiction that prosecuted him for a $9 million Ponzi scheme was sentenced to serve 40 years in state prison.  Jason Snelling, 48, had earlier pleaded guilty to twenty-five charges that included securities fraud, unlawful acts in the sale of securities, and failure to register as a broker-dealer.  Franklin Circuit II Judge Clay Kellerman handed down an eight-year sentence for each of five criminal events, but rather than ordering the terms to be served concurrently (at the same time), Judge Kellerman decided that the sentences would be served consecutively.  This is Snelling's third conviction for his role in the scheme, having previously received a six-year sentence from an Ohio state judge and an eleven-year term by an Ohio federal judge.  He was also ordered to pay $5.3 million in restitution, as well as forfeit various personal property acquired using scheme proceeds.

Snelling, along with partner Jerry Smith, operated Dunhill Investment Advisers and CityFund Advisory in downtown Cincinnati, where they promised lucrative returns through purported day-trading.  The two offered guaranteed rates of return ranging from ten to fifteen percent, with some investors receiving higher promised rates.  To assure investors of the safety of their funds, Snelling and Smith represented that their position would be liquidated to cash at the end of each trading day.  In total, the scheme raised nearly $9 million from seventy-two investors.  But instead of engaging in day-trading, Snelling and Smith spent the majority of investor funds to sustain an exorbitant lifestyle that consisted of boats, jet skis, plastic surgery, and private school tuition.  

Authorities arrested the pair last summer.  Snelling and Smith later pled guilty to federal charges, and a federal judge later sentenced him to serve eleven years.  Smith is currently awaiting two state court trials on securities fraud charges.  

It is unclear which sentence Snelling will begin serving first.  While there is no parole in the federal prison system, Snelling will be eligible for parole and a variety of sentence reductions for his state prison sentences.